42 CFR §423.2410

1. (a)For contracts beginning in 2014 or subsequent contract years, a Part D sponsor (defined at § 423.4) is required to report the information required under § 423.2460 for each contract under this part for each contract year.
2. (b)If CMS determines for a contract year that a Part D sponsor has an MLR for a contract that is less than 0.85, the Part D sponsor must remit to CMS an amount equal to the product of the following:
   1. (1)The total revenue of the prescription drug plan for the contract year.
   2. (2)The difference between 0.85 and the MLR for the contract year.
3. (c)If CMS determines that a Part D sponsor has an MLR for a contract that is less than 0.85 for 3 or more consecutive contract years, CMS does not permit the enrollment of new enrollees under the contract for coverage during the second succeeding contract year.
4. (d)If CMS determines that a Part D sponsor has an MLR for a contract that is less than 0.85 for 5 consecutive contract years, CMS terminates the contract under the authority at 423.509(b)(1) and (d) effective as of the second succeeding contract year.