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116th Congress } { Rept. 116-257
HOUSE OF REPRESENTATIVES
1st Session } { Part 1
======================================================================
PAYMENT COMMISSION DATA ACT OF 2019
_______
October 28, 2019.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Pallone, from the Committee on Energy and Commerce, submitted the
following
R E P O R T
[To accompany H.R. 1781]
[Including cost estimate of the Congressional Budget Office]
The Committee on Energy and Commerce, to whom was referred
the bill (H.R. 1781) to amend titles XVIII and XIX of the
Social Security Act to provide the Medicare Payment Advisory
Commission and the Medicaid and CHIP Payment and Access
Commission with access to certain drug payment information,
including certain rebate information, having considered the
same, report favorably thereon with an amendment and recommend
that the bill as amended do pass.
CONTENTS
Page
I. Purpose and Summary.............................................2
II. Background and Need for the Legislation.........................3
III. Committee Hearings..............................................4
IV. Committee Consideration.........................................4
V. Committee Votes.................................................4
VI. Oversight Findings..............................................4
VII. New Budget Authority, Entitlement Authority, and Tax Expenditure4
VIII. Congressional Budget Office Estimate............................5
IX. Federal Mandates Statement......................................6
X. Statement of General Performance Goals and Objectives...........6
XI. Duplication of Federal Programs.................................6
XII. Committee Cost Estimate.........................................6
XIII. Earmarks, Limited Tax Benefits, and Limited Tariff Benefits.....6
XIV. Advisory Committee Statement....................................6
XV. Applicability to Legislative Branch.............................6
XVI. Section-by-Section Analysis of the Legislation..................7
XVII. Changes in Existing Law Made by the Bill, as Reported...........7
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Payment Commission Data Act of 2019''.
SEC. 2. PROVIDING THE MEDICARE PAYMENT ADVISORY COMMISSION AND MEDICAID
AND CHIP PAYMENT AND ACCESS COMMISSION WITH ACCESS
TO CERTAIN DRUG PAYMENT INFORMATION, INCLUDING
CERTAIN REBATE INFORMATION.
(a) Access to Certain Part D Payment Data.--Section 1860D-15(f) of
the Social Security Act (42 U.S.C. 1395w-115(f)) is amended--
(1) in paragraph (2)--
(A) in subparagraph (A)(ii), by striking ``and'' at
the end;
(B) in subparagraph (B), by striking the period at
the end and inserting ``; and''; and
(C) by inserting at the end the following new
subparagraph:
``(C) by the Executive Director of the Medicare
Payment Advisory Commission for purposes of monitoring,
making recommendations, and analysis of the program
under this title and by the Executive Director of the
Medicaid and CHIP Payment and Access Commission for
purposes of monitoring, making recommendations, and
analysis of the Medicaid program established under
title XIX and the Children's Health Insurance Program
under title XXI.''; and
(2) by adding at the end the following new paragraph:
``(3) Additional restrictions on disclosure of information.--
The Executive Directors described in paragraph (2)(C) shall not
disclose any of the following information disclosed to such
Executive Directors or obtained by such Executive Directors
pursuant to such paragraph, with respect to a prescription drug
plan offered by a PDP sponsor or an MA-PD plan offered by an MA
organization:
``(A) The specific amounts or the identity of the
source of any rebates, discounts, price concessions, or
other forms of direct or indirect remuneration under
such prescription drug plan or such MA-PD plan.
``(B) Information submitted with the bid submitted
under section 1860D-11(b) by such PDP sponsor or under
section 1854(a) by such MA organization.
``(C) In the case of such information from
prescription drug event records, in a form that would
not be permitted under section 423.505(m) of title 42,
Code of Federal Regulations, or any successor
regulation, if made by the Centers for Medicare &
Medicaid Services.''.
(b) Access to Certain Rebate and Payment Data Under Medicare and
Medicaid.--Section 1927(b)(3)(D) of the Social Security Act (42 U.S.C.
1396r-8(b)(3)(D)) is amended--
(1) in the matter before clause (i), by striking ``subsection
(a)(6)(A)(ii)'' and inserting ``subsection (a)(6)(A)'';
(2) in clause (iv), by striking ``and'' at the end;
(3) in clause (v), by striking the period at the end and
inserting ``, and'';
(4) by inserting after clause (v) the following new clause:
``(vi) to permit the Executive Director of
the Medicare Payment Advisory Commission and
the Executive Director of the Medicaid and CHIP
Payment and Access Commission to review the
information provided.'';
(5) in the matter at the end, by striking ``1860D-
4(c)(2)(E)'' and inserting ``1860D-4(c)(2)(G)''; and
(6) by adding at the end the following new sentence: ``Any
information disclosed to the Executive Director of the Medicare
Payment Advisory Commission or the Executive Director of the
Medicaid and CHIP Payment and Access Commission pursuant to
this subparagraph shall not be disclosed by either such
Executive Director in a form which discloses the identity of a
specific manufacturer or wholesaler or prices charged for drugs
by such manufacturer or wholesaler.''.
I. Purpose and Summary
H.R. 1781, the ``Payment Commission Data Act of 2019'', was
introduced in the House on March 14, 2019, by Reps. Buddy
Carter (R-GA), Tom O'Halleran (D-AZ), Tom Rice (R-SC), Jimmy
Panetta (D-CA), Greg Gianforte (R-MT), and Peter Welch (D-VT),
and was referred to the Committee on Energy and Commerce. H.R.
1781 amends titles XVIII and XIX of the Social Security Act to
provide the Medicare Payment Advisory Commission (MedPAC) and
the Medicaid and CHIP Payment and Access Commission (MACPAC)
with access to certain drug payment information, including
certain proprietary rebate information that is not publicly
available in order to better analyze and report to Congress on
drug pricing issues in the Medicare and Medicaid programs.
II. Background and Need for Legislation
The Medicare Payment Advisory Commission (MedPAC) and the
Medicaid and CHIP Payment and Access Commission (MACPAC) are
independent, nonpartisan commissions that advise Congress on
issues affecting the Medicare and Medicaid Programs.
Established in 1997, MedPAC is responsible for advising
Congress on Medicare's fee-for-service program and private
health plans that participate in Medicare, as well as access to
care and quality of care issues that affect Medicare
beneficiaries. MedPAC meets publicly to discuss policy issues
and formulate recommendations and publishes two reports to
Congress each year. MACPAC was established in 2009 and provides
policy and data analysis on the Medicaid program to Congress,
as well as states, on issues affecting Medicaid and the
Children's Health Insurance Program (CHIP). Both commissions
actively analyze payment and coverage issues with respect to
prescription drugs available under Medicare and Medicaid. Under
current law, however, MedPAC and MACPAC lack access to certain
proprietary drug pricing information, such as data on rebates
and other price concessions, that is provided to the Department
of Health and Human Services (HHS) to administer the Medicare
Part D program, as well as the Medicaid prescription drug
rebate program.
The Chairs of MedPAC and MACPAC requested a statutory
change to eliminate this data barrier in letters to the House
Committee on Energy and Commerce in August and September 2018
during the 115th Congress, and again in the current session of
Congress in March 2019. In their letters to the Committee, the
Commissions emphasized that access to proprietary drug pricing
data enhances the capabilities of MedPAC and MACPAC in
assisting Congress on issues related to prescription drug
costs.\1\
---------------------------------------------------------------------------
\1\See Letter to Chairman Frank Pallone, Jr. and Ranking Member
Greg Walden, et al from Francis J. Crosson, M.D., Chairman, Medicare
Payment Advisory Commission (March 26, 2019); Letter to Chairman Frank
Pallone, Jr. and Ranking Member Greg Walden from Penny Thompson, Chair,
Medicaid and CHIP Payment and Access Commission (March 25, 2019);
Letter to Chairman Greg Walden and Ranking Member Frank Pallone, Jr.,
et al from Francis J. Crosson, M.D., Chairman, Medicare Payment
Advisory Commission (Sept. 4, 2018); Letter to Chairman Greg Walden and
Ranking Member Frank Pallone, Jr. from Penny Thompson, Chair, Medicaid
and CHIP Payment and Access Commission (Aug. 30, 2018).
---------------------------------------------------------------------------
H.R. 1781 ensures that HHS can share Medicare Part D and
Medicaid drug price and rebate data with the Executive
Directors of MedPAC and MACPAC for the purposes of monitoring,
making recommendations, and analyzing the programs. The bill
includes additional restrictions on disclosure of information
by MedPAC or MACPAC, including the specific amounts or the
identity of the source of rebates, price concessions, or other
forms of direct or indirect renumeration, as well as price
information submitted as part of a bid by a prescription drug
plan sponsor.
H.R. 1781 will allow MedPAC and MACPAC to better analyze
the impact of increasing drug prices on the Medicare and
Medicaid programs and will ensure the Commissions have access
to the data they need to accurately, effectively, and fully
inform Congress on drug pricing issues.
III. Committee Hearings
For the purposes of section 103(i) of H. Res. 6 of the
116th Congress--the following hearing was used to develop or
consider H.R. 1781:
The Subcommittee on Health held a hearing on April 30,
2019, entitled ``Prescription Drug Coverage in the Medicare
Program.'' The Subcommittee received testimony from the
following witness:
James E. Mathews, Ph.D., Executive Director,
Medicare Payment Advisory Commission.
IV. Committee Consideration
H.R. 1781, the ``Payment Commission Data Act of 2019'', was
introduced in the House on March 14, 2019, by Reps. Carter (R-
GA), O'Halleran (D-AZ), Rice (R-SC), Panetta (D-CA), Gianforte
(R-MT), and Welch (D-VT), and was referred to the Committee on
Energy and Commerce. Subsequently, the bill was referred to the
Subcommittee on Health on March 15, 2019. Following hearings,
the Subcommittee on Health met in open markup session, pursuant
to notice, on March 27, 2019, to consider H.R. 1781. No
amendments were offered to the bill. Subsequently, the
Subcommittee on Health agreed to a motion by Ms. Eshoo,
Chairwoman of the Subcommittee, to forward favorably H.R. 1781,
without amendment, to the full Committee by a voice vote.
On April 3, 2019, the Committee on Energy and Commerce met
in open markup session, pursuant to notice, to consider H.R.
1781 as approved by the Subcommittee on Health. An amendment
offered by Mr. Carter of Georgia, # 1, was agreed to by a voice
vote. Subsequently, the full Committee agreed to a motion by
Mr. Pallone, Chairman of the Committee, to order reported
favorably to the House the bill H.R. 1781, amended, by a voice
vote, a quorum being present.
V. Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list each record vote
on the motion to report legislation and amendments thereto. The
Committee advises that there were no record votes on reporting
H.R. 1781 to the House nor on any amendments to the bill.
VI. Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII and clause 2(b)(1)
of rule X of the Rules of the House of Representatives, the
oversight findings and recommendations of the Committee are
reflected in the descriptive portion of the report.
VII. New Budget Authority, Entitlement Authority, and Tax Expenditures
Pursuant to 3(c)(2) of rule XIII of the Rules of the House
of Representatives, the Committee adopts as its own the
estimate of new budget authority, entitlement authority, or tax
expenditures or revenues contained in the cost estimate
prepared by the Director of the Congressional Budget Office
pursuant to section 402 of the Congressional Budget Act of
1974.
VIII. Congressional Budget Office Estimate
With respect to the requirements of clause (3)(c)(3) of
rule XIII of the Rules of the House of Representatives and
section 402 of the Congressional Budget Act of 1974, the
Committee has received the following cost estimate for H.R.
1781 from the Director of the Congressional Budget Office:
U.S. Congress,
Congressional Budget Office,
Washington, DC, April 26, 2019.
Hon. Frank Pallone, Jr.,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1781, the Payment
Commission Data Act of 2019.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Rebecca Yip
and Lara Robillard.
Sincerely,
Keith Hall.
Enclosure.
H.R. 1781 would grant the Medicare Payment Advisory
Commission (MedPAC) and the Medicaid and CHIP Payment and
Access Commission (MACPAC) access to data about prescription
drug spending and utilization in the Medicare Part D program.
MedPAC and MACPAC would be prohibited from identifying specific
drug prices or discounts revealed by the data.
The bill would not affect spending for drugs or other
services in either Medicare or Medicaid; therefore, CBO
estimates that H.R. 1781 would not affect direct spending or
revenues. MedPAC and MACPAC might have to increase spending on
information technology (IT) to ensure that the data are secure.
Any such spending would be insignificant and subject to
appropriation.
The CBO staff contacts for this estimate are Rebecca Yip
and Lara Robillard. The estimate was reviewed by Leo Lex,
Deputy Assistant Director for Budget Analysis.
IX. Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.
X. Statement of General Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII, the general
performance goal or objective of this legislation is to provide
the Medicare Payment Advisory Commission and the Medicaid and
CHIP Payment and Access Commission with access to drug pricing
information available to the Secretary of Health and Human
Services to monitor, make recommendations, and analyze drug
pricing issues under Medicare and Medicaid.
XI. Duplication of Federal Programs
Pursuant to clause 3(c)(5) of rule XIII, no provision of
H.R. 1781 is known to be duplicative of another Federal
program, including any program that was included in a report to
Congress pursuant to section 21 of Public Law 111-139 or the
most recent Catalog of Federal Domestic Assistance.
XII. Committee Cost Estimate
Pursuant to clause 3(d)(1) of rule XIII, the Committee
adopts as its own the cost estimate prepared by the Director of
the Congressional Budget Office pursuant to section 402 of the
Congressional Budget Act of 1974.
XIII. Earmarks, Limited Tax Benefits, and Limited Tariff Benefits
Pursuant to clause 9(e), 9(f), and 9(g) of rule XXI, the
Committee finds that H.R. 1781 contains no earmarks, limited
tax benefits, or limited tariff benefits.
XIV. Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
XV. Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
XVI. Section-by-Section Analysis of the Legislation
SECTION 1. Short title
Section 1 designates that the short title may be cited as
the ``Payment Commission Data Act of 2019''.
SEC. 2. Providing the Medicare Payment Advisory Commission and Medicaid
and CHIP Payment and Access Commission with access to certain
drug payment information, including certain rebate information
Section 2 amends section 1860D-15(f) and section
1927(b)(3)(D) of the Social Security Act to permit the
Secretary for the Department of Health and Human Services to
share the information provided to the Secretary by prescription
drug plan sponsors and pharmaceutical manufacturers with the
Executive Directors of the Medicare Payment Advisory Commission
and the Medicaid and CHIP Payment and Access Commission.
Section 2 also includes additional restrictions on disclosure,
noting that the Executive Directors shall not disclose the
specific amounts or identity of the source of any rebates,
price concessions, or other forms of direct or indirect
renumeration. Additionally, the Executive Directors are
prohibited from disclosing information that would disclose the
identity of a specific manufacturer or wholesaler.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
SOCIAL SECURITY ACT
* * * * * * *
TITLE XVIII--HEALTH INSURANCE FOR THE AGED AND DISABLED
* * * * * * *
Part D--Voluntary Prescription Drug Benefit Program
* * * * * * *
Subpart 2--Prescription Drug Plans; PDP Sponsors; Financing
* * * * * * *
subsidies for part d eligible individuals for qualified prescription
drug coverage
Sec. 1860D-15. (a) Subsidy Payment.--In order to reduce
premium levels applicable to qualified prescription drug
coverage for part D eligible individuals consistent with an
overall subsidy level of 74.5 percent for basic prescription
drug coverage, to reduce adverse selection among prescription
drug plans and MA-PD plans, and to promote the participation of
PDP sponsors under this part and MA organizations under part C,
the Secretary shall provide for payment to a PDP sponsor that
offers a prescription drug plan and an MA organization that
offers an MA-PD plan of the following subsidies in accordance
with this section:
(1) Direct subsidy.--A direct subsidy for each part D
eligible individual enrolled in a prescription drug
plan or MA-PD plan for a month equal to--
(A) the amount of the plan's standardized bid
amount (as defined in section 1860D-13(a)(5)),
adjusted under subsection (c)(1), reduced by
(B) the base beneficiary premium (as computed
under paragraph (2) of section 1860D-13(a) and
as adjusted under paragraph (1)(B) of such
section).
(2) Subsidy through reinsurance.--The reinsurance
payment amount (as defined in subsection (b)).
This section constitutes budget authority in advance of
appropriations Acts and represents the obligation of the
Secretary to provide for the payment of amounts provided under
this section.
(b) Reinsurance Payment Amount.--
(1) In general.--The reinsurance payment amount under
this subsection for a part D eligible individual
enrolled in a prescription drug plan or MA-PD plan for
a coverage year is an amount equal to 80 percent of the
allowable reinsurance costs (as specified in paragraph
(2)) attributable to that portion of gross covered
prescription drug costs as specified in paragraph (3)
incurred in the coverage year after such individual has
incurred costs that exceed the annual out-of-pocket
threshold specified in section 1860D-2(b)(4)(B).
(2) Allowable reinsurance costs.--For purposes of
this section, the term ``allowable reinsurance costs''
means, with respect to gross covered prescription drug
costs under a prescription drug plan offered by a PDP
sponsor or an MA-PD plan offered by an MA organization,
the part of such costs that are actually paid (net of
discounts, chargebacks, and average percentage rebates)
by the sponsor or organization or by (or on behalf of)
an enrollee under the plan, but in no case more than
the part of such costs that would have been paid under
the plan if the prescription drug coverage under the
plan were basic prescription drug coverage, or, in the
case of a plan providing supplemental prescription drug
coverage, if such coverage were standard prescription
drug coverage.
(3) Gross covered prescription drug costs.--For
purposes of this section, the term ``gross covered
prescription drug costs'' means, with respect to a part
D eligible individual enrolled in a prescription drug
plan or MA-PD plan during a coverage year, the costs
incurred under the plan, not including administrative
costs, but including costs directly related to the
dispensing of covered part D drugs during the year and
costs relating to the deductible. Such costs shall be
determined whether they are paid by the individual or
under the plan, regardless of whether the coverage
under the plan exceeds basic prescription drug
coverage.
(4) Coverage year defined.--For purposes of this
section, the term ``coverage year'' means a calendar
year in which covered part D drugs are dispensed if the
claim for such drugs (and payment on such claim) is
made not later than such period after the end of such
year as the Secretary specifies.
(c) Adjustments Relating to Bids.--
(1) Health status risk adjustment.--
(A) Establishment of risk adjustors.--The
Secretary shall establish an appropriate
methodology for adjusting the standardized bid
amount under subsection (a)(1)(A) to take into
account variation in costs for basic
prescription drug coverage among prescription
drug plans and MA-PD plans based on the
differences in actuarial risk of different
enrollees being served. Any such risk
adjustment shall be designed in a manner so as
not to result in a change in the aggregate
amounts payable to such plans under subsection
(a)(1) and through that portion of the monthly
beneficiary prescription drug premiums
described in subsection (a)(1)(B) and MA
monthly prescription drug beneficiary premiums.
(B) Considerations.--In establishing the
methodology under subparagraph (A), the
Secretary may take into account the similar
methodologies used under section 1853(a)(3) to
adjust payments to MA organizations for
benefits under the original medicare fee-for-
service program option.
(C) Data collection.--In order to carry out
this paragraph, the Secretary shall require--
(i) PDP sponsors to submit data
regarding drug claims that can be
linked at the individual level to part
A and part B data and such other
information as the Secretary determines
necessary; and
(ii) MA organizations that offer MA-
PD plans to submit data regarding drug
claims that can be linked at the
individual level to other data that
such organizations are required to
submit to the Secretary and such other
information as the Secretary determines
necessary.
(D) Publication.--At the time of publication
of risk adjustment factors under section
1853(b)(1)(B)(i)(II), the Secretary shall
publish the risk adjusters established under
this paragraph for the succeeding year.
(2) Geographic adjustment.--
(A) In general.--Subject to subparagraph (B),
for purposes of section 1860D-13(a)(1)(B)(iii),
the Secretary shall establish an appropriate
methodology for adjusting the national average
monthly bid amount (computed under section
1860D-13(a)(4)) to take into account
differences in prices for covered part D drugs
among PDP regions.
(B) De minimis rule.--If the Secretary
determines that the price variations described
in subparagraph (A) among PDP regions are de
minimis, the Secretary shall not provide for
adjustment under this paragraph.
(C) Budget neutral adjustment.--Any
adjustment under this paragraph shall be
applied in a manner so as to not result in a
change in the aggregate payments made under
this part that would have been made if the
Secretary had not applied such adjustment.
(d) Payment Methods.--
(1) In general.--Payments under this section shall be
based on such a method as the Secretary determines. The
Secretary may establish a payment method by which
interim payments of amounts under this section are made
during a year based on the Secretary's best estimate of
amounts that will be payable after obtaining all of the
information.
(2) Requirement for provision of information.--
(A) Requirement.--Payments under this section
to a PDP sponsor or MA organization are
conditioned upon the furnishing to the
Secretary, in a form and manner specified by
the Secretary, of such information as may be
required to carry out this section.
(B) Restriction on use of information.--
Information disclosed or obtained pursuant to
subparagraph (A) may be used by officers,
employees, and contractors of the Department of
Health and Human Services only for the purposes
of, and to the extent necessary in, carrying
out this section.
(3) Source of payments.--Payments under this section
shall be made from the Medicare Prescription Drug
Account.
(4) Application of enrollee adjustment.--The
provisions of section 1853(a)(2) shall apply to
payments to PDP sponsors under this section in the same
manner as they apply to payments to MA organizations
under section 1853(a).
(e) Portion of Total Payments to a Sponsor or Organization
Subject to Risk (Application of Risk Corridors).--
(1) Computation of adjusted allowable risk corridor
costs.--
(A) In general.--For purposes of this
subsection, the term ``adjusted allowable risk
corridor costs'' means, for a plan for a
coverage year (as defined in subsection
(b)(4))--
(i) the allowable risk corridor costs
(as defined in subparagraph (B)) for
the plan for the year, reduced by
(ii) the sum of (I) the total
reinsurance payments made under
subsection (b) to the sponsor of the
plan for the year, and (II) the total
subsidy payments made under section
1860D-14 to the sponsor of the plan for
the year.
(B) Allowable risk corridor costs.--For
purposes of this subsection, the term
``allowable risk corridor costs'' means, with
respect to a prescription drug plan offered by
a PDP sponsor or an MA-PD plan offered by an MA
organization, the part of costs (not including
administrative costs, but including costs
directly related to the dispensing of covered
part D drugs during the year) incurred by the
sponsor or organization under the plan that are
actually paid (net of discounts, chargebacks,
and average percentage rebates) by the sponsor
or organization under the plan, but in no case
more than the part of such costs that would
have been paid under the plan if the
prescription drug coverage under the plan were
basic prescription drug coverage, or, in the
case of a plan providing supplemental
prescription drug coverage, if such coverage
were basic prescription drug coverage taking
into account the adjustment under section
1860D-11(c)(2). In computing allowable costs
under this paragraph, the Secretary shall
compute such costs based upon imposition under
paragraphs (1)(D) and (2)(E) of section 1860D-
14(a) of the maximum amount of copayments
permitted under such paragraphs.
(2) Adjustment of payment.--
(A) No adjustment if adjusted allowable risk
corridor costs within risk corridor.--If the
adjusted allowable risk corridor costs (as
defined in paragraph (1)) for the plan for the
year are at least equal to the first threshold
lower limit of the risk corridor (specified in
paragraph (3)(A)(i)), but not greater than the
first threshold upper limit of the risk
corridor (specified in paragraph (3)(A)(iii))
for the plan for the year, then no payment
adjustment shall be made under this subsection.
(B) Increase in payment if adjusted allowable
risk corridor costs above upper limit of risk
corridor.--
(i) Costs between first and second
threshold upper limits.--If the
adjusted allowable risk corridor costs
for the plan for the year are greater
than the first threshold upper limit,
but not greater than the second
threshold upper limit, of the risk
corridor for the plan for the year, the
Secretary shall increase the total of
the payments made to the sponsor or
organization offering the plan for the
year under this section by an amount
equal to 50 percent (or, for 2006 and
2007, 75 percent or 90 percent if the
conditions described in clause (iii)
are met for the year) of the difference
between such adjusted allowable risk
corridor costs and the first threshold
upper limit of the risk corridor.
(ii) Costs above second threshold
upper limits.--If the adjusted
allowable risk corridor costs for the
plan for the year are greater than the
second threshold upper limit of the
risk corridor for the plan for the
year, the Secretary shall increase the
total of the payments made to the
sponsor or organization offering the
plan for the year under this section by
an amount equal to the sum of--
(I) 50 percent (or, for 2006
and 2007, 75 percent or 90
percent if the conditions
described in clause (iii) are
met for the year) of the
difference between the second
threshold upper limit and the
first threshold upper limit;
and
(II) 80 percent of the
difference between such
adjusted allowable risk
corridor costs and the second
threshold upper limit of the
risk corridor.
(iii) Conditions for application of
higher percentage for 2006 and 2007.--
The conditions described in this clause
are met for 2006 or 2007 if the
Secretary determines with respect to
such year that--
(I) at least 60 percent of
prescription drug plans and MA-
PD plans to which this
subsection applies have
adjusted allowable risk
corridor costs for the plan for
the year that are more than the
first threshold upper limit of
the risk corridor for the plan
for the year; and
(II) such plans represent at
least 60 percent of part D
eligible individuals enrolled
in any prescription drug plan
or MA-PD plan.
(C) Reduction in payment if adjusted
allowable risk corridor costs below lower limit
of risk corridor.--
(i) Costs between first and second
threshold lower limits.--If the
adjusted allowable risk corridor costs
for the plan for the year are less than
the first threshold lower limit, but
not less than the second threshold
lower limit, of the risk corridor for
the plan for the year, the Secretary
shall reduce the total of the payments
made to the sponsor or organization
offering the plan for the year under
this section by an amount (or otherwise
recover from the sponsor or
organization an amount) equal to 50
percent (or, for 2006 and 2007, 75
percent) of the difference between the
first threshold lower limit of the risk
corridor and such adjusted allowable
risk corridor costs.
(ii) Costs below second threshold
lower limit.--If the adjusted allowable
risk corridor costs for the plan for
the year are less the second threshold
lower limit of the risk corridor for
the plan for the year, the Secretary
shall reduce the total of the payments
made to the sponsor or organization
offering the plan for the year under
this section by an amount (or otherwise
recover from the sponsor or
organization an amount) equal to the
sum of--
(I) 50 percent (or, for 2006
and 2007, 75 percent) of the
difference between the first
threshold lower limit and the
second threshold lower limit;
and
(II) 80 percent of the
difference between the second
threshold upper limit of the
risk corridor and such adjusted
allowable risk corridor costs.
(3) Establishment of risk corridors.--
(A) In general.--For each plan year the
Secretary shall establish a risk corridor for
each prescription drug plan and each MA-PD
plan. The risk corridor for a plan for a year
shall be equal to a range as follows:
(i) First threshold lower limit.--The
first threshold lower limit of such
corridor shall be equal to--
(I) the target amount
described in subparagraph (B)
for the plan; minus
(II) an amount equal to the
first threshold risk percentage
for the plan (as determined
under subparagraph (C)(i)) of
such target amount.
(ii) Second threshold lower limit.--
The second threshold lower limit of
such corridor shall be equal to--
(I) the target amount
described in subparagraph (B)
for the plan; minus
(II) an amount equal to the
second threshold risk
percentage for the plan (as
determined under subparagraph
(C)(ii)) of such target amount.
(iii) First threshold upper limit.--
The first threshold upper limit of such
corridor shall be equal to the sum of--
(I) such target amount; and
(II) the amount described in
clause (i)(II).
(iv) Second threshold upper limit.--
The second threshold upper limit of
such corridor shall be equal to the sum
of--
(I) such target amount; and
(II) the amount described in
clause (ii)(II).
(B) Target amount described.--The target
amount described in this paragraph is, with
respect to a prescription drug plan or an MA-PD
plan in a year, the total amount of payments
paid to the PDP sponsor or MA-PD organization
for the plan for the year, taking into account
amounts paid by the Secretary and enrollees,
based upon the standardized bid amount (as
defined in section 1860D-13(a)(5) and as risk
adjusted under subsection (c)(1)), reduced by
the total amount of administrative expenses for
the year assumed in such standardized bid.
(C) First and second threshold risk
percentage defined.--
(i) First threshold risk
percentage.--Subject to clause (iii),
for purposes of this section, the first
threshold risk percentage is--
(I) for 2006 and 2007, and
2.5 percent;
(II) for 2008 through 2011, 5
percent; and
(III) for 2012 and subsequent
years, a percentage established
by the Secretary, but in no
case less than 5 percent.
(ii) Second threshold risk
percentage.--Subject to clause (iii),
for purposes of this section, the
second threshold risk percentage is--
(I) for 2006 and 2007, 5
percent;
(II) for 2008 through 2011,
10 percent; and
(III) for 2012 and subsequent
years, a percentage established
by the Secretary that is
greater than the percent
established for the year under
clause (i)(III), but in no case
less than 10 percent.
(iii) Reduction of risk percentage to
ensure 2 plans in an area.--Pursuant to
section 1860D-11(b)(2)(E)(ii), a PDP
sponsor may submit a bid that requests
a decrease in the applicable first or
second threshold risk percentages or an
increase in the percents applied under
paragraph (2).
(4) Plans at risk for entire amount of supplemental
prescription drug coverage.--A PDP sponsor and MA
organization that offers a plan that provides
supplemental prescription drug benefits shall be at
full financial risk for the provision of such
supplemental benefits.
(5) No effect on monthly premium.--No adjustment in
payments made by reason of this subsection shall affect
the monthly beneficiary premium or the MA monthly
prescription drug beneficiary premium.
(f) Disclosure of Information.--
(1) In general.--Each contract under this part and
under part C shall provide that--
(A) the PDP sponsor offering a prescription
drug plan or an MA organization offering an MA-
PD plan shall provide the Secretary with such
information as the Secretary determines is
necessary to carry out this section; and
(B) the Secretary shall have the right in
accordance with section 1857(d)(2)(B) (as
applied under section 1860D-12(b)(3)(C)) to
inspect and audit any books and records of a
PDP sponsor or MA organization that pertain to
the information regarding costs provided to the
Secretary under subparagraph (A).
(2) Restriction on use of information.--Information
disclosed or obtained pursuant to the provisions of
this section may be used--
(A) by officers, employees, and contractors
of the Department of Health and Human Services
for the purposes of, and to the extent
necessary in--
(i) carrying out this section; and
(ii) conducting oversight,
evaluation, and enforcement under this
title; [and]
(B) by the Attorney General and the
Comptroller General of the United States for
the purposes of, and to the extent necessary
in, carrying out health oversight
activities[.]; and
(C) by the Executive Director of the Medicare
Payment Advisory Commission for purposes of
monitoring, making recommendations, and
analysis of the program under this title and by
the Executive Director of the Medicaid and CHIP
Payment and Access Commission for purposes of
monitoring, making recommendations, and
analysis of the Medicaid program established
under title XIX and the Children's Health
Insurance Program under title XXI.
(3) Additional restrictions on disclosure of
information.--The Executive Directors described in
paragraph (2)(C) shall not disclose any of the
following information disclosed to such Executive
Directors or obtained by such Executive Directors
pursuant to such paragraph, with respect to a
prescription drug plan offered by a PDP sponsor or an
MA-PD plan offered by an MA organization:
(A) The specific amounts or the identity of
the source of any rebates, discounts, price
concessions, or other forms of direct or
indirect remuneration under such prescription
drug plan or such MA-PD plan.
(B) Information submitted with the bid
submitted under section 1860D-11(b) by such PDP
sponsor or under section 1854(a) by such MA
organization.
(C) In the case of such information from
prescription drug event records, in a form that
would not be permitted under section 423.505(m)
of title 42, Code of Federal Regulations, or
any successor regulation, if made by the
Centers for Medicare & Medicaid Services.
(g) Payment for Fallback Prescription Drug Plans.--In lieu of
the amounts otherwise payable under this section to a PDP
sponsor offering a fallback prescription drug plan (as defined
in section 1860D-3(c)(4)), the amount payable shall be the
amounts determined under the contract for such plan pursuant to
section 1860D-11(g)(5).
* * * * * * *
TITLE XIX--GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS
* * * * * * *
payment for covered outpatient drugs
Sec. 1927. (a) Requirement for Rebate Agreement.--
(1) In general.--In order for payment to be available
under section 1903(a) or under part B of title XVIII
for covered outpatient drugs of a manufacturer, the
manufacturer must have entered into and have in effect
a rebate agreement described in subsection (b) with the
Secretary, on behalf of States (except that, the
Secretary may authorize a State to enter directly into
agreements with a manufacturer), and must meet the
requirements of paragraph (5) (with respect to drugs
purchased by a covered entity on or after the first day
of the first month that begins after the date of the
enactment of title VI of the Veterans Health Care Act
of 1992) and paragraph (6). Any agreement between a
State and a manufacturer prior to April 1, 1991, shall
be deemed to have been entered into on January 1, 1991,
and payment to such manufacturer shall be retroactively
calculated as if the agreement between the manufacturer
and the State had been entered into on January 1, 1991.
If a manufacturer has not entered into such an
agreement before March 1, 1991, such an agreement,
subsequently entered into, shall become effective as of
the date on which the agreement is entered into or, at
State option, on any date thereafter on or before the
first day of the calendar quarter that begins more than
60 days after the date the agreement is entered into.
(2) Effective date.--Paragraph (1) shall first apply
to drugs dispensed under this title on or after January
1, 1991.
(3) Authorizing payment for drugs not covered under
rebate agreements.--Paragraph (1), and section
1903(i)(10)(A), shall not apply to the dispensing of a
single source drug or innovator multiple source drug if
(A)(i) the State has made a determination that the
availability of the drug is essential to the health of
beneficiaries under the State plan for medical
assistance; (ii) such drug has been given a rating of
1-A by the Food and Drug Administration; and (iii)(I)
the physician has obtained approval for use of the drug
in advance of its dispensing in accordance with a prior
authorization program described in subsection (d), or
(II) the Secretary has reviewed and approved the
State's determination under subparagraph (A); or (B)
the Secretary determines that in the first calendar
quarter of 1991, there were extenuating circumstances.
(4) Effect on existing agreements.--In the case of a
rebate agreement in effect between a State and a
manufacturer on the date of the enactment of this
section, such agreement, for the initial agreement
period specified therein, shall be considered to be a
rebate agreement in compliance with this section with
respect to that State, if the State agrees to report to
the Secretary any rebates paid pursuant to the
agreement and such agreement provides for a minimum
aggregate rebate of 10 percent of the State's total
expenditures under the State plan for coverage of the
manufacturer's drugs under this title. If, after the
initial agreement period, the State establishes to the
satisfaction of the Secretary that an agreement in
effect on the date of the enactment of this section
provides for rebates that are at least as large as the
rebates otherwise required under this section, and the
State agrees to report any rebates under the agreement
to the Secretary, the agreement shall be considered to
be a rebate agreement in compliance with the section
for the renewal periods of such agreement.
(5) Limitation on prices of drugs purchased by
covered entities.--
(A) Agreement with secretary.--A manufacturer
meets the requirements of this paragraph if the
manufacturer has entered into an agreement with
the Secretary that meets the requirements of
section 340B of the Public Health Service Act
with respect to covered outpatient drugs
purchased by a covered entity on or after the
first day of the first month that begins after
the date of the enactment of this paragraph.
(B) Covered entity defined.--In this
subsection, the term ``covered entity'' means
an entity described in section 340B(a)(4) of
the Public Health Service Act.
(C) Establishment of alternative mechanism to
ensure against duplicate discounts or
rebates.--If the Secretary does not establish a
mechanism under section 340B(a)(5)(A) of the
Public Health Service Act within 12 months of
the date of the enactment of such section, the
following requirements shall apply:
(i) Entities.--Each covered entity
shall inform the single State agency
under section 1902(a)(5) when it is
seeking reimbursement from the State
plan for medical assistance described
in section 1905(a)(12) with respect to
a unit of any covered outpatient drug
which is subject to an agreement under
section 340B(a) of such Act.
(ii) State agency.--Each such single
State agency shall provide a means by
which a covered entity shall indicate
on any drug reimbursement claims form
(or format, where electronic claims
management is used) that a unit of the
drug that is the subject of the form is
subject to an agreement under section
340B of such Act, and not submit to any
manufacturer a claim for a rebate
payment under subsection (b) with
respect to such a drug.
(D) Effect of subsequent amendments.--In
determining whether an agreement under
subparagraph (A) meets the requirements of
section 340B of the Public Health Service Act,
the Secretary shall not take into account any
amendments to such section that are enacted
after the enactment of title VI of the Veterans
Health Care Act of 1992.
(E) Determination of compliance.--A
manufacturer is deemed to meet the requirements
of this paragraph if the manufacturer
establishes to the satisfaction of the
Secretary that the manufacturer would comply
(and has offered to comply) with the provisions
of section 340B of the Public Health Service
Act (as in effect immediately after the
enactment of this paragraph, and would have
entered into an agreement under such section
(as such section was in effect at such time),
but for a legislative change in such section
after the date of the enactment of this
paragraph.
(6) Requirements relating to master
agreements for drugs procured by department of
veterans affairs and certain other federal
agencies.--
(A) In general.--A manufacturer meets
the requirements of this paragraph if
the manufacturer complies with the
provisions of section 8126 of title 38,
United States Code, including the
requirement of entering into a master
agreement with the Secretary of
Veterans Affairs under such section.
(B) Effect of subsequent
amendments.--In determining whether a
master agreement described in
subparagraph (A) meets the requirements
of section 8126 of title 38, United
States Code, the Secretary shall not
take into account any amendments to
such section that are enacted after the
enactment of title VI of the Veterans
Health Care Act of 1992.
(C) Determination of compliance.--A
manufacturer is deemed to meet the
requirements of this paragraph if the
manufacturer establishes to the
satisfaction of the Secretary that the
manufacturer would comply (and has
offered to comply) with the provisions
of section 8126 of title 38, United
States Code (as in effect immediately
after the enactment of this paragraph)
and would have entered into an
agreement under such section (as such
section was in effect at such time),
but for a legislative change in such
section after the date of the enactment
of this paragraph.
(7) Requirement for submission of utilization data
for certain physician administered drugs.--
(A) Single source drugs.--In order for
payment to be available under section 1903(a)
for a covered outpatient drug that is a single
source drug that is physician administered
under this title (as determined by the
Secretary), and that is administered on or
after January 1, 2006, the State shall provide
for the collection and submission of such
utilization data and coding (such as J-codes
and National Drug Code numbers) for each such
drug as the Secretary may specify as necessary
to identify the manufacturer of the drug in
order to secure rebates under this section for
drugs administered for which payment is made
under this title.
(B) Multiple source drugs.--
(i) Identification of most frequently
physician administered multiple source
drugs.--Not later than January 1, 2007,
the Secretary shall publish a list of
the 20 physician administered multiple
source drugs that the Secretary
determines have the highest dollar
volume of physician administered drugs
dispensed under this title. The
Secretary may modify such list from
year to year to reflect changes in such
volume.
(ii) Requirement.--In order for
payment to be available under section
1903(a) for a covered outpatient drug
that is a multiple source drug that is
physician administered (as determined
by the Secretary), that is on the list
published under clause (i), and that is
administered on or after January 1,
2008, the State shall provide for the
submission of such utilization data and
coding (such as J-codes and National
Drug Code numbers) for each such drug
as the Secretary may specify as
necessary to identify the manufacturer
of the drug in order to secure rebates
under this section.
(C) Use of ndc codes.--Not later than January
1, 2007, the information shall be submitted
under subparagraphs (A) and (B)(ii) using
National Drug Code codes unless the Secretary
specifies that an alternative coding system
should be used.
(D) Hardship waiver.--The Secretary may delay
the application of subparagraph (A) or (B)(ii),
or both, in the case of a State to prevent
hardship to States which require additional
time to implement the reporting system required
under the respective subparagraph.
(b) Terms of Rebate Agreement.--
(1) Periodic rebates.--
(A) In general.--A rebate agreement under
this subsection shall require the manufacturer
to provide, to each State plan approved under
this title, a rebate for a rebate period in an
amount specified in subsection (c) for covered
outpatient drugs of the manufacturer dispensed
after December 31, 1990, for which payment was
made under the State plan for such period,
including such drugs dispensed to individuals
enrolled with a medicaid managed care
organization if the organization is responsible
for coverage of such drugs. Such rebate shall
be paid by the manufacturer not later than 30
days after the date of receipt of the
information described in paragraph (2) for the
period involved.
(B) Offset against medical assistance.--
Amounts received by a State under this section
(or under an agreement authorized by the
Secretary under subsection (a)(1) or an
agreement described in subsection (a)(4)) in
any quarter shall be considered to be a
reduction in the amount expended under the
State plan in the quarter for medical
assistance for purposes of section 1903(a)(1).
(C) Special rule for increased minimum rebate
percentage.--
(i) In general.--In addition to the
amounts applied as a reduction under
subparagraph (B), for rebate periods
beginning on or after January 1, 2010,
during a fiscal year, the Secretary
shall reduce payments to a State under
section 1903(a) in the manner specified
in clause (ii), in an amount equal to
the product of--
(I) 100 percent minus the
Federal medical assistance
percentage applicable to the
rebate period for the State;
and
(II) the amounts received by
the State under such
subparagraph that are
attributable (as estimated by
the Secretary based on
utilization and other data) to
the increase in the minimum
rebate percentage effected by
the amendments made by
subsections (a)(1), (b), and
(d) of section 2501 of the
Patient Protection and
Affordable Care Act, taking
into account the additional
drugs included under the
amendments made by subsection
(c) of section 2501 of such
Act.
The Secretary shall adjust such payment
reduction for a calendar quarter to the
extent the Secretary determines, based
upon subsequent utilization and other
data, that the reduction for such
quarter was greater or less than the
amount of payment reduction that should
have been made.
(ii) Manner of payment reduction.--
The amount of the payment reduction
under clause (i) for a State for a
quarter shall be deemed an overpayment
to the State under this title to be
disallowed against the State's regular
quarterly draw for all Medicaid
spending under section 1903(d)(2). Such
a disallowance is not subject to a
reconsideration under section 1116(d).
(2) State provision of information.--
(A) State responsibility.--Each State agency
under this title shall report to each
manufacturer not later than 60 days after the
end of each rebate period and in a form
consistent with a standard reporting format
established by the Secretary, information on
the total number of units of each dosage form
and strength and package size of each covered
outpatient drug dispensed after December 31,
1990, for which payment was made under the plan
during the period, including such information
reported by each medicaid managed care
organization, and shall promptly transmit a
copy of such report to the Secretary.
(B) Audits.--A manufacturer may audit the
information provided (or required to be
provided) under subparagraph (A). Adjustments
to rebates shall be made to the extent that
information indicates that utilization was
greater or less than the amount previously
specified.
(3) Manufacturer provision of price information.--
(A) In general.--Each manufacturer with an
agreement in effect under this section shall
report to the Secretary--
(i) not later than 30 days after the
last day of each rebate period under
the agreement--
(I) on the average manufacturer price
(as defined in subsection (k)(1)) for
covered outpatient drugs for the rebate
period under the agreement (including
for all such drugs that are sold under
a new drug application approved under
section 505(c) of the Federal Food,
Drug, and Cosmetic Act); and
(II) for single source drugs and
innovator multiple source drugs
(including all such drugs that are sold
under a new drug application approved
under section 505(c) of the Federal
Food, Drug, and Cosmetic Act), on the
manufacturer's best price (as defined
in subsection (c)(1)(C)) for such drugs
for the rebate period under the
agreement;
(ii) not later than 30 days after the
date of entering into an agreement
under this section on the average
manufacturer price (as defined in
subsection (k)(1)) as of October 1,
1990 for each of the manufacturer's
covered outpatient drugs (including for
such drugs that are sold under a new
drug application approved under section
505(c) of the Federal Food, Drug, and
Cosmetic Act); and
(iii) for calendar quarters beginning
on or after January 1, 2004, in
conjunction with reporting required
under clause (i) and by National Drug
Code (including package size)--
(I) the manufacturer's
average sales price (as defined
in section 1847A(c)) and the
total number of units specified
under section 1847A(b)(2)(A);
(II) if required to make
payment under section 1847A,
the manufacturer's wholesale
acquisition cost, as defined in
subsection (c)(6) of such
section; and
(III) information on those
sales that were made at a
nominal price or otherwise
described in section
1847A(c)(2)(B);
for a drug or biological described in
subparagraph (C), (D), (E), or (G) of
section 1842(o)(1) or section
1881(b)(13)(A)(ii), and, for calendar
quarters beginning on or after January
1, 2007 and only with respect to the
information described in subclause
(III), for covered outpatient drugs.
(iv) not later than 30 days after the
last day of each month of a rebate
period under the agreement, on the
manufacturer's total number of units
that are used to calculate the monthly
average manufacturer price for each
covered outpatient drug;
Information reported under this subparagraph is
subject to audit by the Inspector General of
the Department of Health and Human Services.
Beginning July 1, 2006, the Secretary shall
provide on a monthly basis to States under
subparagraph (D)(iv) the most recently reported
average manufacturer prices for single source
drugs and for multiple source drugs and shall,
on at least a quarterly basis, update the
information posted on the website under
subparagraph (D)(v) (relating to the weighted
average of the most recently reported monthly
average manufacturer prices).
(B) Verification surveys of average
manufacturer price and manufacturer's average
sales price.--The Secretary may survey
wholesalers and manufacturers that directly
distribute their covered outpatient drugs, when
necessary, to verify manufacturer prices and
manufacturer's average sales prices (including
wholesale acquisition cost) if required to make
payment reported under subparagraph (A). The
Secretary may impose a civil monetary penalty
in an amount not to exceed $100,000 on a
wholesaler, manufacturer, or direct seller, if
the wholesaler, manufacturer, or direct seller
of a covered outpatient drug refuses a request
for information about charges or prices by the
Secretary in connection with a survey under
this subparagraph or knowingly provides false
information. The provisions of section 1128A
(other than subsections (a) (with respect to
amounts of penalties or additional assessments)
and (b)) shall apply to a civil money penalty
under this subparagraph in the same manner as
such provisions apply to a penalty or
proceeding under section 1128A(a).
(C) Penalties.--
(i) Failure to provide timely
information.--In the case of a
manufacturer with an agreement under
this section that fails to provide
information required under subparagraph
(A) on a timely basis, the amount of
the penalty shall be increased by
$10,000 for each day in which such
information has not been provided and
such amount shall be paid to the
Treasury, and, if such information is
not reported within 90 days of the
deadline imposed, the agreement shall
be suspended for services furnished
after the end of such 90-day period and
until the date such information is
reported (but in no case shall such
suspension be for a period of less than
30 days).
(ii) False information.--Any
manufacturer with an agreement under
this section that knowingly provides
false information is subject to a civil
money penalty in an amount not to
exceed $100,000 for each item of false
information. Such civil money penalties
are in addition to other penalties as
may be prescribed by law. The
provisions of section 1128A (other than
subsections (a) and (b)) shall apply to
a civil money penalty under this
subparagraph in the same manner as such
provisions apply to a penalty or
proceeding under section 1128A(a).
(D) Confidentiality of information.--
Notwithstanding any other provision of law,
information disclosed by manufacturers or
wholesalers under this paragraph or under an
agreement with the Secretary of Veterans
Affairs described in [subsection (a)(6)(A)(ii)]
subsection (a)(6)(A) (other than the wholesale
acquisition cost for purposes of carrying out
section 1847A) is confidential and shall not be
disclosed by the Secretary or the Secretary of
Veterans Affairs or a State agency (or
contractor therewith) in a form which discloses
the identity of a specific manufacturer or
wholesaler, prices charged for drugs by such
manufacturer or wholesaler, except--
(i) as the Secretary determines to be
necessary to carry out this section, to
carry out section 1847A (including the
determination and implementation of the
payment amount), or to carry out
section 1847B,
(ii) to permit the Comptroller
General to review the information
provided,
(iii) to permit the Director of the
Congressional Budget Office to review
the information provided,
(iv) to States to carry out this
title, [and]
(v) to the Secretary to disclose
(through a website accessible to the
public) the weighted average of the
most recently reported monthly average
manufacturer prices and the average
retail survey price determined for each
multiple source drug in accordance with
subsection (f)[.], and
(vi) to permit the Executive Director
of the Medicare Payment Advisory
Commission and the Executive Director
of the Medicaid and CHIP Payment and
Access Commission to review the
information provided.
The previous sentence shall also apply to
information disclosed under section 1860D-
2(d)(2) or [1860D-4(c)(2)(E)] 1860D-4(c)(2)(G)
and drug pricing data reported under the first
sentence of section 1860D-31(i)(1). Any
information disclosed to the Executive Director
of the Medicare Payment Advisory Commission or
the Executive Director of the Medicaid and CHIP
Payment and Access Commission pursuant to this
subparagraph shall not be disclosed by either
such Executive Director in a form which
discloses the identity of a specific
manufacturer or wholesaler or prices charged
for drugs by such manufacturer or wholesaler.
(4) Length of agreement.--
(A) In general.--A rebate agreement shall be
effective for an initial period of not less
than 1 year and shall be automatically renewed
for a period of not less than one year unless
terminated under subparagraph (B).
(B) Termination.--
(i) By the secretary.--The Secretary
may provide for termination of a rebate
agreement for violation of the
requirements of the agreement or other
good cause shown. Such termination
shall not be effective earlier than 60
days after the date of notice of such
termination. The Secretary shall
provide, upon request, a manufacturer
with a hearing concerning such a
termination, but such hearing shall not
delay the effective date of the
termination.
(ii) By a manufacturer.--A
manufacturer may terminate a rebate
agreement under this section for any
reason. Any such termination shall not
be effective until the calendar quarter
beginning at least 60 days after the
date the manufacturer provides notice
to the Secretary.
(iii) Effectiveness of termination.--
Any termination under this subparagraph
shall not affect rebates due under the
agreement before the effective date of
its termination.
(iv) Notice to states.--In the case
of a termination under this
subparagraph, the Secretary shall
provide notice of such termination to
the States within not less than 30 days
before the effective date of such
termination.
(v) Application to terminations of
other agreements.--The provisions of
this subparagraph shall apply to the
terminations of agreements described in
section 340B(a)(1) of the Public Health
Service Act and master agreements
described in section 8126(a) of title
38, United States Code.
(C) Delay before reentry.--In the case of any
rebate agreement with a manufacturer under this
section which is terminated, another such
agreement with the manufacturer (or a successor
manufacturer) may not be entered into until a
period of 1 calendar quarter has elapsed since
the date of the termination, unless the
Secretary finds good cause for an earlier
reinstatement of such an agreement.
(c) Determination of Amount of Rebate.--
(1) Basic rebate for single source drugs and
innovator multiple source drugs.--
(A) In general.--Except as provided in
paragraph (2), the amount of the rebate
specified in this subsection for a rebate
period (as defined in subsection (k)(8)) with
respect to each dosage form and strength of a
single source drug or an innovator multiple
source drug shall be equal to the product of--
(i) the total number of units of each
dosage form and strength paid for under
the State plan in the rebate period (as
reported by the State); and
(ii) subject to subparagraph (B)(ii),
the greater of--
(I) the difference between
the average manufacturer price
and the best price (as defined
in subparagraph (C)) for the
dosage form and strength of the
drug, or
(II) the minimum rebate
percentage (specified in
subparagraph (B)(i)) of such
average manufacturer price,
of or the rebate period.
(B) Range of rebates required.--
(i) Minimum rebate percentage.--For
purposes of subparagraph (A)(ii)(II),
the ``minimum rebate percentage'' for
rebate periods beginning--
(I) after December 31, 1990,
and before October 1, 1992, is
12.5 percent;
(II) after September 30,
1992, and before January 1,
1994, is 15.7 percent;
(III) after December 31,
1993, and before January 1,
1995, is 15.4 percent;
(IV) after December 31, 1994,
and before January 1, 1996, is
15.2 percent;
(V) after December 31, 1995,
and before January 1, 2010 is
15.1 percent;and
(VI) except as provided in
clause (iii), after December
31, 2009, 23.1 percent.
(ii) Temporary limitation on maximum
rebate amount.--In no case shall the
amount applied under subparagraph
(A)(ii) for a rebate period beginning--
(I) before January 1, 1992,
exceed 25 percent of the
average manufacturer price; or
(II) after December 31, 1991,
and before January 1, 1993,
exceed 50 percent of the
average manufacturer price.
(iii) Minimum rebate percentage for
certain drugs.--
(I) In general.--In the case
of a single source drug or an
innovator multiple source drug
described in subclause (II),
the minimum rebate percentage
for rebate periods specified in
clause (i)(VI) is 17.1 percent.
(II) Drug described.--For
purposes of subclause (I), a
single source drug or an
innovator multiple source drug
described in this subclause is
any of the following drugs:
(aa) A clotting
factor for which a
separate furnishing
payment is made under
section 1842(o)(5) and
which is included on a
list of such factors
specified and updated
regularly by the
Secretary.
(bb) A drug approved
by the Food and Drug
Administration
exclusively for
pediatric indications.
(C) Best price defined.--For purposes of this
section--
(i) In general.--The term ``best
price'' means, with respect to a single
source drug or innovator multiple
source drug of a manufacturer
(including the lowest price available
to any entity for any such drug of a
manufacturer that is sold under a new
drug application approved under section
505(c) of the Federal Food, Drug, and
Cosmetic Act), the lowest price
available from the manufacturer during
the rebate period to any wholesaler,
retailer, provider, health maintenance
organization, nonprofit entity, or
governmental entity within the United
States, excluding--
(I) any prices charged on or
after October 1, 1992, to the
Indian Health Service, the
Department of Veterans Affairs,
a State home receiving funds
under section 1741 of title 38,
United States Code, the
Department of Defense, the
Public Health Service, or a
covered entity described in
subsection (a)(5)(B) (including
inpatient prices charged to
hospitals described in section
340B(a)(4)(L) of the Public
Health Service Act);
(II) any prices charged under
the Federal Supply Schedule of
the General Services
Administration;
(III) any prices used under a
State pharmaceutical assistance
program;
(IV) any depot prices and
single award contract prices,
as defined by the Secretary, of
any agency of the Federal
Government;
(V) the prices negotiated
from drug manufacturers for
covered discount card drugs
under an endorsed discount card
program under section 1860D-31;
and
(VI) any prices charged which
are negotiated by a
prescription drug plan under
part D of title XVIII, by an
MA-PD plan under part C of such
title with respect to covered
part D drugs or by a qualified
retiree prescription drug plan
(as defined in section 1860D-
22(a)(2)) with respect to such
drugs on behalf of individuals
entitled to benefits under part
A or enrolled under part B of
such title, or any discounts
provided by manufacturers under
the Medicare coverage gap
discount program under section
1860D-14A.
(ii) Special rules.--The term ``best
price''--
(I) shall be inclusive of
cash discounts, free goods that
are contingent on any purchase
requirement, volume discounts,
and rebates (other than rebates
under this section);
(II) shall be determined
without regard to special
packaging, labeling, or
identifiers on the dosage form
or product or package;
(III) shall not take into
account prices that are merely
nominal in amount; and
(IV) in the case of a manufacturer
that approves, allows, or otherwise
permits any other drug of the
manufacturer to be sold under a new
drug application approved under section
505(c) of the Federal Food, Drug, and
Cosmetic Act, shall be inclusive of the
lowest price for such authorized drug
available from the manufacturer during
the rebate period to any manufacturer,
wholesaler, retailer, provider, health
maintenance organization, nonprofit
entity, or governmental entity within
the United States, excluding those
prices described in subclauses (I)
through (IV) of clause (i).
(iii) Application of auditing and
recordkeeping requirements.--With
respect to a covered entity described
in section 340B(a)(4)(L) of the Public
Health Service Act, any drug purchased
for inpatient use shall be subject to
the auditing and recordkeeping
requirements described in section
340B(a)(5)(C) of the Public Health
Service Act.
(D) Limitation on sales at a nominal price.--
(i) In general.--For purposes of
subparagraph (C)(ii)(III) and
subsection (b)(3)(A)(iii)(III), only
sales by a manufacturer of covered
outpatient drugs at nominal prices to
the following shall be considered to be
sales at a nominal price or merely
nominal in amount:
(I) A covered entity
described in section 340B(a)(4)
of the Public Health Service
Act.
(II) An intermediate care
facility for the mentally
retarded.
(III) A State-owned or
operated nursing facility.
(IV) An entity that--
(aa) is described in
section 501(c)(3) of
the Internal Revenue
Code of 1986 and exempt
from tax under section
501(a) of such Act or
is State-owned or
operated; and
(bb) would be a
covered entity
described in section
340(B)(a)(4) of the
Public Health Service
Act insofar as the
entity provides the
same type of services
to the same type of
populations as a
covered entity
described in such
section provides, but
does not receive
funding under a
provision of law
referred to in such
section;
(V) A public or nonprofit
entity, or an entity based at
an institution of higher
learning whose primary purpose
is to provide health care
services to students of that
institution, that provides a
service or services described
under section 1001(a) of the
Public Health Service Act, 42
U.S.C. 300.
(VI) Any other facility or
entity that the Secretary
determines is a safety net
provider to which sales of such
drugs at a nominal price would
be appropriate based on the
factors described in clause
(ii).
(ii) Factors.--The factors described
in this clause with respect to a
facility or entity are the following:
(I) The type of facility or
entity.
(II) The services provided by
the facility or entity.
(III) The patient population
served by the facility or
entity.
(IV) The number of other
facilities or entities eligible
to purchase at nominal prices
in the same service area.
(iii) Nonapplication.--Clause (i)
shall not apply with respect to sales
by a manufacturer at a nominal price of
covered outpatient drugs pursuant to a
master agreement under section 8126 of
title 38, United States Code.
(iv) Rule of Construction.--Nothing
in this subparagraph shall be construed
to alter any existing statutory or
regulatory prohibition on services with
respect to an entity described in
clause (i)(IV), including the
prohibition set forth in section 1008
of the Public Health Service Act.
(2) Additional rebate for single source and innovator
multiple source drugs.--
(A) In general.--The amount of the rebate
specified in this subsection for a rebate
period, with respect to each dosage form and
strength of a single source drug or an
innovator multiple source drug, shall be
increased by an amount equal to the product
of--
(i) the total number of units of such
dosage form and strength dispensed
after December 31, 1990, for which
payment was made under the State plan
for the rebate period; and
(ii) the amount (if any) by which--
(I) the average manufacturer
price for the dosage form and
strength of the drug for the
period, exceeds
(II) the average manufacturer
price for such dosage form and
strength for the calendar
quarter beginning July 1, 1990
(without regard to whether or
not the drug has been sold or
transferred to an entity,
including a division or
subsidiary of the manufacturer,
after the first day of such
quarter), increased by the
percentage by which the
consumer price index for all
urban consumers (United States
city average) for the month
before the month in which the
rebate period begins exceeds
such index for September 1990.
(B) Treatment of subsequently approved
drugs.--In the case of a covered outpatient
drug approved by the Food and Drug
Administration after October 1, 1990, clause
(ii)(II) of subparagraph (A) shall be applied
by substituting ``the first full calendar
quarter after the day on which the drug was
first marketed'' for ``the calendar quarter
beginning July 1, 1990'' and ``the month prior
to the first month of the first full calendar
quarter after the day on which the drug was
first marketed'' for ``September 1990''.
(C) Treatment of new formulations.--
(i) In general.--In the case of a
drug that is a line extension of a
single source drug or an innovator
multiple source drug that is an oral
solid dosage form, the rebate
obligation for a rebate period with
respect to such drug under this
subsection shall be the greater of the
amount described in clause (ii) for
such drug or the amount described in
clause (iii) for such drug.
(ii) Amount 1.--For purposes of
clause (i), the amount described in
this clause with respect to a drug
described in clause (i) and rebate
period is the amount computed under
paragraph (1) for such drug, increased
by the amount computed under
subparagraph (A) and, as applicable,
subparagraph (B) for such drug and
rebate period.
(iii) Amount 2.--For purposes of
clause (i), the amount described in
this clause with respect to a drug
described in clause (i) and rebate
period is the amount computed under
paragraph (1) for such drug, increased
by the product of--
(I) the average manufacturer
price for the rebate period of
the line extension of a single
source drug or an innovator
multiple source drug that is an
oral solid dosage form;
(II) the highest additional
rebate (calculated as a
percentage of average
manufacturer price) under this
paragraph for the rebate period
for any strength of the
original single source drug or
innovator multiple source drug;
and
(III) the total number of
units of each dosage form and
strength of the line extension
product paid for under the
State plan in the rebate period
(as reported by the State).
In this subparagraph, the term ``line
extension'' means, with respect to a drug, a
new formulation of the drug, such as an
extended release formulation, but does not
include an abuse-deterrent formulation of the
drug (as determined by the Secretary),
regardless of whether such abuse-deterrent
formulation is an extended release formulation.
(D) Maximum rebate amount.--In no case shall
the sum of the amounts applied under paragraph
(1)(A)(ii) and this paragraph with respect to
each dosage form and strength of a single
source drug or an innovator multiple source
drug for a rebate period beginning after
December 31, 2009, exceed 100 percent of the
average manufacturer price of the drug.
(3) Rebate for other drugs.--
(A) In general.--Except as provided in
subparagraph (C), the amount of the rebate paid
to a State for a rebate period with respect to
each dosage form and strength of covered
outpatient drugs (other than single source
drugs and innovator multiple source drugs)
shall be equal to the product of--
(i) the applicable percentage (as
described in subparagraph (B)) of the
average manufacturer price for the
dosage form and strength for the rebate
period, and
(ii) the total number of units of
such dosage form and strength dispensed
after December 31, 1990, for which
payment was made under the State plan
for the rebate period.
(B) Applicable percentage defined.--For
purposes of subparagraph (A)(i), the
``applicable percentage'' for rebate periods
beginning--
(i) before January 1, 1994, is 10
percent,
(ii) after December 31, 1993, and
before January 1, 2010, is 11 percent;
and
(iii) after December 31, 2009, is 13
percent.
(C) Additional rebate.--
(i) In general.--The amount of the
rebate specified in this paragraph for
a rebate period, with respect to each
dosage form and strength of a covered
outpatient drug other than a single
source drug or an innovator multiple
source drug of a manufacturer, shall be
increased in the manner that the rebate
for a dosage form and strength of a
single source drug or an innovator
multiple source drug is increased under
subparagraphs (A) and (D) of paragraph
(2), except as provided in clause (ii).
(ii) Special rules for application of
provision.--In applying subparagraphs
(A) and (D) of paragraph (2) under
clause (i)--
(I) the reference in
subparagraph (A)(i) of such
paragraph to ``1990'' shall be
deemed a reference to ``2014'';
(II) subject to clause (iii),
the reference in subparagraph
(A)(ii) of such paragraph to
``the calendar quarter
beginning July 1, 1990'' shall
be deemed a reference to ``the
calendar quarter beginning July
1, 2014''; and
(III) subject to clause
(iii), the reference in
subparagraph (A)(ii) of such
paragraph to ``September 1990''
shall be deemed a reference to
``September 2014'';
(IV) the references in
subparagraph (D) of such
paragraph to ``paragraph
(1)(A)(ii)'', ``this
paragraph'', and ``December 31,
2009'' shall be deemed
references to ``subparagraph
(A)'', ``this subparagraph'',
and ``December 31, 2014'',
respectively; and
(V) any reference in such
paragraph to a ``single source
drug or an innovator multiple
source drug'' shall be deemed
to be a reference to a drug to
which clause (i) applies.
(iii) Special rule for certain
noninnovator multiple source drugs.--In
applying paragraph (2)(A)(ii)(II) under
clause (i) with respect to a covered
outpatient drug that is first marketed
as a drug other than a single source
drug or an innovator multiple source
drug after April 1, 2013, such
paragraph shall be applied--
(I) by substituting ``the
applicable quarter'' for ``the
calendar quarter beginning July
1, 1990''; and
(II) by substituting ``the
last month in such applicable
quarter'' for ``September
1990''.
(iv) Applicable quarter defined.--In
this subsection, the term ``applicable
quarter'' means, with respect to a drug
described in clause (iii), the fifth
full calendar quarter after which the
drug is marketed as a drug other than a
single source drug or an innovator
multiple source drug.
(d) Limitations on Coverage of Drugs.--
(1) Permissible restrictions.--(A) A State may
subject to prior authorization any covered outpatient
drug. Any such prior authorization program shall comply
with the requirements of paragraph (5).
(B) A State may exclude or otherwise restrict
coverage of a covered outpatient drug if--
(i) the prescribed use is not for a medically
accepted indication (as defined in subsection
(k)(6));
(ii) the drug is contained in the list
referred to in paragraph (2);
(iii) the drug is subject to such
restrictions pursuant to an agreement between a
manufacturer and a State authorized by the
Secretary under subsection (a)(1) or in effect
pursuant to subsection (a)(4); or
(iv) the State has excluded coverage of the
drug from its formulary established in
accordance with paragraph (4).
(2) List of drugs subject to restriction.--The
following drugs or classes of drugs, or their medical
uses, may be excluded from coverage or otherwise
restricted:
(A) Agents when used for anorexia, weight
loss, or weight gain.
(B) Agents when used to promote fertility.
(C) Agents when used for cosmetic purposes or
hair growth.
(D) Agents when used for the symptomatic
relief of cough and colds.
(E) Prescription vitamins and mineral
products, except prenatal vitamins and fluoride
preparations.
(F) Nonprescription drugs, except, in the
case of pregnant women when recommended in
accordance with the Guideline referred to in
section 1905(bb)(2)(A), agents approved by the
Food and Drug Administration under the over-
the-counter monograph process for purposes of
promoting, and when used to promote, tobacco
cessation.
(G) Covered outpatient drugs which the
manufacturer seeks to require as a condition of
sale that associated tests or monitoring
services be purchased exclusively from the
manufacturer or its designee.
(H) Agents when used for the treatment of
sexual or erectile dysfunction, unless such
agents are used to treat a condition, other
than sexual or erectile dysfunction, for which
the agents have been approved by the Food and
Drug Administration.
(3) Update of drug listings.--The Secretary shall, by
regulation, periodically update the list of drugs or
classes of drugs described in paragraph (2) or their
medical uses, which the Secretary has determined, based
on data collected by surveillance and utilization
review programs of State medical assistance programs,
to be subject to clinical abuse or inappropriate use.
(4) Requirements for formularies.--A State may
establish a formulary if the formulary meets the
following requirements:
(A) The formulary is developed by a committee
consisting of physicians, pharmacists, and
other appropriate individuals appointed by the
Governor of the State (or, at the option of the
State, the State's drug use review board
established under subsection (g)(3)).
(B) Except as provided in subparagraph (C),
the formulary includes the covered outpatient
drugs of any manufacturer which has entered
into and complies with an agreement under
subsection (a) (other than any drug excluded
from coverage or otherwise restricted under
paragraph (2)).
(C) A covered outpatient drug may be excluded
with respect to the treatment of a specific
disease or condition for an identified
population (if any) only if, based on the
drug's labeling (or, in the case of a drug the
prescribed use of which is not approved under
the Federal Food, Drug, and Cosmetic Act but is
a medically accepted indication, based on
information from the appropriate compendia
described in subsection (k)(6)), the excluded
drug does not have a significant, clinically
meaningful therapeutic advantage in terms of
safety, effectiveness, or clinical outcome of
such treatment for such population over other
drugs included in the formulary and there is a
written explanation (available to the public)
of the basis for the exclusion.
(D) The State plan permits coverage of a drug
excluded from the formulary (other than any
drug excluded from coverage or otherwise
restricted under paragraph (2)) pursuant to a
prior authorization program that is consistent
with paragraph (5).
(E) The formulary meets such other
requirements as the Secretary may impose in
order to achieve program savings consistent
with protecting the health of program
beneficiaries.
A prior authorization program established by a State
under paragraph (5) is not a formulary subject to the
requirements of this paragraph.
(5) Requirements of prior authorization programs.--A
State plan under this title may require, as a condition
of coverage or payment for a covered outpatient drug
for which Federal financial participation is available
in accordance with this section, with respect to drugs
dispensed on or after July 1, 1991, the approval of the
drug before its dispensing for any medically accepted
indication (as defined in subsection (k)(6)) only if
the system providing for such approval--
(A) provides response by telephone or other
telecommunication device within 24 hours of a
request for prior authorization; and
(B) except with respect to the drugs on the
list referred to in paragraph (2), provides for
the dispensing of at least 72-hour supply of a
covered outpatient prescription drug in an
emergency situation (as defined by the
Secretary).
(6) Other permissible restrictions.--A State may
impose limitations, with respect to all such drugs in a
therapeutic class, on the minimum or maximum quantities
per prescription or on the number of refills, if such
limitations are necessary to discourage waste, and may
address instances of fraud or abuse by individuals in
any manner authorized under this Act.
(7) Non-excludable drugs.--The following drugs or
classes of drugs, or their medical uses, shall not be
excluded from coverage:
(A) Agents when used to promote smoking
cessation, including agents approved by the
Food and Drug Administration under the over-
the-counter monograph process for purposes of
promoting, and when used to promote, tobacco
cessation.
(B) Barbiturates.
(C) Benzodiazepines.
(e) Treatment of Pharmacy Reimbursement Limits.--
(1) In general.--During the period beginning on
January 1, 1991, and ending on December 31, 1994--
(A) a State may not reduce the payment limits
established by regulation under this title or
any limitation described in paragraph (3) with
respect to the ingredient cost of a covered
outpatient drug or the dispensing fee for such
a drug below the limits in effect as of January
1, 1991, and
(B) except as provided in paragraph (2), the
Secretary may not modify by regulation the
formula established under sections 447.331
through 447.334 of title 42, Code of Federal
Regulations, in effect on November 5, 1990, to
reduce the limits described in subparagraph
(A).
(2) Special rule.--If a State is not in compliance
with the regulations described in paragraph (1)(B),
paragraph (1)(A) shall not apply to such State until
such State is in compliance with such regulations.
(3) Effect on state maximum allowable cost
limitations.--This section shall not supersede or
affect provisions in effect prior to January 1, 1991,
or after December 31, 1994, relating to any maximum
allowable cost limitation established by a State for
payment by the State for covered outpatient drugs, and
rebates shall be made under this section without regard
to whether or not payment by the State for such drugs
is subject to such a limitation or the amount of such a
limitation.
(4) Establishment of upper payment Limits.--Subject
to paragraph (5), the Secretary shall establish a
Federal upper reimbursement limit for each multiple
source drug for which the FDA has rated three or more
products therapeutically and pharmaceutically
equivalent, regardless of whether all such additional
formulations are rated as such and shall use only such
formulations when determining any such upper limit.
(5) Use of amp in upper payment limits.--The
Secretary shall calculate the Federal upper
reimbursement limit established under paragraph (4) as
no less than 175 percent of the weighted average
(determined on the basis of utilization) of the most
recently reported monthly average manufacturer prices
for pharmaceutically and therapeutically equivalent
multiple source drug products that are available for
purchase by retail community pharmacies on a nationwide
basis. The Secretary shall implement a smoothing
process for average manufacturer prices. Such process
shall be similar to the smoothing process used in
determining the average sales price of a drug or
biological under section 1847A.
(f) Survey of Retail Prices; State Payment and Utilization
Rates; and Performance Rankings.--
(1) Survey of retail prices.--
(A) Use of vendor.--The Secretary may
contract services for--
(i) with respect to a retail
community pharmacy, the determination
on a monthly basis of retail survey
prices for covered outpatient drugs
that represent a nationwide average of
consumer purchase prices for such
drugs, net of all discounts and rebates
(to the extent any information with
respect to such discounts and rebates
is available); and
(ii) the notification of the
Secretary when a drug product that is
therapeutically and pharmaceutically
equivalent and bioequivalent becomes
generally available.
(B) Secretary response to notification of
availability of multiple source products.--If
contractor notifies the Secretary under
subparagraph (A)(ii) that a drug product
described in such subparagraph has become
generally available, the Secretary shall make a
determination, within 7 days after receiving
such notification, as to whether the product is
now described in subsection (e)(4).
(C) Use of competitive bidding.--In
contracting for such services, the Secretary
shall competitively bid for an outside vendor
that has a demonstrated history in--
(i) surveying and determining, on a
representative nationwide basis, retail
prices for ingredient costs of
prescription drugs;
(ii) working with retail community
pharmacies, commercial payers, and
States in obtaining and disseminating
such price information; and
(iii) collecting and reporting such
price information on at least a monthly
basis.
In contracting for such services, the Secretary
may waive such provisions of the Federal
Acquisition Regulation as are necessary for the
efficient implementation of this subsection,
other than provisions relating to
confidentiality of information and such other
provisions as the Secretary determines
appropriate.
(D) Additional provisions.--A contract with a
vendor under this paragraph shall include such
terms and conditions as the Secretary shall
specify, including the following:
(i) The vendor must monitor the
marketplace and report to the Secretary
each time there is a new covered
outpatient drug generally available.
(ii) The vendor must update the
Secretary no less often than monthly on
the retail survey prices for covered
outpatient drugs.
(iii) The contract shall be effective
for a term of 2 years.
(E) Availability of information to states.--
Information on retail survey prices obtained
under this paragraph, including applicable
information on single source drugs, shall be
provided to States on at least a monthly basis.
The Secretary shall devise and implement a
means for providing access to each State agency
designated under section 1902(a)(5) with
responsibility for the administration or
supervision of the administration of the State
plan under this title of the retail survey
price determined under this paragraph.
(2) Annual state report.--Each State shall annually
report to the Secretary information on--
(A) the payment rates under the State plan
under this title for covered outpatient drugs;
(B) the dispensing fees paid under such plan
for such drugs; and
(C) utilization rates for noninnovator
multiple source drugs under such plan.
(3) Annual state performance rankings.--
(A) Comparative analysis.--The Secretary
annually shall compare, for the 50 most widely
prescribed drugs identified by the Secretary,
the national retail sales price data (collected
under paragraph (1)) for such drugs with data
on prices under this title for each such drug
for each State.
(B) Availability of information.--The
Secretary shall submit to Congress and the
States full information regarding the annual
rankings made under subparagraph (A).
(4) Appropriation.--Out of any funds in the Treasury
not otherwise appropriated, there is appropriated to
the Secretary of Health and Human Services $5,000,000
for each of fiscal years 2006 through 2010 to carry out
this subsection.
(g) Drug Use Review.--
(1) In general.--
(A) In order to meet the requirement of
section 1903(i)(10)(B), a State shall provide,
by not later than January 1, 1993, for a drug
use review program described in paragraph (2)
for covered outpatient drugs in order to assure
that prescriptions (i) are appropriate, (ii)
are medically necessary, and (iii) are not
likely to result in adverse medical results.
The program shall be designed to educate
physicians and pharmacists to identify and
reduce the frequency of patterns of fraud,
abuse, gross overuse, or inappropriate or
medically unnecessary care, among physicians,
pharmacists, and patients, or associated with
specific drugs or groups of drugs, as well as
potential and actual severe adverse reactions
to drugs including education on therapeutic
appropriateness, overutilization and
underutilization, appropriate use of generic
products, therapeutic duplication, drug-disease
contraindications, drug-drug interactions,
incorrect drug dosage or duration of drug
treatment, drug-allergy interactions, and
clinical abuse/misuse.
(B) The program shall assess data on drug use
against predetermined standards, consistent
with the following:
(i) compendia which shall consist of
the following:
(I) American Hospital
Formulary Service Drug
Information;
(II) United States
Pharmacopeia-Drug Information
(or its successor
publications); and
(III) the DRUGDEX Information
System; and
(ii) the peer-reviewed medical
literature.
(C) The Secretary, under the procedures
established in section 1903, shall pay to each
State an amount equal to 75 per centum of so
much of the sums expended by the State plan
during calendar years 1991 through 1993 as the
Secretary determines is attributable to the
statewide adoption of a drug use review program
which conforms to the requirements of this
subsection.
(D) States shall not be required to perform
additional drug use reviews with respect to
drugs dispensed to residents of nursing
facilities which are in compliance with the
drug regimen review procedures prescribed by
the Secretary for such facilities in
regulations implementing section 1919,
currently at section 483.60 of title 42, Code
of Federal Regulations.
(2) Description of program.--Each drug use review
program shall meet the following requirements for
covered outpatient drugs:
(A) Prospective drug review.--(i) The State
plan shall provide for a review of drug therapy
before each prescription is filled or delivered
to an individual receiving benefits under this
title, typically at the point-of-sale or point
of distribution. The review shall include
screening for potential drug therapy problems
due to therapeutic duplication, drug-disease
contraindications, drug-drug interactions
(including serious interactions with
nonprescription or over-the-counter drugs),
incorrect drug dosage or duration of drug
treatment, drug-allergy interactions, and
clinical abuse/misuse. Each State shall use the
compendia and literature referred to in
paragraph (1)(B) as its source of standards for
such review.
(ii) As part of the State's prospective drug
use review program under this subparagraph
applicable State law shall establish standards
for counseling of individuals receiving
benefits under this title by pharmacists which
includes at least the following:
(I) The pharmacist must offer to
discuss with each individual receiving
benefits under this title or caregiver
of such individual (in person, whenever
practicable, or through access to a
telephone service which is toll-free
for long-distance calls) who presents a
prescription, matters which in the
exercise of the pharmacist's
professional judgment (consistent with
State law respecting the provision of
such information), the pharmacist deems
significant including the following:
(aa) The name and description
of the medication.
(bb) The route, dosage form,
dosage, route of
administration, and duration of
drug therapy.
(cc) Special directions and
precautions for preparation,
administration and use by the
patient.
(dd) Common severe side or
adverse effects or interactions
and therapeutic
contraindications that may be
encountered, including their
avoidance, and the action
required if they occur.
(ee) Techniques for self-
monitoring drug therapy.
(ff) Proper storage.
(gg) Prescription refill
information.
(hh) Action to be taken in
the event of a missed dose.
(II) A reasonable effort must be made
by the pharmacist to obtain, record,
and maintain at least the following
information regarding individuals
receiving benefits under this title:
(aa) Name, address, telephone
number, date of birth (or age)
and gender.
(bb) Individual history where
significant, including disease
state or states, known
allergies and drug reactions,
and a comprehensive list of
medications and relevant
devices.
(cc) Pharmacist comments
relevant to the individual's
drug therapy.
Nothing in this clause shall be construed as
requiring a pharmacist to provide consultation
when an individual receiving benefits under
this title or caregiver of such individual
refuses such consultation, or to require
verification of the offer to provide
consultation or a refusal of such offer.
(B) Retrospective drug use review.--The
program shall provide, through its mechanized
drug claims processing and information
retrieval systems (approved by the Secretary
under section 1903(r)) or otherwise, for the
ongoing periodic examination of claims data and
other records in order to identify patterns of
fraud, abuse, gross overuse, or inappropriate
or medically unnecessary care, among
physicians, pharmacists and individuals
receiving benefits under this title, or
associated with specific drugs or groups of
drugs.
(C) Application of standards.--The program
shall, on an ongoing basis, assess data on drug
use against explicit predetermined standards
(using the compendia and literature referred to
in subsection (1)(B) as the source of standards
for such assessment) including but not limited
to monitoring for therapeutic appropriateness,
overutilization and underutilization,
appropriate use of generic products,
therapeutic duplication, drug-disease
contraindications, drug-drug interactions,
incorrect drug dosage or duration of drug
treatment, and clinical abuse/misuse and, as
necessary, introduce remedial strategies, in
order to improve the quality of care and to
conserve program funds or personal
expenditures.
(D) Educational program.--The program shall,
through its State drug use review board
established under paragraph (3), either
directly or through contracts with accredited
health care educational institutions, State
medical societies or State pharmacists
associations/societies or other organizations
as specified by the State, and using data
provided by the State drug use review board on
common drug therapy problems, provide for
active and ongoing educational outreach
programs (including the activities described in
paragraph (3)(C)(iii) of this subsection) to
educate practitioners on common drug therapy
problems with the aim of improving prescribing
or dispensing practices.
(3) State drug use review board.--
(A) Establishment.--Each State shall provide
for the establishment of a drug use review
board (hereinafter referred to as the ``DUR
Board'') either directly or through a contract
with a private organization.
(B) Membership.--The membership of the DUR
Board shall include health care professionals
who have recognized knowledge and expertise in
one or more of the following:
(i) The clinically appropriate
prescribing of covered outpatient
drugs.
(ii) The clinically appropriate
dispensing and monitoring of covered
outpatient drugs.
(iii) Drug use review, evaluation,
and intervention.
(iv) Medical quality assurance.
The membership of the DUR Board shall be made
up at least \1/3\ but no more than 51 percent
licensed and actively practicing physicians and
at least \1/3\ licensed and actively practicing
pharmacists.
(C) Activities.--The activities of the DUR
Board shall include but not be limited to the
following:
(i) Retrospective DUR as defined in
section (2)(B).
(ii) Application of standards as
defined in section (2)(C).
(iii) Ongoing interventions for
physicians and pharmacists, targeted
toward therapy problems or individuals
identified in the course of
retrospective drug use reviews
performed under this subsection.
Intervention programs shall include, in
appropriate instances, at least:
(I) information dissemination
sufficient to ensure the ready
availability to physicians and
pharmacists in the State of
information concerning its
duties, powers, and basis for
its standards;
(II) written, oral, or
electronic reminders containing
patient-specific or drug-
specific (or both) information
and suggested changes in
prescribing or dispensing
practices, communicated in a
manner designed to ensure the
privacy of patient-related
information;
(III) use of face-to-face
discussions between health care
professionals who are experts
in rational drug therapy and
selected prescribers and
pharmacists who have been
targeted for educational
intervention, including
discussion of optimal
prescribing, dispensing, or
pharmacy care practices, and
follow-up face-to-face
discussions; and
(IV) intensified review or
monitoring of selected
prescribers or dispensers.
The Board shall re-evaluate interventions after
an appropriate period of time to determine if
the intervention improved the quality of drug
therapy, to evaluate the success of the
interventions and make modifications as
necessary.
(D) Annual report.--Each State shall require
the DUR Board to prepare a report on an annual
basis. The State shall submit a report on an
annual basis to the Secretary which shall
include a description of the activities of the
Board, including the nature and scope of the
prospective and retrospective drug use review
programs, a summary of the interventions used,
an assessment of the impact of these
educational interventions on quality of care,
and an estimate of the cost savings generated
as a result of such program. The Secretary
shall utilize such report in evaluating the
effectiveness of each State's drug use review
program.
(h) Electronic Claims Management.--
(1) In general.--In accordance with chapter 35 of
title 44, United States Code (relating to coordination
of Federal information policy), the Secretary shall
encourage each State agency to establish, as its
principal means of processing claims for covered
outpatient drugs under this title, a point-of-sale
electronic claims management system, for the purpose of
performing on-line, real time eligibility
verifications, claims data capture, adjudication of
claims, and assisting pharmacists (and other authorized
persons) in applying for and receiving payment.
(2) Encouragement.--In order to carry out paragraph
(1)--
(A) for calendar quarters during fiscal years
1991 and 1992, expenditures under the State
plan attributable to development of a system
described in paragraph (1) shall receive
Federal financial participation under section
1903(a)(3)(A)(i) (at a matching rate of 90
percent) if the State acquires, through
applicable competitive procurement process in
the State, the most cost-effective
telecommunications network and automatic data
processing services and equipment; and
(B) the Secretary may permit, in the
procurement described in subparagraph (A) in
the application of part 433 of title 42, Code
of Federal Regulations, and parts 95, 205, and
307 of title 45, Code of Federal Regulations,
the substitution of the State's request for
proposal in competitive procurement for advance
planning and implementation documents otherwise
required.
(i) Annual Report.--
(1) In general.--Not later than May 1 of each year
the Secretary shall transmit to the Committee on
Finance of the Senate, the Committee on Energy and
Commerce of the House of Representatives, and the
Committees on Aging of the Senate and the House of
Representatives a report on the operation of this
section in the preceding fiscal year.
(2) Details.--Each report shall include information
on--
(A) ingredient costs paid under this title
for single source drugs, multiple source drugs,
and nonprescription covered outpatient drugs;
(B) the total value of rebates received and
number of manufacturers providing such rebates;
(C) how the size of such rebates compare with
the size or rebates offered to other purchasers
of covered outpatient drugs;
(D) the effect of inflation on the value of
rebates required under this section;
(E) trends in prices paid under this title
for covered outpatient drugs; and
(F) Federal and State administrative costs
associated with compliance with the provisions
of this title.
(j) Exemption of Organized Health Care Settings.--
(1) Covered outpatient drugs are not subject to the
requirements of this section if such drugs are--
(A) dispensed by health maintenance
organizations, including Medicaid managed care
organizations that contract under section
1903(m); and
(B) subject to discounts under section 340B
of the Public Health Service Act.
(2) The State plan shall provide that a hospital (providing
medical assistance under such plan) that dispenses covered
outpatient drugs using drug formulary systems, and bills the
plan no more than the hospital's purchasing costs for covered
outpatient drugs (as determined under the State plan) shall not
be subject to the requirements of this section.
(3) Nothing in this subsection shall be construed as
providing that amounts for covered outpatient drugs paid by the
institutions described in this subsection should not be taken
into account for purposes of determining the best price as
described in subsection (c).
(k) Definitions.--In the section--
(1) Average manufacturer price.--
(A) In general.--Subject to subparagraph (B),
the term ``average manufacturer price'' means,
with respect to a covered outpatient drug of a
manufacturer for a rebate period, the average
price paid to the manufacturer for the drug in
the United States by--
(i) wholesalers for drugs distributed
to retail community pharmacies; and
(ii) retail community pharmacies that
purchase drugs directly from the
manufacturer.
(B) Exclusion of customary prompt pay
discounts and other payments.--
(i) In general.--The average
manufacturer price for a covered
outpatient drug shall exclude--
(I) customary prompt pay
discounts extended to
wholesalers;
(II) bona fide service fees
paid by manufacturers to
wholesalers or retail community
pharmacies, including (but not
limited to) distribution
service fees, inventory
management fees, product
stocking allowances, and fees
associated with administrative
services agreements and patient
care programs (such as
medication compliance programs
and patient education
programs);
(III) reimbursement by
manufacturers for recalled,
damaged, expired, or otherwise
unsalable returned goods,
including (but not limited to)
reimbursement for the cost of
the goods and any reimbursement
of costs associated with return
goods handling and processing,
reverse logistics, and drug
destruction;
(IV) payments received from,
and rebates or discounts
provided to, pharmacy benefit
managers, managed care
organizations, health
maintenance organizations,
insurers, hospitals, clinics,
mail order pharmacies, long
term care providers,
manufacturers, or any other
entity that does not conduct
business as a wholesaler or a
retail community pharmacy,
unless the drug is an
inhalation, infusion,
instilled, implanted, or
injectable drug that is not
generally dispensed through a
retail community pharmacy; and
(V) discounts provided by
manufacturers under section
1860D-14A.
(ii) Inclusion of other discounts and
payments.--Notwithstanding clause (i),
any other discounts, rebates, payments,
or other financial transactions that
are received by, paid by, or passed
through to, retail community pharmacies
shall be included in the average
manufacturer price for a covered
outpatient drug.
(C) Inclusion of section 505(c) drugs.--In
the case of a manufacturer that approves,
allows, or otherwise permits any drug of the
manufacturer to be sold under a new drug
application approved under section 505(c) of
the Federal Food, Drug, and Cosmetic Act, such
term shall be inclusive of the average price
paid for such drug by wholesalers for drugs
distributed to retail community pharmacies.
(2) Covered outpatient drug.--Subject to the
exceptions in paragraph (3), the term ``covered
outpatient drug'' means--
(A) of those drugs which are treated as
prescribed drugs for purposes of section
1905(a)(12), a drug which may be dispensed only
upon prescription (except as provided in
paragraph (5)), and--
(i) which is approved for safety and
effectiveness as a prescription drug
under section 505 or 507 of the Federal
Food, Drug, and Cosmetic Act or which
is approved under section 505(j) of
such Act;
(ii)(I) which was commercially used
or sold in the United States before the
date of the enactment of the Drug
Amendments of 1962 or which is
identical, similar, or related (within
the meaning of section 310.6(b)(1) of
title 21 of the Code of Federal
Regulations) to such a drug, and (II)
which has not been the subject of a
final determination by the Secretary
that it is a ``new drug'' (within the
meaning of section 201(p) of the
Federal Food, Drug, and Cosmetic Act)
or an action brought by the Secretary
under section 301, 302(a), or 304(a) of
such Act to enforce section 502(f) or
505(a) of such Act; or
(iii)(I) which is described in
section 107(c)(3) of the Drug
Amendments of 1962 and for which the
Secretary has determined there is a
compelling justification for its
medical need, or is identical, similar,
or related (within the meaning of
section 310.6(b)(1) of title 21 of the
Code of Federal Regulations) to such a
drug, and (II) for which the Secretary
has not issued a notice of an
opportunity for a hearing under section
505(e) of the Federal Food, Drug, and
Cosmetic Act on a proposed order of the
Secretary to withdraw approval of an
application for such drug under such
section because the Secretary has
determined that the drug is less than
effective for some or all conditions of
use prescribed, recommended, or
suggested in its labeling; and
(B) a biological product, other than a
vaccine which--
(i) may only be dispensed upon
prescription,
(ii) is licensed under section 351 of
the Public Health Service Act, and
(iii) is produced at an establishment
licensed under such section to produce
such product; and
(C) insulin certified under section 506 of
the Federal Food, Drug, and Cosmetic Act.
(3) Limiting definition.--The term ``covered
outpatient drug'' does not include any drug, biological
product, or insulin provided as part of, or as incident
to and in the same setting as, any of the following
(and for which payment may be made under this title as
part of payment for the following and not as direct
reimbursement for the drug):
(A) Inpatient hospital services.
(B) Hospice services.
(C) Dental services, except that drugs for
which the State plan authorizes direct
reimbursement to the dispensing dentist are
covered outpatient drugs.
(D) Physicians' services.
(E) Outpatient hospital services.
(F) Nursing facility services and services
provided by an intermediate care facility for
the mentally retarded.
(G) Other laboratory and x-ray services.
(H) Renal dialysis.
Such term also does not include any such drug or
product for which a National Drug Code number is not
required by the Food and Drug Administration or a drug
or biological used for a medical indication which is
not a medically accepted indication. Any drug,
biological product, or insulin excluded from the
definition of such term as a result of this paragraph
shall be treated as a covered outpatient drug for
purposes of determining the best price (as defined in
subsection (c)(1)(C)) for such drug, biological
product, or insulin.
(4) Nonprescription drugs.--If a State plan for
medical assistance under this title includes coverage
of prescribed drugs as described in section 1905(a)(12)
and permits coverage of drugs which may be sold without
a prescription (commonly referred to as ``over-the-
counter'' drugs), if they are prescribed by a physician
(or other person authorized to prescribe under State
law), such a drug shall be regarded as a covered
outpatient drug.
(5) Manufacturer.--The term ``manufacturer'' means
any entity which is engaged in--
(A) the production, preparation, propagation,
compounding, conversion, or processing of
prescription drug products, either directly or
indirectly by extraction from substances of
natural origin, or independently by means of
chemical synthesis, or by a combination of
extraction and chemical synthesis, or
(B) in the packaging, repackaging, labeling,
relabeling, or distribution of prescription
drug products.
Such term does not include a wholesale distributor of
drugs or a retail pharmacy licensed under State law.
(6) Medically accepted indication.--The term
``medically accepted indication'' means any use for a
covered outpatient drug which is approved under the
Federal Food, Drug, and Cosmetic Act, or the use of
which is supported by one or more citations included or
approved for inclusion in any of the compendia
described in subsection (g)(1)(B)(i).
(7) Multiple source drug; innovator multiple source
drug; noninnovator multiple source drug; single source
drug.--
(A) Defined.--
(i) Multiple source drug.--The term
``multiple source drug'' means, with
respect to a rebate period, a covered
outpatient drug (not including any drug
described in paragraph (5)) for which
there at least 1 other drug product
which--
(I) is rated as
therapeutically equivalent
(under the Food and Drug
Administration's most recent
publication of ``Approved Drug
Products with Therapeutic
Equivalence Evaluations''),
(II) except as provided in
subparagraph (B), is
pharmaceutically equivalent and
bioequivalent, as defined in
subparagraph (C) and as
determined by the Food and Drug
Administration, and
(III) is sold or marketed in
the United States during the
period.
(ii) Innovator multiple source
drug.--The term ``innovator multiple
source drug'' means a multiple source
drug that was originally marketed under
an original new drug application
approved by the Food and Drug
Administration.
(iii) Noninnovator multiple source
drug.--The term ``noninnovator multiple
source drug'' means a multiple source
drug that is not an innovator multiple
source drug.
(iv) Single source drug.--The term
``single source drug'' means a covered
outpatient drug which is produced or
distributed under an original new drug
application approved by the Food and
Drug Administration, including a drug
product marketed by any cross-licensed
producers or distributors operating
under the new drug application.
(B) Exception.--Subparagraph (A)(i)(II) shall
not apply if the Food and Drug Administration
changes by regulation the requirement that, for
purposes of the publication described in
subparagraph (A)(i)(I), in order for drug
products to be rated as therapeutically
equivalent, they must be pharmaceutically
equivalent and bioequivalent, as defined in
subparagraph (C).
(C) Definitions.--For purposes of this
paragraph--
(i) drug products are
pharmaceutically equivalent if the
products contain identical amounts of
the same active drug ingredient in the
same dosage form and meet compendial or
other applicable standards of strength,
quality, purity, and identity; and
(ii) drugs are bioequivalent if they
do not present a known or potential
bioequivalence problem, or, if they do
present such a problem, they are shown
to meet an appropriate standard of
bioequivalence.
(8) Rebate period.--The term ``rebate period'' means,
with respect to an agreement under subsection (a), a
calendar quarter or other period specified by the
Secretary with respect to the payment of rebates under
such agreement.
(9) State agency.--The term ``State agency'' means
the agency designated under section 1902(a)(5) to
administer or supervise the administration of the State
plan for medical assistance.
(10) Retail community pharmacy.--The term ``retail
community pharmacy'' means an independent pharmacy, a
chain pharmacy, a supermarket pharmacy, or a mass
merchandiser pharmacy that is licensed as a pharmacy by
the State and that dispenses medications to the general
public at retail prices. Such term does not include a
pharmacy that dispenses prescription medications to
patients primarily through the mail, nursing home
pharmacies, long-term care facility pharmacies,
hospital pharmacies, clinics, charitable or not-for-
profit pharmacies, government pharmacies, or pharmacy
benefit managers.
(11) Wholesaler.--The term ``wholesaler'' means a
drug wholesaler that is engaged in wholesale
distribution of prescription drugs to retail community
pharmacies, including (but not limited to)
manufacturers, repackers, distributors, own-label
distributors, private-label distributors, jobbers,
brokers, warehouses (including manufacturer's and
distributor's warehouses, chain drug warehouses, and
wholesale drug warehouses) independent wholesale drug
traders, and retail community pharmacies that conduct
wholesale distributions.
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