[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[S. 3702 Introduced in Senate (IS)]

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115th CONGRESS
  2d Session
                                S. 3702

     To amend title XIX of the Social Security Act to prevent the 
  misclassification of drugs for purposes of the Medicaid drug rebate 
                                program.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            December 4, 2018

Mr. Wyden (for himself and Mr. Grassley) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
     To amend title XIX of the Social Security Act to prevent the 
  misclassification of drugs for purposes of the Medicaid drug rebate 
                                program.

    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 ``Right Rebate Act of 2018''.

SEC. 2. PREVENTING THE MISCLASSIFICATION OF DRUGS UNDER THE MEDICAID 
              DRUG REBATE PROGRAM.

    (a) Application of Civil Money Penalty for Misclassification of 
Covered Outpatient Drugs.--
            (1) In general.--Section 1927(b)(3) of the Social Security 
        Act (42 U.S.C. 1396r-8(b)(3)) is amended--
                    (A) in the paragraph heading, by inserting ``and 
                drug product'' after ``price'';
                    (B) in subparagraph (A)--
                            (i) in clause (ii), by striking ``; and'' 
                        at the end and inserting a semicolon;
                            (ii) in clause (iii), by striking the 
                        period at the end and inserting a semicolon;
                            (iii) in clause (iv), by striking the 
                        semicolon at the end and inserting ``; and''; 
                        and
                            (iv) by inserting after clause (iv) the 
                        following new clause:
                            ``(v) not later than 30 days after the last 
                        day of each month of a rebate period under the 
                        agreement, such drug product information as the 
                        Secretary shall require for each of the 
                        manufacturer's covered outpatient drugs.''; and
                    (C) in subparagraph (C)--
                            (i) in clause (ii), by inserting 
                        ``including information related to drug 
                        pricing, drug product information, and data 
                        related to drug pricing or drug product 
                        information,'' after ``provides false 
                        information,'';
                            (ii) by adding at the end the following new 
                        clauses:
                            ``(iii) Misclassified or misreported 
                        information.--
                                    ``(I) In general.--Any manufacturer 
                                with an agreement under this section 
                                that knowingly (as defined in section 
                                1003.110 of title 42, Code of Federal 
                                Regulations (or any successor 
                                regulation)) misclassifies a covered 
                                outpatient drug, such as by knowingly 
                                submitting incorrect drug category 
                                information, is subject to a civil 
                                money penalty for each covered 
                                outpatient drug that is misclassified 
                                in an amount not to exceed 2 times the 
                                amount of the difference, as determined 
                                by the Secretary, between--
                                            ``(aa) the total amount of 
                                        rebates that the manufacturer 
                                        paid with respect to the drug 
                                        to all States for all rebate 
                                        periods during which the drug 
                                        was misclassified; and
                                            ``(bb) the total amount of 
                                        rebates that the manufacturer 
                                        would have been required to 
                                        pay, as determined by the 
                                        Secretary, with respect to the 
                                        drug to all States for all 
                                        rebate periods during which the 
                                        drug was misclassified if the 
                                        drug had been correctly 
                                        classified.
                                    ``(II) Other penalties and recovery 
                                of underpaid rebates.--The civil money 
                                penalties described in subclause (I) 
                                are in addition to other penalties as 
                                may be prescribed by law and any other 
                                recovery of the underlying underpayment 
                                for rebates due under this section or 
                                the terms of the rebate agreement as 
                                determined by the Secretary.
                            ``(iv) Increasing oversight and 
                        enforcement.--Each year the Secretary shall 
                        retain, in addition to any amount retained by 
                        the Secretary to recoup investigation and 
                        litigation costs related to the enforcement of 
                        the civil money penalties under this 
                        subparagraph and subsection (c)(4)(B)(ii)(III), 
                        an amount equal to 25 percent of the total 
                        amount of civil money penalties collected under 
                        this subparagraph and subsection 
                        (c)(4)(B)(ii)(III) for the year, and such 
                        retained amount shall be available to the 
                        Secretary, without further appropriation and 
                        until expended, for activities related to the 
                        oversight and enforcement of this section and 
                        agreements under this section, including--
                                    ``(I) improving drug data reporting 
                                systems;
                                    ``(II) evaluating and ensuring 
                                manufacturer compliance with rebate 
                                obligations; and
                                    ``(III) oversight and enforcement 
                                related to ensuring that manufacturers 
                                accurately and fully report drug 
                                information, including data related to 
                                drug classification.''; and
                            (iii) in subparagraph (D)--
                                    (I) in clause (iv), by striking ``; 
                                and'' and inserting a semicolon;
                                    (II) in clause (v), by striking the 
                                period and inserting ``; and''; and
                                    (III) by inserting after clause (v) 
                                the following new clause:
                            ``(vi) in the case of categories of drug 
                        product or classification information that were 
                        not considered confidential by the Secretary on 
                        the day before the date of the enactment of the 
                        Right Rebate Act of 2018.''.
            (2) Technical amendments.--
                    (A) Section 1903(i)(10) of the Social Security Act 
                (42 U.S.C. 1396b(i)(10)) is amended--
                            (i) in subparagraph (C)--
                                    (I) by adjusting the left margin so 
                                as to align with the left margin of 
                                subparagraph (B); and
                                    (II) by striking ``, and'' and 
                                inserting a semicolon;
                            (ii) in subparagraph (D), by striking ``; 
                        or'' and inserting ``; and''; and
                            (iii) by adding at the end the following 
                        new subparagraph:
                    ``(E) with respect to any amount expended for a 
                covered outpatient drug for which a suspension under 
                section 1927(c)(4)(B)(ii)(II) is in effect; or''.
                    (B) Section 1927(b)(3)(C)(ii) of the Social 
                Security Act (42 U.S.C. 1396r-8(b)(3)(C)(ii)) is 
                amended by striking ``subsections (a) and (b)'' and 
                inserting ``subsections (a), (b), (f)(3), and (f)(4)''.
    (b) Recovery of Unpaid Rebate Amounts Due to Misclassification of 
Covered Outpatient Drugs.--
            (1) In general.--Section 1927(c) of the Social Security Act 
        (42 U.S.C. 1396r-8(c)) is amended by adding at the end the 
        following new paragraph:
            ``(4) Recovery of unpaid rebate amounts due to 
        misclassification of covered outpatient drugs.--
                    ``(A) In general.--If the Secretary determines that 
                a manufacturer with an agreement under this section 
                paid a lower per-unit rebate amount to a State for a 
                rebate period as a result of the misclassification by 
                the manufacturer of a covered outpatient drug (without 
                regard to whether the manufacturer knowingly made the 
                misclassification or should have known that the 
                misclassification would be made) than the per-unit 
                rebate amount that the manufacturer would have paid to 
                the State if the drug had been correctly classified, 
                the manufacturer shall pay to the State an amount equal 
                to the product of--
                            ``(i) the difference between--
                                    ``(I) the per-unit rebate amount 
                                paid to the State for the period; and
                                    ``(II) the per-unit rebate amount 
                                that the manufacturer would have paid 
                                to the State for the period, as 
                                determined by the Secretary, if the 
                                drug had been correctly classified; and
                            ``(ii) the total units of the drug paid for 
                        under the State plan in the period.
                    ``(B) Authority to correct misclassifications.--
                            ``(i) In general.--If the Secretary 
                        determines that a manufacturer with an 
                        agreement under this section has misclassified 
                        a covered outpatient drug (without regard to 
                        whether the manufacturer knowingly made the 
                        misclassification or should have known that the 
                        misclassification would be made), the Secretary 
                        shall notify the manufacturer of the 
                        misclassification and require the manufacturer 
                        to correct the misclassification in a timely 
                        manner.
                            ``(ii) Enforcement.--If, after receiving 
                        notice of a misclassification from the 
                        Secretary under clause (i), a manufacturer 
                        fails to correct the misclassification by such 
                        time as the Secretary shall require, until the 
                        manufacturer makes such correction, the 
                        Secretary may--
                                    ``(I) correct the misclassification 
                                on behalf of the manufacturer;
                                    ``(II) suspend the misclassified 
                                drug and the drug's status as a covered 
                                outpatient drug under the 
                                manufacturer's national rebate 
                                agreement; or
                                    ``(III) impose a civil money 
                                penalty (which shall be in addition to 
                                any other recovery or penalty which may 
                                be available under this section or any 
                                other provision of law) for each rebate 
                                period during which the drug is 
                                misclassified not to exceed an amount 
                                equal to the product of--
                                            ``(aa) the total number of 
                                        units of each dosage form and 
                                        strength of such misclassified 
                                        drug paid for under any State 
                                        plan during such a rebate 
                                        period; and
                                            ``(bb) 23.1 percent of the 
                                        average manufacturer price for 
                                        the dosage form and strength of 
                                        such misclassified drug.
                    ``(C) Reporting and transparency.--
                            ``(i) In general.--The Secretary shall 
                        submit a report to Congress on at least an 
                        annual basis that includes information on the 
                        covered outpatient drugs that have been 
                        identified as misclassified, the steps taken to 
                        reclassify such drugs, the actions the 
                        Secretary has taken to ensure the payment of 
                        any rebate amounts which were unpaid as a 
                        result of such misclassification, and a 
                        disclosure of expenditures from the fund 
                        created in subsection (b)(3)(C)(iv), including 
                        an accounting of how such funds have been 
                        allocated and spent in accordance with such 
                        subsection.
                            ``(ii) Public access.--The Secretary shall 
                        make the information contained in the report 
                        required under clause (i) available to the 
                        public on a timely basis.
                    ``(D) Other penalties and actions.--Actions taken 
                and penalties imposed under this clause shall be in 
                addition to other remedies available to the Secretary 
                including terminating the manufacturer's rebate 
                agreement for noncompliance with the terms of such 
                agreement and shall not exempt a manufacturer from, or 
                preclude the Secretary from pursuing, any civil money 
                penalty under this title or title XI, or any other 
                penalty or action as may be prescribed by law.''.
            (2) Offset of recovered amounts against medical 
        assistance.--Section 1927(b)(1)(B) of the Social Security Act 
        (42 U.S.C. 1396r-8(b)(1)(B)) is amended by inserting ``, 
        including amounts received by a State under subsection 
        (c)(4),'' after ``in any quarter''.
    (c) Clarifying Definitions.--Section 1927(k)(7)(A) of the Social 
Security Act (42 U.S.C. 1396r-8(k)(7)(A)) is amended--
            (1) by striking ``an original new drug application'' and 
        inserting ``a new drug application'' each place it appears;
            (2) in clause (i), by inserting ``but including a drug 
        product approved for marketing as a non-prescription drug that 
        is regarded as a covered outpatient drug under paragraph (4)'' 
        after ``drug described in paragraph (5)'';
            (3) in clause (ii), by striking ``was originally marketed'' 
        and inserting ``is marketed''; and
            (4) in clause (iv)--
                    (A) by inserting ``, including a drug product 
                approved for marketing as a non-prescription drug that 
                is regarded as a covered outpatient drug under 
                paragraph (4),'' after ``covered outpatient drug''; and
                    (B) by adding at the end the following new 
                sentence: ``Such term also includes a covered 
                outpatient drug that is a biological product licensed, 
                produced, or distributed under a biologics license 
                application approved by the Food and Drug 
                Administration.''
    (d) Exclusion of Manufacturers for Knowing Misclassification of 
Covered Outpatient Drugs.--Section 1128(b) of the Social Security Act 
(42 U.S.C. 1320a-7(b)) is amended by adding at the end the following 
new paragraph:
            ``(17) Knowingly misclassifying covered outpatient drugs.--
        Any manufacturer or officer, director, agent, or managing 
        employee of such manufacturer that knowingly misclassifies a 
        covered outpatient drug under an agreement under section 1927, 
        knowingly fails to correct such misclassification, or knowingly 
        provides false information related to drug pricing, drug 
        product information, or data related to drug pricing or drug 
        product information.''.
    (e) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act, and shall apply to 
covered outpatient drugs supplied by manufacturers under agreements 
under section 1927 of the Social Security Act (42 U.S.C. 1396r-8) on or 
after such date.
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