I 112th CONGRESS 1st Session H. R. 2674 IN THE HOUSE OF REPRESENTATIVES July 27, 2011 Mrs. McMorris Rodgers (for herself, Mr. Rush, Mrs. Emerson, Ms. Brown of Florida, Mr. Owens, Mr. Clarke of Michigan, Mrs. Capito, Mr. Cleaver, and Mr. Young of Florida) introduced the following bill; which was referred to the Committee on Energy and Commerce, and in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To amend section 340B of the Public Health Service Act to improve the provision of discounts on drug purchases for certain safety net providers.

1.

Short title

This Act may be cited as the 340B Program Improvement Act.

2.

Extension of discounts to inpatient drugs

(a)

In general

Section 340B of the Public Health Service Act (42 U.S.C. 256b) is amended— (1)in subsection (a)— (A)in paragraphs (1), (2), and (5), by striking covered outpatient drug each place such term appears and inserting covered drug; and (B)in paragraphs (1), (7), and (9), by striking covered outpatient drugs each place such term appears and inserting covered drugs; (2)in subsection (b)(2)(B) by striking paragraph (3)(A) and inserting paragraph (3); and (3)in subsection (d), by striking covered outpatient drugs each place such term 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 inserting after subsection (b) the following new subsection: (c)

Medicaid credits on inpatient drugs

(1)

In general

For each cost reporting period, based on the most recently filed Medicare cost report under title XVIII of the Social Security Act and subject to paragraph (5), 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 that has a plan for medical assistance under title XIX of such Act and that makes payment to such hospital for covered drugs provided to Medicaid recipients for inpatient use, a credit on the estimated annual purchases by such hospital of such covered drugs provided to such Medicaid recipients. (2)

Amount of credit

(A)

In general

The credit described in paragraph (1), with respect to a hospital and cost reporting period described in such paragraph shall be equal to— (i)the product of— (I)the sum of the annual credit amounts (described in subparagraph (B)) calculated under subparagraph (B)(i) for each dosage form and strength of each covered drug purchased by the hospital during the cost reporting period; and (II)the estimated percentage of the purchases of covered drugs by the hospital during such period attributable to Medicaid recipients for inpatient use, as determined in accordance with subparagraph (D); and (ii)subject to paragraph (3)(D), reduced by the amount by which the Medicaid inpatient reimbursement (as defined in subparagraph (E)(ii)) of the hospital for such period was reduced as a result of participation in the drug discount program under this section during such period by the hospital, as determined in accordance with subparagraph (E). (B)

Annual credit amounts

For purposes of subparagraph (A)(i)(I), an annual credit amount, with respect to a covered drug purchased by a hospital described in paragraph (1) during a cost reporting period of the hospital— (i)is equal to the sum of the quarterly credit amounts calculated under subparagraph (C)(i), for each of the 4 quarters of the cost reporting period for such covered drug; and (ii)shall be calculated for each dosage form and strength of such covered drug. (C)

Quarterly credit amounts

For purposes of subparagraph (B)(ii), a quarterly credit amount, with respect to a covered drug purchased by a hospital described in paragraph (1) during a quarter of the cost reporting period of the hospital— (i)is equal to the product of— (I)the total number of units of each dosage form and strength of such covered drug purchased by the hospital during such quarter; (II)the average manufacturer price of the covered drug (for the unit of the dosage form and strength involved) during such quarter; and (III)half of the rebate percentage for the covered drug, as defined in subsection (a)(2); and (ii)shall be calculated for— (I)each dosage form and strength of the covered drug purchased by the hospital; and (II)each of the 4 quarters of such cost reporting period. (D)

Percentage of drug purchases attributable to medicaid recipients for impatient use

For purposes of subparagraph (A)(i)(II), the estimated percentage of the drug purchases of the hospital attributable to Medicaid recipients for inpatient use shall be equal to the Medicaid inpatient drug charges as reported on the most recently filed Medicare cost report of the hospital, divided by the total drug charges reported on the cost report. (E)

Credit offset

(i)

In general

For purposes of subparagraph (A)(ii), the amount by which the Medicaid inpatient reimbursement of a hospital, with respect to a cost reporting period, is reduced as a result of the participation in the drug discount program under this section by the hospital shall be computed as the difference between— (I)the Medicaid inpatient reimbursement that would have otherwise been payable to the hospital for the cost reporting period if the hospital did not participate in such drug discount program; and (II)the actual Medicaid inpatient reimbursement payable to the hospital for the cost reporting period. (ii)

Medicaid inpatient reimbursement defined

For purposes of this subsection, the term Medicaid inpatient reimbursement means the total payments received by the hospital under the State plan under title XIX of the Social Security Act for providing inpatient services to Medicaid recipients. (3)

Requirements

(A)

In general

A hospital shall not be required to provide a credit under paragraph (1) to a State unless, not later than 30 days after receiving the information described in subparagraph (B), the State calculates in accordance with paragraph (2) the amount of the credit owed by the hospital under paragraph (1) and provides the hospital with both the amount of such credit so owed and an explanation of how the State calculated such credit. (B)

Hospital provision of information

Not later than 30 days after the date of the filing of the most recently filed Medicare cost report of a hospital described in paragraph (1), the hospital shall provide the State involved with the information described in subparagraphs (C)(i)(I) and (D) of paragraph (2). With respect to each covered drug purchased during the cost reporting period, the hospital shall provide the National Drug Code, date of purchase, and the number of units purchased. Submission of such information shall not be required if a covered drug has not been assigned a National Drug Code at the time of purchase. (C)

Access to AMP and rebate data

The Secretary shall establish a system for giving States access to the information necessary for them to calculate credits under paragraph (2), with respect to covered drugs, including the average manufacturer price and rebate percentage for such covered drugs. (D)

Credit offset

Paragraph (2)(A)(ii) shall be applied, with respect to a credit owed by a hospital under paragraph (1), only if, not later than 30 days after filing the most recent Medicare cost report, the hospital submits to the State involved— (i)a request for the State to apply such paragraph and to calculate the amount described in such paragraph in accordance with paragraph (2)(E); and (ii)the data needed by the State to determine the amount of the Medicaid inpatient reimbursement described in paragraph (2)(E)(i)(I) for such hospital. (E)

Disputes

A State and hospital described in paragraph (1) shall have access to the same State dispute resolution procedures and system applicable to Medicaid reimbursement matters under title XIX of the Social Security Act. (4)

Payment deadline

A hospital shall provide to a State the credits owed by such hospital under paragraph (1) not later than 60 days after the hospital receives the information described in paragraph (3)(A). (5)

Opt out

A hospital shall not be required to provide a credit under paragraph (1) to a State if the hospital and State agree to an alternative arrangement. (6)

Offset against medical assistance

Amounts received by a State under this subsection shall be considered to be a reduction in the amount expended under the State plan for medical assistance for purposes of section 1903(a)(1) of the Social Security Act. (7)

Medicaid recipient defined

For purposes of this subsection, the term Medicaid recipient means, with respect to a State, an individual who receives benefits under the State plan under title XIX of the Social Security Act. . (c)

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 drugs and inserting covered drugs (as defined in section 340B(b)(2) of the Public Health Service Act); and (B)by striking subparagraphs (D) and (E); and (2)in subsection (c)(1)(C)(i)— (A)by redesignating subclauses (II) through (VI) as subclauses (III) through (VII), 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; .

3.

Prohibition against duplicate discounts for physician administered drugs

Section 340B(a)(5)(A) of the Public Health Service Act (42 U.S.C. 256b) is amended by adding at the end the following: (iii)

Physician administered drugs

A hospital described in subparagraph (L), (M), (N), or (O) of paragraph (4) shall not be required under section 1927(a)(7) of the Social Security Act to report National Drug Code numbers for drugs administered by a physician (or under a physician’s supervision) if the State is precluded from seeking a rebate on such drugs because such drugs were purchased at a discount under this section. Nothing in this clause shall relieve a hospital of its obligation to submit National Drug Codes in accordance with subsection (c)(3)(B). .

4.

Continued inclusion of orphan drugs in definition of covered outpatient drugs; technical amendment

(a)

In general

Section 340B of the Public Health Service Act (42 U.S.C. 256b) is amended by striking subsection (e). (b)

Effective date

The amendment made by subsection (a) shall apply to drugs purchased on or after March 30, 2010.

5.

Application of rules for determining provider-based status for certain entities

Notwithstanding any other provision of law, in making determinations of provider-based status under title XVIII of the Social Security Act, the facility or organization shall be treated as satisfying any requirements and standards for geographic location in relation to a hospital or a critical access hospital if the facility or organization is described in subparagraph (L), (M), (N), or (O) of section 340B(a)(4) of the Public Health Service Act (42 U.S.C. 256b(a)(4)).