[Congressional Record Volume 153, Number 79 (Monday, May 14, 2007)]
[Senate]
[Pages S6057-S6060]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BINGAMAN (for himself and Mr. Thune):
  S. 1376. 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; to the Committee on Health, Education, Labor, and 
Pensions.
  Mr. BINGAMAN. Mr. President, I rise today to introduce legislation 
with my colleague from South Dakota, Senator Thune, designed to address 
the growing burden faced by this Nation's health care safety net 
institutions in being able to provide adequate pharmaceutical care to 
the most vulnerable patient populations.
  Communities across the country rely on public and nonprofit hospitals 
to serve as the health care ``safety net'' for low-income, uninsured, 
and underinsured patients. With the ever-increasing cost of 
pharmaceuticals, these institutions are struggling more and more to 
provide basic pharmaceutical care to those least able to afford it.
  Fortunately, many safety net hospitals are currently able to 
participate in the Federal 340B Drug Discount Program, which enables 
them to purchase outpatient drugs for their patients at discounted 
prices. These hospitals, known as ``covered entities'' under the 340B 
statute, include high-Medicaid disproportionate share hospitals, DSH, 
large and small urban hospitals, and certain rural hospitals.
  I am introducing legislation today, the 340B Program Improvement and 
Integrity Act of 2007, which would extend discounted drug prices 
currently mandated only for outpatient drugs to inpatient drugs 
purchased by covered entities under the 340B program. Although the 
Medicare Modernization Act, MMA, of 2003 permitted pharmaceutical 
manufacturers to offer 340B drug discounts to covered entities, this 
legislation did not include a mandate. Without a mandate we have seen 
very little willingness on the part of manufactures to offer 340B drug 
discounts for inpatient drugs. As the prices of pharmaceutical drugs 
continue to increase sharply, the need for these inpatient discounts 
grows more and more acute.
  My legislation would also expand participation in the program to a 
subset of rural hospitals that, for a variety of reasons, cannot 
currently access 340B discounts. These newly eligible rural hospitals 
include critical access hospitals, sole community hospitals, and rural 
referral centers. In proposing this modest expansion to the program, we 
have struck an important balance between ensuring a close nexus with 
low-income and indigent care, ensured that a significant portion of 
savings is passed on to the Medicaid Program, and strengthened the 
integrity of the program.
  Specifically, newly eligible rural hospitals would have to meet 
appropriate standards demonstrating their ``safety net'' status, as do 
all hospitals that currently participate in the program. For example, 
sole community hospitals and rural referral centers, all of which are 
paid under the prospective payment system, would be required under this 
legislation to serve a significant percentage of low-income and 
indigent patients, have public or nonprofit status, and, if privately 
owned and operated, to have a contract with State or local government 
to provide a significant level of indigent care. All standards are 
designed to reinforce the obligation of these covered entities to 
continue serving low-income and uninsured patients.
  This legislation would also generate savings for the Medicaid Program 
by requiring participating hospitals to credit to their Medicaid 
agencies a significant percentage of their savings on inpatient drugs. 
It would address the overall efficiency and integrity of the 340B 
program through improved enforcement and compliance measures with 
respect to manufacturers and covered entities. This is designed to 
improve program administration and to prevent and remedy instances of 
program abuse.
  In the end, this legislation would accomplish several important 
goals. It would help safety net providers stretch their already limited 
resources through increased access to discounted pharmaceuticals; it 
would enhance 340B program integrity by making sure participants are 
complying with program rules; and it would help to improve the care 
provided to this Nation's most vulnerable populations.
  I urge my colleagues to cosponsor this important legislation.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 1376

       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)--

[[Page S6058]]

       ``(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

[[Page S6059]]

       ``(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

[[Page S6060]]

     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.''.
                                 ______