[Congressional Record Volume 149, Number 82 (Thursday, June 5, 2003)]
[Senate]
[Page S7488]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KYL  (for himself, Mr. Bingaman, Mr. Rockefeller, Mr. 
        McCain, Mr. Frist, Mr. Alexander, Mrs. Lincoln, Mr. Bunning, 
        Mr. Smith, Mr. Graham of Florida, Mr. Santorum, Mr. Kerry, Mr. 
        Kennedy, and Mr. Hatch):
  S. 1195. A bill to amend title XIX of the Social Security Act to 
clarify that inpatient drug prices charged to certain public hospitals 
are included in the best price exemptions for the medicaid drug rebate 
program; to the Committee on Finance.
  Mr. KYL. Mr. President, I rise today with Senators Bingaman, 
Rockefeller, McCain, Frist, Alexander, Lincoln, Bunning, Smith, Bob 
Graham, Santorum, Kerry, Kennedy and Hatch to introduce a modest but 
important piece of legislation, the Safety Net Hospital Pharmacy Access 
Act. This legislation would correct a small error in current law that 
prohibits safety-net hospitals from being able to negotiate with 
pharmaceutical companies for the lowest prices they can get.
  Let me provide some background on this problem. In 1990, Congress 
established the Medicaid drug-rebate program to ensure that the 
Medicaid program pays no more than a pharmaceutical manufacturer's 
``best price'' for a covered outpatient drug. So whatever was the 
lowest price the manufacturer offered to anyone, this becomes the price 
Medicaid pays under this ``best price'' rule.
  Unfortunately, this rule provides an incentive for pharmaceutical 
manufacturers not to offer deep discounts to anyone, given that these 
prices may become the new price that Medicaid pays. Given this, in 1992 
Congress exempted some organizations from the Medicaid best price 
calculations so that pharmaceutical manufacturers would offer them 
lower drug prices. These organizations include the VA, the Department 
of Defense, and section 340B covered entities. These 340B hospitals are 
so called because they fall under section 340B of the Public Health 
Services Act, which defines 12 categories of publicly funded safety net 
providers. There are approximately 160 hospitals in the country that 
fall under the 340B program. These hospitals often bear the burden of 
providing a substantial amount of uncompensated care in dealing with 
the indigent or the uninsured.
  Unfortunately, the Center for Medicare and Medicaid Services 
interpreted the 1992 law as only applying to outpatient drugs purchased 
by these entities. Therefore, drugs purchased for inpatient use at the 
340B hospitals are covered by the Medicaid best price rule. This means 
these hospitals actually pay more for these drugs than for drugs that 
they can negotiate their own prices for in the outpatient setting. The 
legislation I am introducing today corrects this problem by allowing 
the 340B hospitals to also negotiate for lower drug prices in the 
inpatient setting.
  This is an important correction since these hospitals are often 
providing free care to the indigent and the uninsured. And let me be 
clear that this legislation would not require pharmaceutical companies 
to provide discounts to these hospitals. All this legislation would do 
is allow the hospitals to negotiate for lower prices. However, in my 
discussion with representatives of hospitals that would be affected by 
this law, they believe they would be able to save money.
  For instance, the Maricopa County hospital, which is the public 
hospital for the city of Phoenix, believes that it could save up to $1 
million a year. Since this hospital constantly runs in the red because 
of the massive amount of uncompensated care it is required under 
federal law to provide, such savings would be very helpful.
  I want to thank the bill's cosponsors. I also want to urge my 
colleagues to take a close look at this important legislation. I am 
going to work to see that it is passed this year.
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