[Congressional Record Volume 155, Number 87 (Thursday, June 11, 2009)]
[Senate]
[Pages S6546-S6548]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BINGAMAN (for himself, Mr. Thune, and Mrs. Gillibrand):
  S. 1239. A bill to amend section 340B of the Public Health Service 
Act to revise and expand the drug discount program under that section 
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 with my colleague from 
South Dakota, Sen. Thune, to introduce the 340B Program Improvement and 
Integrity Act of 2009. This legislation is designed to address the 
growing burden faced by our 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 non-profit 
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 2009, 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 allow expanded 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, ensuring that a significant portion of 
savings are passed on to the Medicaid program, and strengthening 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 non-profit 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 State Medicaid 
program a 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.
  The 340B Program Improvement and Integrity Act of 2009 would help 
safety net providers stretch their limited resources through increased 
access to discounted pharmaceuticals, enhance 340B program integrity by 
making sure participants are complying with program rules, and improve 
the care provided to this Nation's most vulnerable populations.
  Mr. President, 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. 1239

       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 2009''.

     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

[[Page S6547]]

     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) Extension of Discounts to Inpatient Drugs.--Section 
     340B of the Public Health Service Act (42 U.S.C. 256b) is 
     amended--
       (1) in subsection (a), by striking ``outpatient'' each 
     place that such appears in paragraphs (2), (5), (7), and (9); 
     and
       (2) in subsection (b)--
       (A) by striking ``In this section'' and inserting the 
     following:
       ``(A) In general.--In this section''; and
       (B) by adding at the end the following:
       ``(B) Covered drug.--In this section, the term `covered 
     drug'--
       ``(i) means a covered outpatient drug (as defined in 
     section 1927(k)(2) of the Social Security Act); and
       ``(ii) includes, notwithstanding paragraph (3)(A) of such 
     section 1927(k), 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) that 
     is enrolled to participate in the drug discount program under 
     this section.
       ``(C) Purchasing arrangements for inpatient drugs.--The 
     Secretary shall ensure that a hospital described in 
     subparagraph (L), (M), (N), or (O) of subsection (a)(4) that 
     is enrolled to participate in the drug discount program under 
     this section shall have multiple options for purchasing 
     covered drugs for inpatients including by utilizing a group 
     purchasing organization or other group purchasing 
     arrangement, establishing and utilizing its own group 
     purchasing program, purchasing directly from a manufacturer, 
     and any other purchasing arrangements that the Secretary may 
     deem appropriate to ensure access to drug discount pricing 
     under this section for inpatient drugs taking into account 
     the particular needs of small and rural hospitals.''.
       (c) 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)--
       (A) in clause (i), by adding ``and'' at the end;
       (B) in clause (ii), by striking ``; and'' and inserting a 
     period; and
       (C) 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)--

       ``(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).''.

       (d) Medicaid Credits on Inpatient Drugs.--Section 
     340B(a)(5) of the Public Health Service Act (42 U.S.C. 
     256b(a)(5)) is amended by adding at the end the following:
       ``(E) Medicaid credits.--Not later than 90 days after the 
     date of filing of the hospital's most recently filed Medicare 
     cost report, the hospital shall issue a credit as determined 
     by the Secretary to the State Medicaid program for inpatient 
     covered drugs provided to Medicaid recipients.''.
       (e) Integrity Improvements.--Subsection (c) of section 340B 
     of the Public Health Service Act (42 U.S.C. 256b(c)) is 
     amended to read as follows:
       ``(c) Improvements in Program Integrity.--
       ``(1) Manufacturer compliance.--
       ``(A) In general.--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) Improvements.--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 the date of enactment of the 340B Program Improvement 
     and Integrity Act of 2009;
       ``(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) In general.--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) Improvements.--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

[[Page S6548]]

     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.

       ``(3) Administrative dispute resolution process.--
       ``(A) In general.--Not later than 180 days after the date 
     of enactment of the 340B Program Improvement and Integrity 
     Act of 2009, 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) Deadline and procedures.--Regulations promulgated by 
     the Secretary under subparagraph (A) shall--
       ``(i) designate or establish a decision-making official or 
     decision-making 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 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 under 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 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 2010, and each 
     succeeding fiscal year.''.
       (f) Conforming Amendments.--
       (1) Social security act.--Section 1927 of the Social 
     Security Act (42 U.S.C. 1396r-8), is amended--
       (A) in subsection (a)(5)--
       (i) 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)'';
       (ii) by striking subparagraph (D); and
       (iii) by redesignating subparagraph (E) as subparagraph 
     (D);
       (B) 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

       (C) in subsection (k)(1)--
       (i) in subparagraph (A), by striking ``subparagraph (B)'' 
     and inserting ``subparagraphs (B) and (D)''; and
       (ii) by adding at the end the following new subparagraph:
       ``(D) Calculation for covered drugs.--With 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. The 
     Secretary shall establish a mechanism for collecting the 
     necessary data for the acute care class of trade from 
     manufacturers.''.
       (2) Public health service act.--Section 340B(a) of such Act 
     (42 U.S.C. 256b(a)) is amended--
       (A) 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
       (B) in the first sentence of subsection (a)(5)(E), as so 
     redesignated by subsection (c)(2), by inserting ``after an 
     audit as described in subparagraph (D), and'' after 
     ``finds,''.

     SEC. 3. EFFECTIVE DATES.

       (a) In General.--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) Effectiveness.--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.
                                 ______