1.Short title; table of
contents
(a)This Act may be cited as the 340B Program Improvement and Integrity Act of
2009
.
(b)The table of contents of this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Expanded participation in 340B program.
Sec. 3. Extension of discounts to inpatient drugs.
Sec. 4. Improvements to 340B program integrity.
Sec. 5. Other improvements in 340B program.
Sec. 6. Effective dates.
2.Expanded
participation in 340B program
(a)Expansion of
Covered Entities Receiving Discounted PricesSection 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 new subparagraphs:
(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 (42 U.S.C. 1395ww(d)(1)(B)(iii)) which would meet the
requirements of subsection (a)(4)(L), including the disproportionate share
adjustment percentage requirement under clause (ii), 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 (42 U.S.C.
1395i–4(c)(2)).
(O)An entity
receiving funds under title V of the Social
Security Act (relating to maternal and child health) for the
provision of health services.
(P)An entity
receiving funds under subpart I of part B of title XIX of the
Public Health Service Act (relating
to comprehensive mental health services) for the provision of community mental
health services.
(Q)An entity
receiving funds under subpart II of such part B (relating to the prevention and
treatment of substance abuse) for the provision of treatment services for
substance abuse.
(R)An entity that is
a Medicare-dependent, small rural hospital (as defined in section
1886(d)(5)(G)(iv) of the Social Security
Act).
(S)An entity that is
a sole community hospital (as defined in section 1886(d)(5)(D)(iii) of the
Social Security Act).
(T)An entity that is
classified as a rural referral center under section 1886(d)(5)(C) of the
Social Security
Act.
.
(b)Prohibition on
Group Purchasing ArrangementsSection 340B(a) of such Act (42
U.S.C. 256b(a)) is amended—
(1)in paragraph
(4)(L)—
(A)by adding
and
at the end of clause (i);
(B)by striking
; and
at the end of clause (ii) and inserting a period;
and
(C)by striking
clause (iii);
(2)in subsection
(a)(5), by redesignating the subparagraphs (C) and (D) as subparagraphs (D) and
(E), respectively, and by inserting after subparagraph (B) the following new
subparagraph:
(C)Prohibiting use
of group purchasing arrangements
(i)A
hospital described in subparagraph (L), (M), (N), (R), (S), or (T) of
subsection (a)(4) shall not obtain covered outpatient drugs through a group
purchasing organization or other group purchasing arrangement, except as
permitted or provided pursuant to clause (ii) or (iii).
(ii)Clause (i) shall
not apply to drugs purchased for inpatient use.
(iii)The Secretary
shall establish reasonable exceptions to the requirement of 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 reason beyond the hospital’s control;
(II)to facilitate
generic substitution when a generic covered outpatient drug is available at a
lower price; and
(III)to reduce in
other ways the administrative burdens of managing both inventories of drugs
obtained under this section and not under this section, if such exception does
not create a duplicate discount problem in violation of subparagraph (A) or a
diversion problem in violation of subparagraph
(B).
.
3.Extension of
discounts to inpatient drugs
(a)Section 340B of the Public
Health Service Act (42 U.S.C. 256b) is amended—
(1)in subsection
(b)—
(A)by designating
the matter beginning In this section
as a paragraph (1) with
the heading In
general
; and
(B)by adding at the
end the following new paragraph:
(2)In this section, the term covered drug—
(A)means a covered
outpatient drug (as defined in section 1927(k)(2) of the
Social Security Act); and
(B)includes,
notwithstanding the section 1927(k)(3)(A) of such Act, a drug used in
connection with an inpatient or outpatient service provided by a hospital
described in subparagraph (L), (M), (N), (R), (S), or (T) of subsection (a)(4)
that is enrolled to participate in the drug discount program under this
section.
;
and
(2)in paragraphs
(5), (7), and (9) of subsection (a), by striking outpatient
each
place it appears.
(b)Medicaid
Credits on Inpatient DrugsSubsection (c) of section 340B of the
Public Health Service Act (42 U.S.C.
256b(c)) is replaced as follows:
(c)Medicaid
Credits on Inpatient Drugs
(1)For the cost reporting period covered by the most
recently filed Medicare cost report under title XVIII of the
Social Security Act, a hospital
described in subparagraph (L), (M), (N), (R), (S), or (T) of subsection (a)(4)
and enrolled to participate in the drug discount program under this section
shall provide to each State under its plan under title XIX of such 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)
(A)Single source
and innovator multiple source drugsFor purposes of paragraph
(1)(A)—
(i)the credit under
such paragraph shall be equal to the product of—
(I)the annual value
of single source and innovator multiple source drugs purchased under this
section by the hospital based on the drugs’ average manufacturer price;
(II)the estimated
percentage of the hospital’s drug purchases attributable to Medicaid recipients
for inpatient use; and
(III)the minimum
rebate percentage described in section 1927(c)(1)(B) of the
Social Security Act;
(ii)the reference in
clause (i)(I) to the annual value of single source and innovator multiple
source drugs purchased under this section by the hospital based on the drugs’
average manufacturer price shall be equal to the sum of—
(I)the annual
quantity of each single source and innovator multiple source drug purchased
during the cost reporting period, multiplied by
(II)the average
manufacturer price for that drug;
(iii)the reference
in clause (i)(II) to the estimated percentage of the hospital’s drug purchases
attributable to Medicaid recipients for inpatient use; shall be equal
to—
(I)the Medicaid
inpatient drug charges as reported on the hospital’s most recently filed
Medicare cost report, divided by
(II)total drug
charges reported on the cost report; 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 drugsFor purposes of subparagraph (1)(B)—
(i)the credit under
such paragraph shall be equal to the product of—
(I)the annual value
of noninnovator multiple source drugs purchased under this section by the
hospital based on the drugs’ average manufacturer price;
(II)the estimated
percentage of the hospital’s drug purchases attributable to Medicaid recipients
for inpatient use; and
(III)the applicable
percentage as defined in section 1927(c)(3)(B) of the
Social Security Act;
(ii)the reference in
clause (i)(I) to the annual value of noninnovator multiple source drugs
purchased under this section by the hospital based on the drugs’ average
manufacturer price shall be equal to the sum of—
(I)the annual
quantity of each noninnovator multiple source drug purchased during the cost
reporting period, multiplied by
(II)the average
manufacturer price for that drug;
(iii)the reference
in clause (i)(II) to the estimated percentage of the hospital’s drug purchases
attributable to Medicaid recipients for inpatient use shall be equal to—
(I)the Medicaid
inpatient drug charges as reported on the hospital’s most recently filed
Medicare cost report, divided by
(II)total drug
charges reported on the cost report; 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)
(A)Not later than 30 days after receiving the information
specified in subparagraph (B), the State shall calculate the credits owed by
the hospital under paragraph (1) and provide the hospital with both the amounts
and an explanation of how it calculated the credits. In performing the
calculations specified in paragraphs (2)(A)(ii) and (2)(B)(ii), the State shall
use the average manufacturer price applicable to the calendar quarter in which
the drug was purchased by the hospital.
(B)Hospital
provision of informationNot later than 30 days after the date of
the filing of the hospital’s most recently filed Medicare cost report, the
hospital shall provide the State with the information described in paragraphs
(2)(A)(ii) and (2)(B)(ii). With respect to each drug purchased during the cost
reporting period, the hospital shall provide the dosage form, strength, package
size, date of purchase and the number of units purchased.
(4)The credits provided by a hospital under paragraph (1)
shall be paid within 60 days after receiving the information specified in
paragraph (3)(A).
(5)A hospital shall not be required to provide the Medicaid
credit required under paragraph (1) if—
(A)it can
demonstrate to the State that it will lose reimbursement under the State plan
resulting from the extension of discounts to inpatient drugs under subsection
(b)(2) and that the loss of reimbursement will exceed the amount of the credit
otherwise owed by the hospital; or
(B)the hospital and
State agree to an alternative arrangement.
Any
dispute between the hospital and the State under this paragraph shall be
adjudicated through the administrative dispute resolution process under this
section.(6)Offset against
medical assistanceAmounts 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)Section 1927 of the Social Security Act (42 U.S.C. 1396r–8), is
amended—
(1)in subsection
(a)(5)(A), by striking covered outpatient drugs
and inserting
covered drugs (as defined in section 340B(b)(2) of the
Public Health Service
Act)
;
(2)by striking
subsection (a)(5)(D) in its entirety;
(3)in subsection
(c)(1)(C)(i), by redesignating subclauses (II) through (IV) as subclauses (III)
through (V), respectively and by inserting after subclause (I) the following
new subclause:
(II)any prices
charged for a covered drug as defined in section 340B(b)(2) of the Public
Health Service Act;
;
and
(4)in subsection
(k)(1)—
(A)in subparagraph
(A), by striking subparagraph (B)
and inserting
subparagraphs (B) and (D)
; and
(B)by adding at the
end the following new subparagraph:
(D)Calculation for
covered drugsWith respect to a covered drug (as defined in
section 340B(b)(2) of the Public Health Service
Act), the average manufacturer price shall be determined in
accordance with subparagraph (A) except that, in the event a covered drug is
not distributed to the retail pharmacy class of trade, it shall mean the
average price paid to the manufacturer for the drug in the United States by
wholesalers for drugs distributed to the acute care class of trade, after
deducting customary prompt pay
discounts.
.
4.Improvements to
340B program integrity
(a)Subsection (d) of section 340B of the
Public Health Service Act (42 U.S.C.
256b) is replaced as follows:
(d)Improvements in
Program Integrity
(1)
(A)From amounts appropriated under paragraph (4), the
Secretary shall provide for improvements in compliance by 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)The
improvements 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 the following:
(I)Developing and
publishing through an appropriate policy or regulatory issuance, precisely
defined standards and methodology for the calculation of ceiling prices under
such subsection.
(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.
(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 the following:
(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.
(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 assures security and protection of privileged pricing
data from unauthorized re-disclosure.
(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 discounts or rebates
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 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 purchase of a drug that
exceeds the maximum applicable price under subsection (a)(1).
(2)Covered entity
compliance
(A)From amounts appropriated under paragraph (4), the
Secretary shall provide for improvements in compliance by covered entities with
the requirements of this section in order to prevent diversion and violations
of the duplicate discount provision and other requirements specified under
subsection (a)(5).
(B)The
improvements 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, in appropriate cases as determined by the Secretary, additional to
those to which covered entities are subject under subparagraph (a)(5)(E),
through one or more of the following actions:
(I)Where a covered
entity knowingly and intentionally violates subparagraph (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 paragraph (a)(5)(E), 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 a violation of subparagraph (a)(5)(B) was systematic and
egregious as well as knowing and intentional, removing the covered entity from
the drug discount program under this section and disqualifying the entity from
re-entry into such 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 of Department of Health and
Human Services, or other Federal agencies for consideration of appropriate
action under other Federal statutes, such as the Prescription Drug Marketing
Act (21 U.S.C. 353).
(3)Administrative
dispute resolution process
(A)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).
(B)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 one 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 resolutionThe 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 appropriationsThere are authorized to be appropriated to
carry out this subsection, such sums as may be necessary for fiscal year 2010
and each succeeding fiscal
year.
.
(b)Section 340B(a) of such Act (42 U.S.C. 256b(a)) is
amended—
(1)in subsection
(a)(1), 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.
; and
(2)in the first
sentence of subsection (a)(5)(E), as redesignated by section 2(b), by inserting
after audit as described in subparagraph (D) and
after
finds,
.
5.Other
improvements in 340B programSection 340B of the
Public Health Service Act (42 U.S.C.
256b), as amended by section 4(a), is further amended by adding at the end the
following new subsections:
(f)Use of Multiple
Contract Pharmacies PermittedNothing in this section shall be
construed as prohibiting a covered entity from entering into contracts with
more than one pharmacy for the provision of covered drugs, including such a
contract that supplements the use of an in-house pharmacy arrangement or as
requiring the approval of the Secretary for entering into such a
contract.
(g)Intra-Agency
CoordinationThe 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 by establishment of a permanent working group, 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.
.
6.
(a)The amendments made by this Act shall take effect on
January 1, 2010, and shall apply to drugs purchased on or after January 1,
2010.
(b)The
amendments made by this Act shall be effective, 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 of section 1927(a)(5) of the
Social Security Act (42 U.S.C.
1396r–8(a)(5)), notwithstanding any other provision of law.