[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 1376 Introduced in Senate (IS)]







110th CONGRESS
  1st Session
                                S. 1376

 To amend the Public Health Service Act to revise and expand the drug 
    discount program under section 340B of such Act to improve the 
    provision of discounts on drug purchases for certain safety net 
                               providers.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 14, 2007

Mr. Bingaman (for himself and Mr. Thune) introduced the following bill; 
     which was read twice and referred to the Committee on Health, 
                     Education, Labor, and Pensions

_______________________________________________________________________

                                 A BILL


 
 To amend the Public Health Service Act to revise and expand the drug 
    discount program under section 340B of such Act to improve the 
    provision of discounts on drug purchases for certain safety net 
                               providers.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``340B Program Improvement and 
Integrity Act of 2007''.

SEC. 2. EXPANDED PARTICIPATION IN SECTION 340B PROGRAM.

    (a) Expansion of Covered Entities Receiving Discounted Prices.--
Section 340B(a)(4) of the Public Health Service Act (42 U.S.C. 
256b(a)(4)) is amended by adding at the end the following:
                    ``(M) A children's hospital excluded from the 
                Medicare prospective payment system pursuant to section 
                1886(d)(1)(B)(iii) of the Social Security Act which 
                would meet the requirements of subparagraph (L), 
                including the disproportionate share adjustment 
                percentage requirement under clause (ii) of such 
                subparagraph, if the hospital were a subsection (d) 
                hospital as defined by section 1886(d)(1)(B) of the 
                Social Security Act.
                    ``(N) An entity that is a critical access hospital 
                (as determined under section 1820(c)(2) of the Social 
                Security Act), and that meets the requirements of 
                subparagraph (L)(i).
                    ``(O) An entity that is a rural referral center, as 
                defined by section 1886(d)(5)(C)(i) of the Social 
                Security Act, or a sole community hospital, as defined 
                by section 1886(d)(5)(C)(iii) of such Act, and that 
                both meets the requirements of subparagraph (L)(i) and 
                has a disproportionate share adjustment percentage 
                equal to or greater than 8 percent.''.
    (b) Prohibition on Group Purchasing Arrangements.--Section 340B(a) 
of the Public Health Service Act (42 U.S.C. 256b(a)) is amended--
            (1) in paragraph (4)(L), by striking clause (iii); and
            (2) in paragraph (5)--
                    (A) by redesignating subparagraphs (C) and (D) as 
                subparagraphs (D) and (E); respectively; and
                    (B) by inserting after subparagraph (B), the 
                following:
                    ``(C) Prohibiting the use of group purchasing 
                arrangements.--
                            ``(i) In general.--A hospital described in 
                        subparagraphs (L), (M), (N), or (O) of 
                        paragraph (4) shall not obtain covered 
                        outpatient drugs through a group purchasing 
                        organization or other group purchasing 
                        arrangement, except as permitted or provided 
                        for pursuant to clauses (ii) or (iii).
                            ``(ii) Inpatient drugs.--Clause (i) shall 
                        not apply to drugs purchased for inpatient use.
                            ``(iii) Exceptions.--The Secretary shall 
                        establish reasonable exceptions to clause (i)--
                                    ``(I) with respect to a covered 
                                outpatient drug that is unavailable to 
                                be purchased through the program under 
                                this section due to a drug shortage 
                                problem, manufacturer noncompliance, or 
                                any other circumstance beyond the 
                                hospital's control;
                                    ``(II) to facilitate generic 
                                substitution when a generic covered 
                                outpatient drug is available at a lower 
                                price; or
                                    ``(III) to reduce in other ways the 
                                administrative burdens of managing both 
                                inventories of drugs subject to this 
                                section and inventories of drugs that 
                                are not subject to this section, so 
                                long as the exceptions do not create a 
                                duplicate discount problem in violation 
                                of subparagraph (A) or a diversion 
                                problem in violation of subparagraph 
                                (B).''.

SEC. 3. EXTENSION OF DISCOUNTS TO INPATIENT DRUGS.

    (a) Definitions.--
            (1) In general.--Section 340B(b) of the Public Health 
        Service Act (42 U.S.C. 256b(b)) is amended--
                    (A) by striking ``In this section'' and inserting 
                the following:
            ``(1) In general.--In this section''; and
                    (B) adding at the end the following:
            ``(2) Covered drug.--In this section, the term `covered 
        drug' means--
                    ``(A) a `covered outpatient drug' as defined in 
                section 1927(k)(2) of the Social Security Act; and
                    ``(B) notwithstanding the limiting definition set 
                forth in section 1927(k)(3) of such Act, a drug used in 
                connection with an inpatient or outpatient service 
                provided by a hospital described in subparagraph (L), 
                (M), (N), or (O) of subsection (a)(4), and enrolled to 
                participate in the drug discount program under this 
                section.''.
            (2) Conforming amendments.--Paragraphs (2)(A), (5)(B), 
        (5)(D), (5)(E), (7)(B), (7)(C), and (9) of section 340B(a) of 
        the Public Health Service Act (42 U.S.C. 256b(a)) are amended--
                    (A) by striking ``covered outpatient drug'' each 
                place that such appears and inserting ``covered drug''; 
                and
                    (B) by striking ``covered outpatient drugs'' each 
                place that such appears and inserting ``covered 
                drugs''.
    (b) Medicaid Credits on Inpatient Drugs.--Section 340B of the 
Public Health Service Act (42 U.S.C. 256b) is amended by striking 
subsection (c) and inserting the following:
    ``(c) Medicaid Credits on Inpatient Drugs.--
            ``(1) In general.--With respect to the cost reporting 
        period covered by the most recently filed Medicare cost report, 
        a hospital described in subparagraph (L), (M), (N), or (O) of 
        subsection (a)(4) and enrolled to participate in the drug 
        discount program under this section shall provide to each State 
        with an approved State plan under title XIX of the Social 
        Security Act--
                    ``(A) a credit on the estimated annual costs to 
                such hospital of single source and innovator multiple 
                source drugs provided to Medicaid recipients for 
                inpatient use; and
                    ``(B) a credit on the estimated annual costs to 
                such hospital of noninnovator multiple source drugs 
                provided to Medicaid recipients for inpatient use.
            ``(2) Calculation of credits.--
                    ``(A) Single source and innovator multiple source 
                drugs.--For purposes of paragraph (1)(A)--
                            ``(i) the credit under such paragraph shall 
                        be determined by multiplying--
                                    ``(I) the product of--
                                            ``(aa) the estimated annual 
                                        costs of single source and 
                                        innovator multiple source drugs 
                                        provided by the hospital to 
                                        Medicaid recipients for 
                                        inpatient use; and
                                            ``(bb) the average 
                                        manufacturer price adjustment; 
                                        and
                                    ``(II) 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 by the hospital to Medicaid 
                        recipients for inpatient use under clause 
                        (i)(I)(aa) shall be determined by multiplying--
                                    ``(I) the product of--
                                            ``(aa) the hospital's 
                                        actual acquisition costs of all 
                                        drugs purchased during the cost 
                                        reporting period for inpatient 
                                        use; and
                                            ``(bb)(AA) the Medicaid 
                                        inpatient drug charges as 
                                        reported on the hospital's most 
                                        recently filed Medicare cost 
                                        report; divided by
                                            ``(BB) the total inpatient 
                                        drug charges reported on the 
                                        cost report; and
                                    ``(II) the percentage of the 
                                hospital's annual inpatient drug costs 
                                described in subclause (I) that arise 
                                out of the purchase of single source 
                                and innovator multiple source drugs;
                            ``(iii) the average manufacturer price 
                        adjustment referred to in clause (i)(I)(bb) 
                        shall be determined annually by the Secretary 
                        for single source and innovator multiple source 
                        drugs by dividing on an aggregate basis--
                                    ``(I) the average manufacturer 
                                price as defined in section 
                                1927(k)(1)(D) of the Social Security 
                                Act, averaged across all covered drugs 
                                reported to the Secretary pursuant to 
                                section 1927(b)(3) of such Act; by
                                    ``(II) the average ceiling price 
                                under this section for covered drugs 
                                calculated pursuant to subsection 
                                (a)(1); and
                            ``(iv) 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 credit under such paragraph shall 
                        be calculated by multiplying--
                                    ``(I) the product of--
                                            ``(aa) the estimated annual 
                                        costs to the hospital of 
                                        noninnovator multiple source 
                                        drugs provided to Medicaid 
                                        recipients for inpatient use; 
                                        and
                                            ``(bb) the average 
                                        manufacturer price adjustment; 
                                        and
                                    ``(II) the applicable percentage as 
                                defined in section 1927(c)(3)(B) of the 
                                Social Security Act;
                            ``(ii) the estimated annual costs to a 
                        hospital of noninnovator multiple source drugs 
                        provided to Medicaid recipients for inpatient 
                        use under clause (i)(I)(aa) shall be determined 
                        by multiplying--
                                    ``(I) the product of--
                                            ``(aa) the hospital's 
                                        actual acquisition cost of all 
                                        drugs purchased during the cost 
                                        reporting period for inpatient 
                                        use; and
                                            ``(bb)(AA) the Medicaid 
                                        inpatient drug charges as 
                                        reported on the hospital's most 
                                        recently filed Medicare cost 
                                        report; divided by
                                            ``(BB) total inpatient drug 
                                        charges reported on the cost 
                                        report; and
                                    ``(II) the percentage of the 
                                hospital's annual inpatient drug costs 
                                described in subclause (I) arising out 
                                of the purchase of noninnovator 
                                multiple source drugs;
                            ``(iii) the average manufacturer price 
                        adjustment referred to in clause (i)(I)(bb) 
                        shall be determined annually by the Secretary 
                        for noninnovator multiple source drugs by 
                        dividing on an aggregate basis--
                                    ``(I) the average manufacturer 
                                price as defined in section 
                                1927(k)(1)(D) of the Social Security 
                                Act, averaged across all covered drugs 
                                reported to the Secretary pursuant to 
                                section 1927(b)(3) of such Act; by
                                    ``(II) the average ceiling price 
                                under this section for covered drugs 
                                calculated pursuant to subsection 
                                (a)(1); and
                            ``(iv) 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 credits provided by a hospital 
        under paragraph (1) shall be paid not later than 90 days after 
        the date of the filing of the hospital's most recently filed 
        Medicare cost report.
            ``(4) Opt-out.--A hospital shall not be required to provide 
        the Medicaid credit required under this subsection if the 
        hospital is able to demonstrate to the State that the credits 
        would be less than or equal to the loss of reimbursement under 
        the State plan resulting from the extension of discounts to 
        inpatient drugs under subsection (b)(2), or if the hospital and 
        State agree to an alternative arrangement. Any dispute between 
        the hospital and the State regarding the applicability of this 
        paragraph shall be adjudicated through the administrative 
        dispute resolution process described in subsection (e)(3).
            ``(5) 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.
            ``(6) Effectiveness notwithstanding other provisions of 
        law.--Notwithstanding any other provision of law, all 
        references to provisions of the Social Security Act in this 
        section shall be deemed to be references to the Social Security 
        Act as in effect on the date of enactment of the 340B Program 
        Improvement and Integrity Act of 2007.''.

SEC. 4. IMPROVEMENTS TO 340B PROGRAM INTEGRITY.

    (a) Integrity Improvements.--Section 340B of the Public Health 
Service Act (42 U.S.C. 256b) is amended by adding at the end the 
following:
    ``(e) Improvements in Program Integrity.--
            ``(1) Manufacturer compliance.--
                    ``(A) In general.--From amounts appropriated under 
                paragraph (4), the Secretary shall carry out activities 
                to provide for improvement in the compliance of 
                manufacturers with the requirements of this section in 
                order to prevent overcharges and other violations of 
                the discounted pricing requirements specified in this 
                section.
                    ``(B) Activities.--The activities described in 
                subparagraph (A) shall include the following:
                            ``(i) The development of a system to enable 
                        the Secretary to verify the accuracy of ceiling 
                        prices calculated by manufacturers under 
                        subsection (a)(1) and charged to covered 
                        entities, which shall include--
                                    ``(I) developing and publishing, 
                                through an appropriate policy or 
                                regulatory issuance, precisely defined 
                                standards and methodologies for the 
                                calculation of ceiling prices under 
                                subsection (a)(1);
                                    ``(II) comparing regularly the 
                                ceiling prices calculated by the 
                                Secretary with the quarterly pricing 
                                data that is reported by manufacturers 
                                to the Secretary;
                                    ``(III) performing spot checks of 
                                sales transactions by covered entities; 
                                and
                                    ``(IV) inquiring into the cause of 
                                any pricing discrepancies that may be 
                                identified and either taking, or 
                                requiring manufacturers to take, such 
                                corrective action as is appropriate in 
                                response to such price discrepancies.
                            ``(ii) The establishment of procedures for 
                        manufacturers to issue refunds to covered 
                        entities in the event that there is an 
                        overcharge by the manufacturers, including--
                                    ``(I) providing the Secretary with 
                                an explanation of why and how the 
                                overcharge occurred, how the refunds 
                                will be calculated, and to whom the 
                                refunds will be issued; and
                                    ``(II) oversight by the Secretary 
                                to ensure that the refunds are issued 
                                accurately and within a reasonable 
                                period of time, both in routine 
                                instances of retroactive adjustment to 
                                relevant pricing data and exceptional 
                                circumstances such as erroneous or 
                                intentional overcharging for covered 
                                drugs.
                            ``(iii) The provision of access, through 
                        the Internet website of the Department of 
                        Health and Human Services, to the applicable 
                        ceiling prices for covered drugs as calculated 
                        and verified by the Secretary in accordance 
                        with this section, in a manner (such as through 
                        the use of password protection) that limits 
                        such access to covered entities and adequately 
                        ensures security and the protection of 
                        privileged pricing data from unauthorized 
                        redisclosure.
                            ``(iv) The development of a mechanism by 
                        which--
                                    ``(I) rebates and other discounts 
                                provided by manufacturers to other 
                                purchasers, subsequent to the sale of 
                                covered drugs to covered entities, are 
                                reported to the Secretary; and
                                    ``(II) appropriate credits and 
                                refunds are issued to covered entities 
                                if such credits and refunds have the 
                                effect of lowering the applicable 
                                ceiling price for the relevant quarter 
                                for the drugs involved.
                            ``(v) Selective auditing of manufacturers 
                        and wholesalers to ensure the integrity of the 
                        drug discount program under this section.
                            ``(vi) The imposition of sanctions in the 
                        form of civil monetary penalties, which--
                                    ``(I) shall be assessed according 
                                to standards established in regulations 
                                to be promulgated by the Secretary 
                                within 180 days of the date of 
                                enactment of this subsection;
                                    ``(II) shall not exceed $5,000 for 
                                each instance of overcharging a covered 
                                entity that may have occurred; and
                                    ``(III) shall apply to any 
                                manufacturer with an agreement under 
                                this section that knowingly and 
                                intentionally charges a covered entity 
                                a price for the purchase of a drug that 
                                exceeds the maximum applicable price 
                                under subsection (a)(1).
            ``(2) Covered entity compliance.--
                    ``(A) In general.--From amounts appropriated under 
                paragraph (4), the Secretary shall carry out activities 
                to provide for improvement in compliance by covered 
                entities with the requirements of this section in order 
                to prevent diversion and other violations of the 
                duplicate discount requirements specified under 
                subsection (a)(5).
                    ``(B) Activities.--The activities described in 
                subparagraph (A) shall include the following:
                            ``(i) The development of procedures to 
                        enable and require covered entities to 
                        regularly update (at least annually) the 
                        information on the Internet website of the 
                        Department of Health and Human Services 
                        relating to this section.
                            ``(ii) The development of a system for the 
                        Secretary to verify the accuracy of information 
                        regarding covered entities that is listed on 
                        the website described in clause (i).
                            ``(iii) The development of more detailed 
                        guidance describing methodologies and options 
                        available to covered entities for billing 
                        covered drugs to State Medicaid agencies in a 
                        manner that avoids duplicate discounts pursuant 
                        to subsection (a)(5)(A).
                            ``(iv) The establishment of a single, 
                        universal, and standardized identification 
                        system by which each covered entity site can be 
                        identified by manufacturers, distributors, 
                        covered entities and the Secretary for purposes 
                        of facilitating the ordering, purchasing, and 
                        delivery of covered drugs under this section, 
                        including the processing of chargebacks for 
                        such drugs.
                            ``(v) The imposition of sanctions, as 
                        determined appropriate by the Secretary, in 
                        addition to the sanctions to which covered 
                        entities are subject to under subsection 
                        (a)(5)(D), through 1 or more of the following 
                        actions:
                                    ``(I) Where a covered entity 
                                knowingly and intentionally violates 
                                subsection (a)(5)(B), the covered 
                                entity shall be required to pay a 
                                monetary penalty to a manufacturer or 
                                manufacturers in the form of interest 
                                on sums for which the covered entity is 
                                found liable under subsection 
                                (a)(5)(E), and such interest to be 
                                compounded monthly and equal to the 
                                current short-term interest rate as 
                                determined by the Federal Reserve for 
                                the time period for which the covered 
                                entity is liable.
                                    ``(II) Where the Secretary 
                                determines that a violation of 
                                subsection (a)(5)(B) was systematic and 
                                egregious as well as knowing and 
                                intentional, removing the covered 
                                entity from the program under this 
                                section and disqualifying the entity 
                                from reentry into the program for a 
                                reasonable period of time to be 
                                determined by the Secretary.
                                    ``(III) Referring matters to 
                                appropriate Federal authorities within 
                                the Food and Drug Administration, the 
                                Office of Inspector General, or other 
                                Federal agencies for consideration of 
                                appropriate action under other Federal 
                                law, such as the Prescription Drug 
                                Marketing Act.
            ``(3) Administrative dispute resolution process.--
                    ``(A) In general.--Not later than 180 days after 
                the date of enactment of this subsection, the Secretary 
                shall promulgate regulations to establish and implement 
                an administrative process for the resolution of claims 
                by covered entities that they have been overcharged for 
                drugs purchased under this section, and claims by 
                manufacturers, after the conduct of audits as 
                authorized by subsection (a)(5)(D), of violations of 
                subsections (a)(5)(A) or (a)(5)(B), including 
                appropriate procedures for the provision of remedies 
                and enforcement of determinations made pursuant to such 
                process through mechanisms and sanctions described in 
                paragraphs (1)(B) and (2)(B) of this subsection. Such 
                regulations shall also establish an administrative 
                process for resolution of disputes described in 
                subsection (c)(4).
                    ``(B) Deadlines and procedures.--Regulations 
                promulgated by the Secretary under subparagraph (A) 
                shall--
                            ``(i) designate or establish a 
                        decisionmaking official or decisionmaking body 
                        within the Department of Health and Human 
                        Services to be responsible for reviewing and 
                        finally resolving claims by covered entities 
                        that they have been charged prices for covered 
                        drugs in excess of the ceiling price described 
                        in subsection (a)(1), and claims by 
                        manufacturers that violations of subsection 
                        (a)(5)(A) or (a)(5)(B) have occurred;
                            ``(ii) establish such deadlines and 
                        procedures as may be necessary to ensure that 
                        claims shall be resolved fairly, efficiently, 
                        and expeditiously;
                            ``(iii) establish procedures by which a 
                        covered entity may discover and obtain such 
                        information and documents from manufacturers 
                        and third parties as may be relevant to 
                        demonstrate the merits of a claim that charges 
                        for a manufacturer's product have exceeded the 
                        applicable ceiling price under this section, 
                        and may submit such documents and information 
                        to the administrative official or body 
                        responsible for adjudicating such claim;
                            ``(iv) require that a manufacturer must 
                        conduct an audit of a covered entity pursuant 
                        to subsection (a)(5)(D) as a prerequisite to 
                        initiating administrative dispute resolution 
                        proceedings against a covered entity;
                            ``(v) permit the official or body 
                        designated in clause (i), at the request of a 
                        manufacturer or manufacturers, to consolidate 
                        claims brought by more than 1 manufacturer 
                        against the same covered entity where, in the 
                        judgment of such official or body, 
                        consolidation is appropriate and consistent 
                        with the goals of fairness and economy of 
                        resources; and
                            ``(vi) include provisions and procedures to 
                        permit multiple covered entities to jointly 
                        assert claims of overcharges by the same 
                        manufacturer for the same drug or drugs in one 
                        administrative proceeding, and permit such 
                        claims to be asserted on behalf of covered 
                        entities by associations or organizations 
                        representing the interests of such covered 
                        entities and of which the covered entities are 
                        members.
                    ``(C) Finality of administrative resolution.--The 
                administrative resolution of a claim or claims under 
                the regulations promulgated under subparagraph (A) 
                shall be a final agency decision and shall be binding 
                upon the parties involved, unless invalidated by an 
                order of a court of competent jurisdiction.
            ``(4) Authorization of appropriations.--There are 
        authorized to be appropriated to carry out this subsection, 
        such sums as may be necessary for fiscal year 2008, and each 
        succeeding fiscal year.''.
    (b) Related Amendments.--Section 340B(a)(1) of the Public Health 
Service Act (42 U.S.C. 256b(a)) is amended by adding at the end the 
following: ``Each such agreement shall require that the manufacturer 
furnish the Secretary with reports, on a quarterly basis, of the price 
for each covered drug subject to the agreement that, according to the 
manufacturer, represents the maximum price that covered entities may 
permissibly be required to pay for the drug (referred to in this 
section as the `ceiling price'), and shall require that the 
manufacturer offer each covered entity covered drugs for purchase at or 
below the applicable ceiling price if such drug is made available to 
any other purchaser at any price.''.

SEC. 5. OTHER IMPROVEMENTS.

    (a) General.--Section 340B of the Public Health Service Act (42 
U.S.C. 256b), as amended by section 4, is further amended by adding at 
the end the following:
    ``(f) Use of Multiple Contract Pharmacies Permitted.--Nothing in 
this section shall be construed as prohibiting a covered entity from 
entering into contracts with more than 1 pharmacy for the provision of 
covered drugs, including a contract that supplements the use of an in-
house pharmacy arrangement or requires the approval of the Secretary 
for entering into such a contract.
    ``(g) Intraagency Coordination.--The Secretary shall establish 
specific measures, policies, and procedures to ensure effective 
communication and coordination between the Centers for Medicare & 
Medicaid Services and the Health Resources and Services Administration 
with respect to all agency actions and all aspects of policy and 
administration affecting or pertaining to the drug discount program 
under this section and in which the functions and responsibilities of 
those agency components are interrelated or interdependent, including 
through the establishment of a permanent working group that is composed 
of representatives of both the Health Resources and Services 
Administration and the Centers for Medicare & Medicaid Services, to 
identify and oversee matters requiring such coordination.''.
    (b) Effective Dates.--
            (1) Amendment.--Section 340B(d) of the Public Health 
        Service Act (42 U.S.C. 256b(d)) is amended by striking 
        ``Veterans Health Care Act of 1992'' and inserting ``340B 
        Program Improvement and Integrity Act of 2007''.
            (2) Application of act.--The amendments made by this Act 
        shall apply to drugs purchased on or after January 1, 2008.
    (c) Effectiveness Notwithstanding Other Provisions of Law.--
Notwithstanding any other provision of law, the amendments made by this 
Act shall become effective on January 1, 2008, and shall be taken into 
account in determining whether a manufacturer is deemed to meet the 
requirements of section 340B(a) of the Public Health Service Act (42 
U.S.C. 256b(a)), and the requirements of section 1927(a)(5) of the 
Social Security Act (42 U.S.C. 1396r-8(a)(5)).

SEC. 6. CONFORMING AMENDMENTS.

    Section 1927 of the Social Security Act (42 U.S.C. 1396r-8) is 
amended--
            (1) in subsection (a)(5)--
                    (A) in subparagraph (A), by striking ``covered 
                outpatient'' and inserting ``covered'';
                    (B) by redesignating subparagraphs (C) through (E), 
                as subparagraphs (D) through (F), respectively;
                    (C) by inserting after subparagraph (B) the 
                following:
                    ``(C) Covered drug defined.--In this subsection, 
                the term `covered drug' means a drug defined in section 
                340B(b)(2) of the Public Health Service Act.'';
                    (D) in subparagraph (E), as so redesignated, by 
                striking ``title VI of the Veterans Health Care Act of 
                1992'' and inserting ``340B Program Improvement and 
                Integrity Act of 2007.''; and
                    (E) in subparagraph (F), as so redesignated--
                            (i) by striking ``as in effect immediately 
                        after the enactment of this paragraph'' and 
                        inserting ``as in effect upon the effective 
                        date of the 340B Program Improvement and 
                        Integrity Act of 2007,''; and
                            (ii) by striking ``after the date of the 
                        enactment of this paragraph'' and inserting 
                        ``after the date of enactment of such Act.'';
            (2) in subsection (c)(1)(C)(i)--
                    (A) by redesignating subclauses (II) through (IV) 
                as subclauses (III) through (V), respectively; and
                    (B) by inserting after subclause (I) the following:
                                    ``(II) any prices charged for a 
                                covered drug as defined in section 
                                340B(b)(2) of the Public Health Service 
                                Act;''; and
            (3) in subsection (k)(1), by adding at the end the 
        following:
                    ``(D) Calculation for covered drugs.--
                Notwithstanding any other provision of this subsection, 
                with respect to a covered drug as defined in section 
                340B(b)(2) of the Public Health Service Act, average 
                manufacturer price means the average price paid to the 
                manufacturer for the drug in the United States by 
                wholesalers for drugs distributed to both the retail 
                pharmacy and acute care classes of trade, after 
                deducting customary prompt pay discounts.''.
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