Extension of discounts to inpatient drugs

(a)

In general

Section 340B(b) of the Public Health Service Act (42 U.S.C. 256b(b)) is amended by inserting before the period the following: , except that, notwithstanding the limiting definition set forth in section 1927(k)(3) of the Social Security Act, the terms covered outpatient drug and covered drug include any inpatient or outpatient drug purchased by a hospital described in subsection (a)(4)(L). (b)

Payment of medicaid rebates on inpatient drugs

Section 340B(c) of such Act (42 U.S.C. 256b(c)) is amended to read as follows:

(c)

Payment of medicaid rebates on inpatient drugs

(1)

In general

For the cost reporting period covered by the most recently filed Medicare cost report, a hospital described in subsection (a)(4)(L) shall provide to each State with an approved State plan under title XIX of such Act— (A)a rebate on the estimated annual costs of single source and innovator multiple source drugs provided to Medicaid recipients for inpatient use; and (B)a rebate on the estimated annual costs of noninnovator multiple source drugs provided to Medicaid recipients for inpatient use. (2)

Calculations of rebates

(A)

Single source and innovator multiple source drugs

For purposes of paragraph (1)(A)— (i)the rebate under such paragraph shall be calculated by multiplying the estimated annual costs of single source and innovator multiple source drugs provided to Medicaid recipients for inpatient use by the minimum rebate percentage described in section 1927(c)(1)(B) of the Social Security Act; (ii)the estimated annual costs of single source drugs and innovator multiple source drugs provided to Medicaid recipients for inpatient use under clause (i) shall be equal to the product of— (I)the hospital’s actual acquisition costs of all drugs purchased during the cost reporting period for inpatient use; (II)the Medicaid inpatient drug charges as reported on the hospital’s most recently filed Medicare cost report divided by total inpatient drug charges reported on the cost report; and (III)the percent of the hospital’s annual inpatient drug costs described in subclause (I) arising out of the purchase of single source and innovator multiple source drugs; and (iii)the terms single source drug and innovator multiple source drug have the meanings given such terms in section 1927(k)(7) of the Social Security Act. (B)

Noninnovator multiple source drugs

For purposes of subparagraph (1) (B)— (i)the rebate under such paragraph shall be calculated by multiplying the estimated annual costs of noninnovator multiple source drugs provided to Medicaid recipients for inpatient use by the applicable percentage as defined in section 1927(c)(3)(B) of the Social Security Act; (ii)the estimated annual costs of noninnovator multiple source drugs provided to Medicaid recipients for inpatient use shall be equal to the product of— (I)the hospital’s actual acquisition cost of all drugs purchased during the cost reporting period for inpatient use; (II)the Medicaid inpatient drug charges as reported on the hospital’s most recently filed Medicare cost report divided by total inpatient drug charges reported on the cost report; and (III)the percent of the hospital’s annual inpatient drug costs described in subclause (I) arising out of the purchase of noninnovator multiple source drugs; and (iii)the term noninnovator multiple source drug has the meaning given such term in section 1927(k)(7) of the Social Security Act. (3)

Payment deadline

The rebates provided by a hospital under paragraph (1) shall be paid within 90 days of the filing of the hospital’s most recently filed Medicare cost report. (4)

Offset against medical assistance

Amounts received by a State under this subsection 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) of the Social Security Act.

(c)

Clarification that group purchasing prohibition for certain hospitals is not applicable to inpatient drugs

Section 340B(a)(4)(L)(iii) of such Act (42 U.S.C. 256b(a)(4)(L)(iii)) is amended by inserting (not including such drugs purchased for inpatient use) after covered outpatient drugs.

Providing access to discounted drug prices for critical access hospitals

(a)

In general

Section 340B of the Public Health Service Act (42 U.S.C. 256b) is amended— (1)in subsection (a)(4), by adding at the end the following:

(M)An entity that— (i)is a critical access hospital (as determined under section 1820(c)(2) of the Social Security Act); and (ii)does not obtain covered outpatient drugs though a group purchasing organization or other group purchasing arrangement (not including such drugs purchased for inpatient use).

;

(2)in subsection (b), as amended by section 2(a), by inserting or subsection (a)(4)(M) after subsection (a)(4)(L); and (3)in subsection (c)(1), as added by inserting or subsection (a)(4)(M) after subsection (a)(4)(L). (b)

Exclusion from medicaid best price calculations

Section 1927(c)(1)(C)(i)(I) of the Social Security Act (42 U.S.C. 1396r–8(c)(1)(C)(i)(I)) is amended by inserting and to critical access hospitals described in section 340B(a)(4)(M) of such Act after Public Health Service Act. (c)

Effective date

The amendments made by this section shall apply to drugs purchased on or after January 1, 2006.