[House Report 116-215] [From the U.S. Government Publishing Office] 116th Congress } { Report HOUSE OF REPRESENTATIVES 1st Session } { 116-215 ====================================================================== MORE EFFICIENT TOOLS TO REALIZE INFORMATION FOR CONSUMERS ACT _______ September 24, 2019.--Committed to the Committee of the Whole House on the State of the Union and ordered to be printed _______ Mr. Pallone, from the Committee on Energy and Commerce, submitted the following R E P O R T [To accompany H.R. 2296] The Committee on Energy and Commerce, to whom was referred the bill (H.R. 2296) to require reporting regarding certain drug price increases, and for other purposes, having considered the same, report favorably thereon with amendments and recommend that the bill as amended do pass. CONTENTS Page I. Purpose and Summary..............................................9 II. Background and Need for the Legislation.........................10 III. Committee Hearings..............................................12 IV. Committee Consideration.........................................13 V. Committee Votes.................................................13 VI. Oversight Findings..............................................13 VII. New Budget Authority, Entitlement Authority, and Tax Expenditure13 VIII.Federal Mandates Statement......................................14 IX. Statement of General Performance Goals and Objectives...........14 X. Duplication of Federal Programs.................................14 XI. Committee Cost Estimate.........................................14 XII. Earmarks, Limited Tax Benefits, and Limited Tariff Benefits.....14 XIII.Advisory Committee Statement....................................14 XIV. Applicability to Legislative Branch.............................14 XV. Section-by-Section Analysis of the Legislation..................14 XVI. Changes in Existing Law Made by the Bill, as Reported...........17 The amendments are as follows: Strike all after the enacting clause and insert the following: SECTION 1. SHORT TITLE; TABLE OF CONTENTS. (a) Short Title.--This Act may be cited as the ``More Efficient Tools to Realize Information for Consumers Act'' or the ``METRIC Act''. (b) Table of Contents.--The table of contents for this Act is as follows: Sec. 1. Short title; table of contents. Sec. 2. Reporting on explanation for drug price increases. Sec. 3. Public disclosure of drug discounts. Sec. 4. Study of pharmaceutical supply chain intermediaries and merger activity. Sec. 5. Requiring certain manufacturers to report drug pricing information with respect to drugs under the Medicare program. Sec. 6. Making prescription drug marketing sample information reported by manufacturers available to certain individuals and entities. Sec. 7. Requiring prescription drug plan sponsors to include real-time benefit information as part of such sponsor's electronic prescription program under the Medicare program. Sec. 8. Sense of Congress regarding the need to expand commercially available drug pricing comparison platforms. Sec. 9. Technical corrections. SEC. 2. REPORTING ON EXPLANATION FOR DRUG PRICE INCREASES. (a) In General.--Title III of the Public Health Service Act (42 U.S.C. 241 et seq.) is amended by adding at the end the following: ``PART W--DRUG PRICE REPORTING; DRUG VALUE FUND ``SEC. 399OO. REPORTING ON EXPLANATION FOR DRUG PRICE INCREASES. ``(a) Definitions.--In this section: ``(1) Manufacturer.--The term `manufacturer' means the person-- ``(A) that holds the application for a drug approved under section 505 of the Federal Food, Drug, and Cosmetic Act or licensed under section 351 of this Act; or ``(B) who is responsible for setting the wholesale acquisition cost for the drug. ``(2) Qualifying drug.--The term `qualifying drug' means any drug that is approved under subsection (c) or (j) of section 505 of the Federal Food, Drug, and Cosmetic Act or licensed under subsection (a) or (k) of section 351 of this Act-- ``(A) that has a wholesale acquisition cost of $100 or more, adjusted for inflation occurring after the date of enactment of the More Efficient Tools to Realize Information for Consumers Act, for a month's supply or a typical course of treatment that lasts less than a month, and is-- ``(i) subject to section 503(b)(1) of the Federal Food, Drug, and Cosmetic Act; ``(ii) administered or otherwise dispensed to treat a disease or condition affecting more than 200,000 persons in the United States; and ``(iii) not a vaccine; and ``(B) for which, during the previous calendar year, at least 1 dollar of the total amount of sales were for individuals enrolled under the Medicare program under title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) or under a State Medicaid plan under title XIX of such Act (42 U.S.C. 1396 et seq.) or under a waiver of such plan. ``(3) Wholesale acquisition cost.--The term `wholesale acquisition cost' has the meaning given that term in section 1847A(c)(6)(B) of the Social Security Act (42 U.S.C. 1395w- 3a(c)(6)(B)). ``(b) Report.-- ``(1) Report required.--The manufacturer of a qualifying drug shall submit a report to the Secretary for each increase in the price of a qualifying drug that results in an increase in the wholesale acquisition cost of that drug that is equal to-- ``(A) 10 percent or more within a single calendar year beginning on or after January 1, 2019; or ``(B) 25 percent or more within three consecutive calendar years for which the first such calendar year begins on or after January 1, 2019. ``(2) Report deadline.--Each report described in paragraph (1) shall be submitted to the Secretary-- ``(A) in the case of a report with respect to an increase in the price of a qualifying drug that occurs during the period beginning on January 1, 2019, and ending on the day that is 60 days after the date of the enactment of the More Efficient Tools to Realize Information for Consumers Act, not later than 90 days after such date of enactment; and ``(B) in the case of a report with respect to an increase in the price of a qualifying drug that occurs after the period described in subparagraph (A), not later than 30 days prior to the planned effective date of such price increase for such qualifying drug. ``(c) Contents.--A report under subsection (b), consistent with the standard for disclosures described in section 213.3(d) of title 12, Code of Federal Regulations (as in effect on the date of enactment of the More Efficient Tools to Realize Information for Consumers Act), shall, at a minimum, include-- ``(1) with respect to the qualifying drug-- ``(A) the percentage by which the manufacturer will raise the wholesale acquisition cost of the drug within the calendar year or three consecutive calendar years as described in subsection (b)(1)(A) or (b)(1)(B), and the effective date of such price increase; ``(B) an explanation for, and description of, each price increase for such drug that will occur during the calendar year period described in subsection (b)(1)(A) or the three consecutive calendar year period described in subsection (b)(1)(B), as applicable; ``(C) if known and different from the manufacturer of the qualifying drug, the identity of-- ``(i) the sponsor or sponsors of any investigational new drug applications under section 505(i) of the Federal Food, Drug, and Cosmetic Act for clinical investigations with respect to such drug, for which the full reports are submitted as part of the application-- ``(I) for approval of the drug under section 505 of such Act; or ``(II) for licensure of the drug under section 351 of this Act; and ``(ii) the sponsor of an application for the drug approved under such section 505 of the Federal Food, Drug, and Cosmetic Act or licensed under section 351 of this Act; ``(D) a description of the history of the manufacturer's price increases for the drug since the approval of the application for the drug under section 505 of the Federal Food, Drug, and Cosmetic Act or the issuance of the license for the drug under section 351 of this Act, or since the manufacturer acquired such approved application or license, if applicable; ``(E) the current wholesale acquisition cost of the drug; ``(F) the total expenditures of the manufacturer on-- ``(i) materials and manufacturing for such drug; and ``(ii) acquiring patents and licensing for such drug; ``(G) the percentage of total expenditures of the manufacturer on research and development for such drug that was derived from Federal funds; ``(H) the total expenditures of the manufacturer on research and development for such drug that is necessary to demonstrate that it meets applicable statutory standards for approval under section 505 of the Federal Food, Drug, and Cosmetic Act or licensure under section 351 of this Act, as applicable; ``(I) the total expenditures of the manufacturer on pursuing new or expanded indications or dosage changes for such drug under section 505 of the Federal Food, Drug, and Cosmetic Act or section 351 of this Act; ``(J) the total expenditures of the manufacturer on carrying out postmarket requirements related to such drug, including under section 505(o)(3) of the Federal Food, Drug, and Cosmetic Act; ``(K) the total revenue and the net profit generated from the qualifying drug for each calendar year since the approval of the application for the drug under section 505 of the Federal Food, Drug, and Cosmetic Act or the issuance of the license for the drug under section 351, or since the manufacturer acquired such approved application or license; and ``(L) the total costs associated with marketing and advertising for the qualifying drug; ``(2) with respect to the manufacturer-- ``(A) the total revenue and the net profit of the manufacturer for each of the 1-year period described in subsection (b)(1)(A) or the 3-year period described in subsection (b)(1)(B), as applicable; ``(B) all stock-based performance metrics used by the manufacturer to determine executive compensation for each of the 1-year period described in subsection (b)(1)(A) or the 3-year period described in subsection (b)(1)(B), as applicable; and ``(C) any additional information the manufacturer chooses to provide related to drug pricing decisions, such as total expenditures on-- ``(i) drug research and development; or ``(ii) clinical trials, including on drugs that failed to receive approval by the Food and Drug Administration; and ``(3) such other related information as the Secretary considers appropriate and as specified by the Secretary through notice-and-comment rulemaking. ``(d) Information Provided.--The manufacturer of a qualifying drug that is required to submit a report under subsection (b), shall ensure that such report and any explanation for, and description of, each price increase described in subsection (c)(1)(B) shall be truthful, not misleading, and accurate. ``(e) Civil Monetary Penalty.--Any manufacturer of a qualifying drug that fails to submit a report for the drug as required by this section, following notification by the Secretary to the manufacturer that the manufacturer is not in compliance with this section, shall be subject to a civil monetary penalty of $75,000 for each day on which the violation continues. ``(f) False Information.--Any manufacturer that submits a report for a drug as required by this section that knowingly provides false information in such report is subject to a civil monetary penalty in an amount not to exceed $75,000 for each item of false information. ``(g) Public Posting.-- ``(1) In general.--Subject to paragraph (3), the Secretary shall post each report submitted under subsection (b) on the public website of the Department of Health and Human Services the day the price increase of a qualifying drug is scheduled to go into effect. ``(2) Format.--In developing the format in which reports will be publicly posted under paragraph (1), the Secretary shall consult with stakeholders, including beneficiary groups, and shall seek feedback from consumer advocates and readability experts on the format and presentation of the content of such reports to ensure that such reports are-- ``(A) user-friendly to the public; and ``(B) written in plain language that consumers can readily understand. ``(3) Protected information.--Nothing in this section shall be construed to authorize the public disclosure of information submitted by a manufacturer that is prohibited from disclosure by applicable laws concerning the protection of trade secrets, commercial information, and other information covered under such laws. ``SEC. 399OO-1. ANNUAL REPORT TO CONGRESS. ``(a) In General.--Subject to subsection (b), the Secretary shall submit to Congress, and post on the public website of the Department of Health and Human Services in a way that is user-friendly to the public and written in plain language that consumers can readily understand, an annual report-- ``(1) summarizing the information reported pursuant to section 399OO; ``(2) including copies of the reports and supporting detailed economic analyses submitted pursuant to such section; ``(3) detailing the costs and expenditures incurred by the Department of Health and Human Services in carrying out section 399OO; and ``(4) explaining how the Department of Health and Human Services is improving consumer and provider information about drug value and drug price transparency. ``(b) Protected Information.--Nothing in this section shall be construed to authorize the public disclosure of information submitted by a manufacturer that is prohibited from disclosure by applicable laws concerning the protection of trade secrets, commercial information, and other information covered under such laws.''. (b) Effective Date.--The amendment made by subsection (a) takes effect on the date of enactment of this Act. SEC. 3. PUBLIC DISCLOSURE OF DRUG DISCOUNTS. Section 1150A of the Social Security Act (42 U.S.C. 1320b-23) is amended-- (1) in subsection (c), in the matter preceding paragraph (1), by inserting ``(other than as permitted under subsection (e))'' after ``disclosed by the Secretary''; and (2) by adding at the end the following new subsection: ``(e) Public Availability of Certain Information.-- ``(1) In general.--In order to allow the comparison of PBMs' ability to negotiate rebates, discounts, direct and indirect remuneration fees, administrative fees, and price concessions and the amount of such rebates, discounts, direct and indirect remuneration fees, administrative fees, and price concessions that are passed through to plan sponsors, beginning January 1, 2020, the Secretary shall make available on the Internet website of the Department of Health and Human Services the information with respect to the second preceding calendar year provided to the Secretary on generic dispensing rates (as described in paragraph (1) of subsection (b)) and information provided to the Secretary under paragraphs (2) and (3) of such subsection that, as determined by the Secretary, is with respect to each PBM. ``(2) Availability of data.--In carrying out paragraph (1), the Secretary shall ensure the following: ``(A) Confidentiality.--The information described in such paragraph is displayed in a manner that prevents the disclosure of information, with respect to an individual drug or an individual plan, on rebates, discounts, direct and indirect remuneration fees, administrative fees, and price concessions. ``(B) Class of drug.--The information described in such paragraph is made available by class of drug, using an existing classification system, but only if the class contains such number of drugs, as specified by the Secretary (but not fewer than three drugs), to ensure confidentiality of proprietary information or other information that is prevented to be disclosed under subparagraph (A).''. SEC. 4. STUDY OF PHARMACEUTICAL SUPPLY CHAIN INTERMEDIARIES AND MERGER ACTIVITY. (a) Initial Report.--Not later than 1 year after the date of enactment of this Act, the Commission shall submit to the appropriate committees of Congress a report that-- (1) addresses at minimum-- (A) whether pharmacy benefit managers-- (i) charge payers a higher price than the reimbursement rate at which the pharmacy benefit managers reimburse competing pharmacies; (ii) steer patients for anticompetitive purposes to any pharmacies, including retail, mail-order, or any other type of pharmacy, in which the pharmacy benefit manager has an ownership interest; (iii) audit or review proprietary data, including acquisition costs, patient information, or dispensing information, of competing pharmacies that can be used for anticompetitive purposes; or (iv) use formulary designs to increase the market share of higher cost prescription drugs and depress the market share of lower cost prescription drugs (each net of rebates and discounts); (B) how companies and payers assess the benefits, costs, and risks of contracting with intermediaries, including pharmacy services administrative organizations, and whether more information about the roles of intermediaries should be available to consumers and payers; and (C) whether there are any specific legal or regulatory obstacles the Commission currently faces in ensuring a competitive and transparent marketplace in the pharmaceutical supply chain, including the pharmacy benefit manager marketplace and pharmacy services administrative organizations; and (2) provides-- (A) observations or conclusions drawn from the November 2017 roundtable entitled ``Understanding Competition in Prescription Drug Markets: Entry and Supply Chain Dynamics'', and any similar efforts; (B) specific actions the Commission intends to take as a result of the November 2017 roundtable, and any similar efforts, including a detailed description of relevant forthcoming actions, additional research or roundtable discussions, consumer education efforts, or enforcement actions; and (C) policy or legislative recommendations to-- (i) improve transparency and competition in the pharmaceutical supply chain; (ii) prevent and deter anticompetitive behavior in the pharmaceutical supply chain; and (iii) best ensure that consumers benefit from any cost savings or efficiencies that may result from mergers and consolidations. (b) Interim Report.--Not later than 180 days after the date of enactment of this Act, the Commission shall submit to the appropriate committees of Congress an interim report on the progress of the report required by subsection (a), along with preliminary findings and conclusions based on information collected to that date. (c) Definitions.--In this section: (1) Appropriate committees of congress.--The term ``appropriate committees of Congress'' means-- (A) the Committee on Energy and Commerce of the House of Representatives; (B) the Committee on the Judiciary of the Senate; and (C) the Committee on the Judiciary of the House of Representatives. (2) Commission.--The term ``Commission'' means the Federal Trade Commission. SEC. 5. REQUIRING CERTAIN MANUFACTURERS TO REPORT DRUG PRICING INFORMATION WITH RESPECT TO DRUGS UNDER THE MEDICARE PROGRAM. (a) In General.--Section 1847A of the Social Security Act (42 U.S.C. 1395w-3a) is amended-- (1) in subsection (b)-- (A) in paragraph (2)(A), by inserting ``or subsection (f)(2), as applicable'' before the period at the end; (B) in paragraph (3), in the matter preceding subparagraph (A), by inserting ``or subsection (f)(2), as applicable,'' before ``determined by''; and (C) in paragraph (6)(A), in the matter preceding clause (i), by inserting ``or subsection (f)(2), as applicable,'' before ``determined by''; and (2) in subsection (f)-- (A) by striking ``For requirements'' and inserting the following: ``(1) In general.--For requirements''; and (B) by adding at the end the following new paragraph: ``(2) Manufacturers without a rebate agreement under title xix.-- ``(A) In general.--If the manufacturer of a drug or biological described in subparagraph (C), (E), or (G) of section 1842(o)(1) or in section 1881(b)(14)(B) that is payable under this part has not entered into and does not have in effect a rebate agreement described in subsection (b) of section 1927, for calendar quarters beginning on or after January 1, 2020, such manufacturer shall report to the Secretary the information described in subsection (b)(3)(A)(iii) of such section 1927 with respect to such drug or biological in a time and manner specified by the Secretary. For purposes of applying this paragraph, a drug or biological described in the previous sentence includes items, services, supplies, and products that are payable under this part as a drug or biological. ``(B) Audit.--Information reported under subparagraph (A) is subject to audit by the Inspector General of the Department of Health and Human Services. ``(C) Verification.--The Secretary may survey wholesalers and manufacturers that directly distribute drugs described in subparagraph (A), when necessary, to verify manufacturer prices and manufacturer's average sales prices (including wholesale acquisition cost) if required to make payment reported under subparagraph (A). The Secretary may impose a civil monetary penalty in an amount not to exceed $100,000 on a wholesaler, manufacturer, or direct seller, if the wholesaler, manufacturer, or direct seller of such a drug refuses a request for information about charges or prices by the Secretary in connection with a survey under this subparagraph or knowingly provides false information. The provisions of section 1128A (other than subsections (a) (with respect to amounts of penalties or additional assessments) and (b)) shall apply to a civil money penalty under this subparagraph in the same manner as such provisions apply to a penalty or proceeding under section 1128A(a). ``(D) Confidentiality.--Notwithstanding any other provision of law, information disclosed by manufacturers or wholesalers under this paragraph (other than the wholesale acquisition cost for purposes of carrying out this section) is confidential and shall not be disclosed by the Secretary in a form which discloses the identity of a specific manufacturer or wholesaler or prices charged for drugs by such manufacturer or wholesaler, except-- ``(i) as the Secretary determines to be necessary to carry out this section (including the determination and implementation of the payment amount), or to carry out section 1847B; ``(ii) to permit the Comptroller General of the United States to review the information provided; and ``(iii) to permit the Director of the Congressional Budget Office to review the information provided.''. (b) Enforcement.--Section 1847A of such Act (42 U.S.C. 1395w-3a) is further amended-- (1) in subsection (d)(4)-- (A) in subparagraph (A), by striking ``In general'' and inserting ``Misrepresentation''; (B) in subparagraph (B), by striking ``subparagraph (B)'' and inserting ``subparagraph (A), (B), or (C)''; (C) by redesignating subparagraph (B) as subparagraph (D); and (D) by inserting after subparagraph (A) the following new subparagraphs: ``(B) Failure to provide timely information.--If the Secretary determines that a manufacturer described in subsection (f)(2) has failed to report on information described in section 1927(b)(3)(A)(iii) with respect to a drug or biological in accordance with such subsection, the Secretary shall apply a civil money penalty in an amount of $10,000 for each day the manufacturer has failed to report such information and such amount shall be paid to the Treasury. ``(C) False information.--Any manufacturer required to submit information under subsection (f)(2) that knowingly provides false information is subject to a civil money penalty in an amount not to exceed $100,000 for each item of false information. Such civil money penalties are in addition to other penalties as may be prescribed by law.''; and (2) in subsection (c)(6)(A), by striking the period at the end and inserting ``, except that, for purposes of subsection (f)(2), the Secretary may, if the Secretary determines appropriate, exclude repackagers of a drug or biological from such term.''. (c) Manufacturers With a Rebate Agreement.-- (1) In general.--Section 1927(b)(3)(A) of the Social Security Act (42 U.S.C. 1396r-8(b)(3)(A)) is amended by adding at the end the following new sentence: ``For purposes of applying clause (iii), a drug or biological described in the flush matter following such clause includes items, services, supplies, and products that are payable under this part as a drug or biological.''. (2) Technical amendment.--Section 1927(b)(3)(A)(iii) of the Social Security Act (42 U.S.C. 1396r-8(b)(3)(A)(iii)) is amended by striking ``section 1881(b)(13)(A)(ii)'' and inserting ``section 1881(b)(14)(B)''. (d) Report.--Not later than January 1, 2021, the Inspector General of the Department of Health and Human Services shall assess and submit to Congress a report on the accuracy of average sales price information submitted by manufacturers under section 1847A of the Social Security Act (42 U.S.C. 1395w-3a). Such report shall include any recommendations on how to improve the accuracy of such information. SEC. 6. MAKING PRESCRIPTION DRUG MARKETING SAMPLE INFORMATION REPORTED BY MANUFACTURERS AVAILABLE TO CERTAIN INDIVIDUALS AND ENTITIES. (a) In General.--Section 1128H of the Social Security Act (42 U.S.C. 1320a-7i) is amended-- (1) by redesignating subsection (b) as subsection (e); and (2) by inserting after subsection (a) the following new subsections: ``(b) Data Sharing Agreements.-- ``(1) In general.--The Secretary shall enter into agreements with the specified data sharing individuals and entities described in paragraph (2) under which-- ``(A) upon request of such an individual or entity, as applicable, the Secretary makes available to such individual or entity the information submitted under subsection (a) by manufacturers and authorized distributors of record; and ``(B) such individual or entity agrees to not disclose publicly or to another individual or entity any information that identifies a particular practitioner or health care facility. ``(2) Specified data sharing individuals and entities.--For purposes of paragraph (1), the specified data sharing individuals and entities described in this paragraph are the following: ``(A) Oversight agencies.--Health oversight agencies (as defined in section 164.501 of title 45, Code of Federal Regulations), including the Centers for Medicare & Medicaid Services, the Office of the Inspector General of the Department of Health and Human Services, the Government Accountability Office, the Congressional Budget Office, the Medicare Payment Advisory Commission, and the Medicaid and CHIP Payment and Access Commission. ``(B) Researchers.--Individuals who conduct scientific research (as defined in section 164.501 of title 45, Code of Federal Regulations) in relevant areas as determined by the Secretary. ``(C) Payers.--Private and public health care payers, including group health plans, health insurance coverage offered by health insurance issuers, Federal health programs, and State health programs. ``(3) Exemption from freedom of information act.--Except as described in paragraph (1), the Secretary may not be compelled to disclose the information submitted under subsection (a) to any individual or entity. For purposes of section 552 of title 5, United States Code (commonly referred to as the Freedom of Information Act), this paragraph shall be considered a statute described in subsection (b)(3)(B) of such section. ``(c) Penalties.-- ``(1) Data sharing agreements.--Subject to paragraph (3), any specified data sharing individual or entity described in subsection (b)(2) that violates the terms of a data sharing agreement the individual or entity has with the Secretary under subsection (b)(1) shall be subject to a civil money penalty of not less than $1,000, but not more than $10,000, for each such violation. Such penalty shall be imposed and collected in the same manner as civil money penalties under subsection (a) of section 1128A are imposed and collected under that section. ``(2) Failure to report.--Subject to paragraph (3), any manufacturer or authorized distributor of record of an applicable drug under subsection (a) that fails to submit information required under such subsection in a timely manner in accordance with rules or regulations promulgated to carry out such subsection shall be subject to a civil money penalty of not less than $1,000, but not more than $10,000, for each such failure. Such penalty shall be imposed and collected in the same manner as civil money penalties under subsection (a) of section 1128A are imposed and collected under that section. ``(3) Limitation.--The total amount of civil money penalties imposed under paragraph (1) or (2) with respect to a year and an individual or entity described in subparagraph (A) or a manufacturer or distributor described in subparagraph (B), respectively, shall not exceed $150,000. ``(d) Drug Sample Distribution Information.-- ``(1) In general.--Not later than January 1 of each year (beginning with 2021), the Secretary shall maintain a list containing information related to the distribution of samples of applicable drugs. Such list shall provide the following information with respect to the preceding year: ``(A) The name of the manufacturer or authorized distributor of record of an applicable drug for which samples were requested or distributed under this section. ``(B) The quantity and class of drug samples requested. ``(C) The quantity and class of drug samples distributed. ``(2) Public availability.--The Secretary shall make the information in such list available to the public on the Internet Web site of the Food and Drug Administration.''. (b) FDA Maintenance of Information.--The Food and Drug Administration shall maintain information available to affected reporting companies to ensure their ability to fully comply with the requirements of section 1128H of the Social Security Act. (c) Prohibition on Distribution of Samples of Opioids.--Section 503(d) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 353(d)) is amended-- (1) by moving the margin of paragraph (4) 2 ems to the left; and (2) by adding at the end the following: ``(5) No person may distribute a drug sample of a drug that is-- ``(A) an applicable drug (as defined in section 1128H(d) of the Social Security Act); ``(B) a controlled substance (as defined in section 102 of the Controlled Substances Act) for which the findings required under section 202(b)(2) of such Act have been made; and ``(C) approved under section 505 for use in the management or treatment of pain (other than for the management or treatment of a substance use disorder).''. (d) MedPAC Report.--Not later than 3 years after the date of the enactment of this Act, the Medicare Payment Advisory Commission shall conduct a study on the impact of drug samples on provider prescribing practices and health care costs and may, as the Commission deems appropriate, make recommendations on such study. SEC. 7. REQUIRING PRESCRIPTION DRUG PLAN SPONSORS TO INCLUDE REAL-TIME BENEFIT INFORMATION AS PART OF SUCH SPONSOR'S ELECTRONIC PRESCRIPTION PROGRAM UNDER THE MEDICARE PROGRAM. Section 1860D-4(e)(2) of the Social Security Act (42 U.S.C. 1395w- 104(e)(2)) is amended-- (1) in subparagraph (D), by striking ``To the extent'' and inserting ``Except as provided in subparagraph (F), to the extent''; and (2) by adding at the end the following new subparagraph: ``(F) Real-time benefit information.-- ``(i) In general.--Not later than January 1, 2021, the program shall implement real-time benefit tools that are capable of integrating with a prescribing health care professional's electronic prescribing or electronic health record system for the transmission of formulary and benefit information in real time to prescribing health care professionals. With respect to a covered part D drug, such tools shall be capable of transmitting such information specific to an individual enrolled in a prescription drug plan. Such information shall include the following: ``(I) A list of any clinically- appropriate alternatives to such drug included in the formulary of such plan. ``(II) Cost-sharing information for such drug and such alternatives, including a description of any variance in cost sharing based on the pharmacy dispensing such drug or such alternatives. ``(III) Information relating to whether such drug is included in the formulary of such plan and any prior authorization or other utilization management requirements applicable to such drug and such alternatives so included. ``(ii) Electronic transmission.--The provisions of subclauses (I) and (II) of clause (ii) of subparagraph (E) shall apply to an electronic transmission described in clause (i) in the same manner as such provisions apply with respect to an electronic transmission described in clause (i) of such subparagraph. ``(iii) Special rule for 2021.--The program shall be deemed to be in compliance with clause (i) for 2021 if the program complies with the provisions of section 423.160(b)(7) of title 42, Code of Federal Regulations (or a successor regulation), for such year. ``(iv) Rule of construction.--Nothing in this subparagraph shall be construed as to allow a real time benefits tool to steer an individual, without the consent of the individual, to a particular pharmacy or pharmacy setting over their preferred pharmacy setting nor prohibit the designation of a preferred pharmacy under such tool.''. SEC. 8. SENSE OF CONGRESS REGARDING THE NEED TO EXPAND COMMERCIALLY AVAILABLE DRUG PRICING COMPARISON PLATFORMS. It is the sense of Congress that-- (1) commercially available drug pricing comparison platforms can, at no cost, help patients find the lowest price for their medications at their local pharmacy; (2) such platforms should be integrated, to the maximum extent possible, in the health care delivery ecosystem; and (3) pharmacy benefit managers should work to disclose generic and brand name drug prices to such platforms to ensure that-- (A) patients can benefit from the lowest possible price available to them; and (B) overall drug prices can be reduced as more educated purchasing decisions are made based on price transparency. SEC. 9. TECHNICAL CORRECTIONS. (a) In General.--Section 3022(b) of the Public Health Service Act (42 U.S.C. 300jj-52(b)) is amended by adding at the end the following new paragraph: ``(4) Application of authorities under inspector general act of 1978.--In carrying out this subsection, the Inspector General shall have the same authorities as provided under section 6 of the Inspector General Act of 1978 (5 U.S.C. App.).''. (b) Effective Date.--The amendment made by subsection (a) shall take effect as if included in the enactment of the 21st Century Cures Act (Public Law 114-255). Amend the title so as to read: A bill to require reporting for certain drug price information, and for other purposes. I. Purpose and Summary H.R. 2296, the ``More Efficient Tools to Realize Information for Consumers Act'' or the ``METRIC Act'', was introduced in the House on April 12, 2019, by Reps. Jan Schakowsky (D-IL) and Francis Rooney (R-FL), originally with the short title of the ``FAIR Drug Pricing Act of 2019''. The bill was referred to the Committee on Energy and Commerce. H.R. 2296 increases consumer transparency of the prescription drug supply chain by requiring qualifying pharmaceutical manufacturers to report specific information to the Department of Health and Human Services (HHS) prior to certain drug price increases. The legislation also makes public more information concerning rebates, discounts, and other price concessions that are negotiated by pharmacy benefit managers. Additionally, H.R. 2296 requires all pharmaceutical manufacturers to report average sales price (ASP) data to HHS and requires prescription drug plan sponsors to include real-time benefit information for electronic prescribing. The legislation also ensures greater transparency of pharmaceutical supply chain intermediaries and merger activity, as well as information on drug samples that are distributed by pharmaceutical manufacturers to providers or healthcare facilities. Ultimately, H.R. 2296 increases the information available to consumers to better understand how prescription drugs are developed, distributed, priced, and covered throughout the pharmaceutical drug supply chain. II. Background and Need for Legislation Retail prescription drug spending in the United States, adjusted for inflation, increased on a per capita basis from $90 in 1960 to $1,025 in 2017.\1\ In the Medicare program, prescription drugs covered under Medicare Part B and Part D account for nearly 20 percent ($129 billion) of total Medicare spending, with the majority of that spending occurring in Part D (13 percent).\2\ In 2010, 33,000 Part D enrollees filled a prescription for which a single claim would have been sufficient to meet the Part D out-of-pocket threshold. By 2016, however, that number had jumped to 360,000.\3\ The Medicare Payment Advisory Commission (MedPAC) recently found that nearly all growth in spending among high-cost Part D enrollees between 2007 and 2017 was due to increases in the average price per prescription filled.\4\ --------------------------------------------------------------------------- \1\ Kamal, Rabah, et al, Kaiser Family Foundation, What are the recent and forecasted trends in prescription drug spending? (2017) (www.healthsystemtracker.org/chart-collection/recentforecasted-trends- prescription-drug-spending/#item-start). \2\MedPAC, The Medicare prescription drug program (Part D): Status Report (March 2019) (medpac.gov/docs/default-source/reports/ mar19_medpac_ch14_sec.pdf?sfvrsn=0). \3\Id. \4\Id. --------------------------------------------------------------------------- A recent analysis has found that prescription drug cost increases are primarily attributable to price increases for drugs already on the market.\5\ The cost of brand name prescription drugs rose more than nine percent a year from 2008 to 2016, and the cost of injectable drugs rose more than 15 percent annually over that same period.\6\ Independent experts have suggested that greater transparency across the drug supply chain may provide insight into why drug prices are continuing to grow and help address the price increases that are leading to higher out-of-pocket costs for consumers.\7\ --------------------------------------------------------------------------- \5\Inmaculada Hernandez, et al. The Contribution of New Product Entry Versus Existing Product Inflation in the Rising Costs of Drugs, Health Affairs (Jan. 2019) (www.healthaffairs.org/doi/abs/10.1377/ hlthaff.2018.05147). \6\ Id. \7\National Academies of Sciences, Engineering, and Medicine, Making Medicines Affordable: A National Imperative, (Nov. 2017) (www.nationalacademies.org/hmd/Reports/2017/making-medicines- affordable-a-nationalimperative.aspx). --------------------------------------------------------------------------- To that end, H.R. 2296 contains a number of provisions aimed at providing greater transparency and insight into the drug supply chain and how entities in the supply chain affect the price of prescription drugs. Similar to various efforts to increase drug pricing transparency at the state level\8\, section 2 of the METRIC Act includes Federal reporting requirements for manufacturers of qualifying drugs that increase in price by 10 percent or more within a single calendar year, or 25 percent or more within three consecutive calendar years, based on changes in wholesale acquisition cost (WAC). The manufacturers of a qualifying drug that exceeds such price thresholds are required to submit a report that includes specific documentation to the Secretary of HHS prior to the price increase of the qualifying drug. --------------------------------------------------------------------------- \8\See Recent Approaches and Innovations in State Prescription Drug Laws, National Conference of State Legislatures, (May 2019) (www.ncsl.org/research/health/rx-costs.aspx). --------------------------------------------------------------------------- In addition to section 2, section 3 of H.R. 2296 requires HHS to make publicly available the aggregated number of rebates, discounts, or price concessions that pharmacy benefit managers (PBMs) negotiate in order to allow the comparison of these fees across PBMs for consumers. Section 4 of H.R. 2296 requires the Federal Trade Commission (FTC) to issue a report that addresses PBM market practices and whether there are legal or regulatory obstacles to ensuring a competitive marketplace in the pharmaceutical supply chain. Section 5 of the legislation provides for greater transparency regarding the prices of drugs in the Medicare Part B program by requiring all manufacturers of drugs covered under Medicare Part B to report ASP data to the Centers for Medicare and Medicaid Services (CMS). ASP is defined as a manufacturer's quarterly sales of a drug to all U.S. purchasers, divided by the drug's total units sold for the same quarter. Current law requires only manufacturers with Medicaid drug rebate agreements to report ASP data to CMS. Drugs that lack ASP data may use a payment methodology that results in higher reimbursement (such as the wholesale acquisition cost or average wholesale price). In its June 2017 report to Congress, MedPAC recommended that all manufacturers be required to report ASP data to help ensure the Medicare program is not overpaying for drugs as a result of the lack of ASP data. Additionally, section 6 of H.R. 2296 increases drug sample transparency by allowing the Secretary to share through data use agreements the information on drug samples currently reported to the Food and Drug Administration (FDA) by drug manufacturers with researchers, insurers, and oversight agencies for the purposes of research. Section 6004 of the Affordable Care Act (ACA) required drug manufacturers and distributors to report to FDA information on product samples requested and distributed, including information on the physicians receiving such samples. In 2017, MedPAC recommended that Congress ``authorize and require the Secretary to make this information available to researchers, payers, and plans that sign confidentiality and data use agreements'' to bring greater transparency to the potential effects of samples on provider prescribing practices.\9\ --------------------------------------------------------------------------- \9\MedPAC, Report to the Congress: Medicare and the Health Care Delivery System, Chapter 6 (June 2017) (www.medpac.gov/docs/default- source/reports/jun17_ch6.pdf?sfvrsn=0). --------------------------------------------------------------------------- Section 7 of H.R. 2296 ensures consumers have the information they need at the point of prescribing on cost- sharing requirements for a given drug and drug alternatives, as well as real-time information on prior authorization and other utilization management requirements. This will enable consumers to know their out-of-pocket expenditures and other information before reaching the pharmacy counter. Section 8 of the legislation provides a sense of Congress that more price information should be made available to patients to inform drug purchasing decisions. Finally, section 9 of the legislation includes a provision to help improve interoperability and ensure that individuals are able to easily access their health records. It makes technical corrections to ensure that the HHS Office of the Inspector General has the authority necessary to enforce the information blocking provisions enacted under section 4004 of the 21st Century Cures Act. III. Committee Hearings For the purposes of section 103(i) of H. Res. 6 of the 116th Congress--the following hearings were used to develop or consider H.R. 2296: The Subcommittee on Health held a hearing on April 30, 2019, entitled ``Prescription Drug Coverage in the Medicare Program.'' The Subcommittee received testimony from the following witness:James E. Mathews, Ph.D., Executive Director, Medicare Payment Advisory Commission. The Subcommittee on Health held a related hearing on May 9, 2019, entitled ``Lowering Prescription Drug Prices: Deconstructing the Drug Supply Chain.'' The Subcommittee received testimony from the following witnesses: Justin McCarthy, Senior Vice President, Patient & Health Impact Group, Pfizer; Kave Niksefat, Vice President, Value and Access, Amgen; Jeffrey Hessekiel, Executive Vice President & General Counsel, Exelixis; Amy Bricker, Senior Vice President, Supply Chain, Express Scripts; Brent Eberle, Chief Pharmacy Officer, Navitus Health Solutions; Estay Greene, Vice President of Pharmacy Services, Blue Cross Blue Shield of North Carolina; Lynn Eschenbacher, Chief Pharmacy Officer, Ascension; Jack Resneck, M.D., Chair, Board of Trustees, American Medical Association; Richard Ashworth, President of Pharmacy, Walgreens; and Leigh Purvis, Director of Health Services Research, AARP. The Subcommittee on Health held a hearing on May 21, 2019, entitled ``Improving Drug Pricing Transparency and Lowering Prices for American Consumers.'' The Subcommittee received testimony from the following witnesses: Lisa Joldersma, Senior Vice President, Insurance and State Issues, Pharmaceutical Research and Manufacturers of America; Kristin Bass, Chief Policy and External Affairs Officer, Pharmaceutical Care Management Association; Madelaine Feldman, President, Coalition of State Rheumatology Organizations, Alliance of Specialty Medicine; Frederick Isasi, Executive Director, Families USA; Mark Miller, Executive Vice President of Health Care, Arnold Ventures; and Douglas Holtz-Eakin, President, American Action Forum. IV. Committee Consideration H.R. 2296, the ``More Efficient Tools to Realize Information for Consumers Act'' or the ``METRIC Act'', was introduced in the House on April 12, 2019, by Reps. Schakowsky (D-IL) and Rooney (R-FL), originally with the short title of the ``FAIR Drug Pricing Act of 2019''. The bill was referred to the Committee on Energy and Commerce. Subsequently, H.R. 2296 was referred to the Subcommittee on Health on April 15, 2019. Following a series of hearings, on July 11, 2019, the Subcommittee met in open markup session, pursuant to notice, for consideration of the bill H.R. 2296. An amendment in the nature of a substitute offered by Mr. Carter of Georgia, # 1, was agreed to by a voice vote. Subsequently, the Subcommittee on Health agreed to a motion by Ms. Eshoo, Chairwoman of the Subcommittee, that H.R. 2296 be forwarded favorably to the full Committee on Energy and Commerce, amended, by a voice vote. On July 17, 2019, the full Committee met in open markup session, pursuant to notice, to consider the bill H.R. 2296 as amended by the Subcommittee on Health on July 11, 2019 (Committee Print of H.R. 2296). During consideration of the bill, an amendment was offered by Ms. Schakowsky, # 1, and was agreed to by a voice vote. Subsequently, the full Committee on Energy and Commerce agreed to a motion offered by Mr. Pallone, Chairman of the Committee, that H.R. 2296 be ordered reported favorably to the House, amended, by a voice vote, a quorum being present. V. Committee Votes Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list each record vote on the motion to report legislation and amendments thereto. The Committee advises that there were no record votes taken on final passage of H.R. 2296 or any amendments to the bill. VI. Oversight Findings Pursuant to clause 3(c)(1) of rule XIII and clause 2(b)(1) of rule X of the Rules of the House of Representatives, the oversight findings and recommendations of the Committee are reflected in the descriptive portion of the report. VII. New Budget Authority, Entitlement Authority, and Tax Expenditures Pursuant to 3(c)(2) of rule XIII of the Rules of the House of Representatives, the Committee adopts as its own the estimate of new budget authority, entitlement authority, or tax expenditures or revenues contained in the cost estimate prepared by the Director of the Congressional Budget Office pursuant to section 402 of the Congressional Budget Act of 1974. The Committee has requested but not received from the Director of the Congressional Budget Office a statement as to whether this bill contains any new budget authority, credit authority, or an increase or decrease in revenues or tax expenditures. VIII. Federal Mandates Statement The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office pursuant to section 423 of the Unfunded Mandates Reform Act. IX. Statement of General Performance Goals and Objectives Pursuant to clause 3(c)(4) of rule XIII, the general performance goal or objective of this legislation is to increase transparency and the availability of information provided to consumers concerning certain drug price increases, rebates, costs, and other drug price information. X. Duplication of Federal Programs Pursuant to clause 3(c)(5) of rule XIII, no provision of H.R. 2296 is known to be duplicative of another Federal program, including any program that was included in a report to Congress pursuant to section 21 of Public Law 111-139 or the most recent Catalog of Federal Domestic Assistance. XI. Committee Cost Estimate Pursuant to clause 3(d)(1) of rule XIII, the Committee adopts as its own the cost estimate prepared by the Director of the Congressional Budget Office pursuant to section 402 of the Congressional Budget Act of 1974. XII. Earmarks, Limited Tax Benefits, and Limited Tariff Benefits Pursuant to clause 9(e), 9(f), and 9(g) of rule XXI, the Committee finds that H.R. 2296 contains no earmarks, limited tax benefits, or limited tariff benefits. XIII. Advisory Committee Statement No advisory committees within the meaning of section 5(b) of the Federal Advisory Committee Act were created by this legislation. XIV. Applicability to Legislative Branch The Committee finds that the legislation does not relate to the terms and conditions of employment or access to public services or accommodations within the meaning of section 102(b)(3) of the Congressional Accountability Act. XV. Section-by-Section Analysis of the Legislation Section 1. Short title; table of contents Section 1 designates that the short title may be cited as the ``More Efficient Tools to Realize Information for Consumers Act'' or the ``METRIC Act''. Sec. 2. Reporting on explanation for drug price increases Section 2 requires the manufacturer of a qualifying drug to submit an explanation and specific documentation to the Secretary of HHS in the event of a price increase in the wholesale acquisition cost that is equal to 10 percent or more within a single calendar year beginning on or after January 1, 2019, or 25 percent or more within three consecutive calendars years for which the first such calendar year begins on or after January 1, 2019. With respect to the qualifying drug, the manufacturer must include in the report an explanation for the price increase, a description of the price increase that will occur during the calendar year or years implicated, and a description of the history of the manufacturer's price increases for the qualifying drug since its approval, in addition to other requirements. The manufacturer of a qualifying drug is also required to provide documentation on the total expenditures on research and development for the qualifying drug in order to have gained approval or licensure by the FDA, pursue new or expanded indications or dosage changes, and carry out post-market requirements. Additionally, the manufacturer of a qualifying drug is required to provide to the Secretary the total revenue and net profit generated from the qualifying drug for each calendar year since its approval or licensure by the FDA, as well as the total costs associated with the marketing and advertising for the qualifying drug. Finally, the manufacturer of the qualifying drug is required to provide to the Secretary the total revenue and net profit overall for the manufacturer for calendar year or years implicated as well as all stock-based performance metrics utilized to determine executive compensation for the calendar year or years implicated and any additional information the manufacturer chooses to provide related to drug pricing decisions. The Secretary of HHS may also specify additional information to be disclosed by rulemaking. The manufacturer of a qualifying drug that is required to submit a report shall ensure that all documentation provided to the Secretary is truthful, not misleading, and accurate. Should a manufacturer of a qualifying drug fail to comply or knowingly provide false information, the manufacturer shall be subject to a civil monetary penalty of $75,000 for each day the violation continues or for each item of false information. Following the disclosure of the report by a manufacturer of a qualifying drug to the Secretary, the Secretary shall post each report submitted in full on the public website of HHS the day the price increase is scheduled to go into effect. The Secretary shall not disclose information that would be prohibited from disclosure under current law. The Secretary shall submit an annual report to Congress summarizing the information submitted pursuant to the bill, as well as how HHS is improving consumer and provider information about drug value and drug price transparency. Sec. 3. Public disclosure of drug discounts Section 3 requires the Secretary to make publicly available on the HHS website information on aggregate rebates, discounts, and other price concessions negotiated by PBMs, as well as the price concessions that are passed through to plan sponsors beginning January 1, 2020. Sec. 4. Study of pharmaceutical supply chain intermediaries and merger activity Section 4 requires the FTC not later than 1 year after the date of enactment to submit a report to the appropriate committees of Congress on pharmaceutical supply chain intermediaries and merger activity, including whether PBMs charge payers a higher price than the reimbursement rate at which the PBM reimburses competing pharmacies, as well as other actions. The report is required to also include policy or legislative recommendations to improve transparency and competition in the pharmaceutical supply chain. Sec. 5. Requiring certain manufacturers to report drug pricing information with respect to drugs under the Medicare program Section 5 requires all manufacturers to report ASP data to CMS for all drugs covered under Medicare Part B, authorizes civil money penalties against manufacturers who fail to report the data or report false data, and improves oversight related to the accuracy of the ASP data reported. Sec. 6. Making prescription drug marketing sample information reported by manufacturers available to certain individuals and entities Section 6 allows the Secretary to share through data use agreements the information on drug samples currently reported to the FDA by drug manufacturers (under section 1128H of the Social Security Act) with researchers, payers, and oversight agencies for the purposes of research. The findings of any such research on drug samples may be made publicly available so long as the individual or entity does not disclose information identifying individual providers or health care facilities. It also requires the FDA to publicly post on its website each year a list that contains the following information: (1) The name of the manufacturer or authorized distributor of record of an applicable drug for which samples were requested or distributed; (2) The quantity and class of drug samples requested; and (3) The quantity and class of drug samples distributed. This section would also prohibit the distribution of opioid samples, excluding those opioid samples used for the purposes of medication assisted treatment (MAT) for a substance use disorder. Sec. 7. Requiring prescription drug plan sponsors to include real-time benefit information as part of such sponsor's electronic prescription program under the Medicare program Section 7 requires Medicare Part D drug plan sponsors to provide formulary and benefit information to beneficiaries at the point of prescribing in order for beneficiaries and prescribers to know: a description of clinically appropriate alternatives to a prescribed drug included in the formulary; information on cost-sharing requirements for a given drug and alternatives; and information on prior authorization or other utilization management requirements for a given drug and alternatives within the formulary. Sec. 8. Sense of Congress regarding the need to expand commercially available drug pricing comparison platforms Section 8 expresses the sense of Congress that more price information should be made available to patients to inform drug purchasing decisions. Sec. 9. Technical corrections Section 9 makes technical corrections to ensure that the HHS Office of the Inspector General has the authority necessary to enforce the information blocking provisions enacted under section 4004 of the 21st Century Cures Act. XVI. Changes in Existing Law Made by the Bill, as Reported Changes in Existing Law Made by the Bill, as Reported In compliance with clause 3(e) of rule XIII of the Rules of the House of Representatives, changes in existing law made by the bill, as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, and existing law in which no change is proposed is shown in roman): PUBLIC HEALTH SERVICE ACT * * * * * * * TITLE III--GENERAL POWERS AND DUTIES OF PUBLIC HEALTH SERVICE * * * * * * * PART W--DRUG PRICE REPORTING; DRUG VALUE FUND SEC. 399OO. REPORTING ON EXPLANATION FOR DRUG PRICE INCREASES. (a) Definitions.--In this section: (1) Manufacturer.--The term ``manufacturer'' means the person-- (A) that holds the application for a drug approved under section 505 of the Federal Food, Drug, and Cosmetic Act or licensed under section 351 of this Act; or (B) who is responsible for setting the wholesale acquisition cost for the drug. (2) Qualifying drug.--The term ``qualifying drug'' means any drug that is approved under subsection (c) or (j) of section 505 of the Federal Food, Drug, and Cosmetic Act or licensed under subsection (a) or (k) of section 351 of this Act-- (A) that has a wholesale acquisition cost of $100 or more, adjusted for inflation occurring after the date of enactment of the More Efficient Tools to Realize Information for Consumers Act, for a month's supply or a typical course of treatment that lasts less than a month, and is-- (i) subject to section 503(b)(1) of the Federal Food, Drug, and Cosmetic Act; (ii) administered or otherwise dispensed to treat a disease or condition affecting more than 200,000 persons in the United States; and (iii) not a vaccine; and (B) for which, during the previous calendar year, at least 1 dollar of the total amount of sales were for individuals enrolled under the Medicare program under title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) or under a State Medicaid plan under title XIX of such Act (42 U.S.C. 1396 et seq.) or under a waiver of such plan. (3) Wholesale acquisition cost.--The term ``wholesale acquisition cost'' has the meaning given that term in section 1847A(c)(6)(B) of the Social Security Act (42 U.S.C. 1395w-3a(c)(6)(B)). (b) Report.-- (1) Report required.--The manufacturer of a qualifying drug shall submit a report to the Secretary for each increase in the price of a qualifying drug that results in an increase in the wholesale acquisition cost of that drug that is equal to-- (A) 10 percent or more within a single calendar year beginning on or after January 1, 2019; or (B) 25 percent or more within three consecutive calendar years for which the first such calendar year begins on or after January 1, 2019. (2) Report deadline.--Each report described in paragraph (1) shall be submitted to the Secretary-- (A) in the case of a report with respect to an increase in the price of a qualifying drug that occurs during the period beginning on January 1, 2019, and ending on the day that is 60 days after the date of the enactment of the More Efficient Tools to Realize Information for Consumers Act, not later than 90 days after such date of enactment; and (B) in the case of a report with respect to an increase in the price of a qualifying drug that occurs after the period described in subparagraph (A), not later than 30 days prior to the planned effective date of such price increase for such qualifying drug. (c) Contents.--A report under subsection (b), consistent with the standard for disclosures described in section 213.3(d) of title 12, Code of Federal Regulations (as in effect on the date of enactment of the More Efficient Tools to Realize Information for Consumers Act), shall, at a minimum, include-- (1) with respect to the qualifying drug-- (A) the percentage by which the manufacturer will raise the wholesale acquisition cost of the drug within the calendar year or three consecutive calendar years as described in subsection (b)(1)(A) or (b)(1)(B), and the effective date of such price increase; (B) an explanation for, and description of, each price increase for such drug that will occur during the calendar year period described in subsection (b)(1)(A) or the three consecutive calendar year period described in subsection (b)(1)(B), as applicable; (C) if known and different from the manufacturer of the qualifying drug, the identity of-- (i) the sponsor or sponsors of any investigational new drug applications under section 505(i) of the Federal Food, Drug, and Cosmetic Act for clinical investigations with respect to such drug, for which the full reports are submitted as part of the application-- (I) for approval of the drug under section 505 of such Act; or (II) for licensure of the drug under section 351 of this Act; and (ii) the sponsor of an application for the drug approved under such section 505 of the Federal Food, Drug, and Cosmetic Act or licensed under section 351 of this Act; (D) a description of the history of the manufacturer's price increases for the drug since the approval of the application for the drug under section 505 of the Federal Food, Drug, and Cosmetic Act or the issuance of the license for the drug under section 351 of this Act, or since the manufacturer acquired such approved application or license, if applicable; (E) the current wholesale acquisition cost of the drug; (F) the total expenditures of the manufacturer on-- (i) materials and manufacturing for such drug; and (ii) acquiring patents and licensing for such drug; (G) the percentage of total expenditures of the manufacturer on research and development for such drug that was derived from Federal funds; (H) the total expenditures of the manufacturer on research and development for such drug that is necessary to demonstrate that it meets applicable statutory standards for approval under section 505 of the Federal Food, Drug, and Cosmetic Act or licensure under section 351 of this Act, as applicable; (I) the total expenditures of the manufacturer on pursuing new or expanded indications or dosage changes for such drug under section 505 of the Federal Food, Drug, and Cosmetic Act or section 351 of this Act; (J) the total expenditures of the manufacturer on carrying out postmarket requirements related to such drug, including under section 505(o)(3) of the Federal Food, Drug, and Cosmetic Act; (K) the total revenue and the net profit generated from the qualifying drug for each calendar year since the approval of the application for the drug under section 505 of the Federal Food, Drug, and Cosmetic Act or the issuance of the license for the drug under section 351, or since the manufacturer acquired such approved application or license; and (L) the total costs associated with marketing and advertising for the qualifying drug; (2) with respect to the manufacturer-- (A) the total revenue and the net profit of the manufacturer for each of the 1-year period described in subsection (b)(1)(A) or the 3-year period described in subsection (b)(1)(B), as applicable; (B) all stock-based performance metrics used by the manufacturer to determine executive compensation for each of the 1-year period described in subsection (b)(1)(A) or the 3-year period described in subsection (b)(1)(B), as applicable; and (C) any additional information the manufacturer chooses to provide related to drug pricing decisions, such as total expenditures on-- (i) drug research and development; or (ii) clinical trials, including on drugs that failed to receive approval by the Food and Drug Administration; and (3) such other related information as the Secretary considers appropriate and as specified by the Secretary through notice-and-comment rulemaking. (d) Information Provided.--The manufacturer of a qualifying drug that is required to submit a report under subsection (b), shall ensure that such report and any explanation for, and description of, each price increase described in subsection (c)(1)(B) shall be truthful, not misleading, and accurate. (e) Civil Monetary Penalty.--Any manufacturer of a qualifying drug that fails to submit a report for the drug as required by this section, following notification by the Secretary to the manufacturer that the manufacturer is not in compliance with this section, shall be subject to a civil monetary penalty of $75,000 for each day on which the violation continues. (f) False Information.--Any manufacturer that submits a report for a drug as required by this section that knowingly provides false information in such report is subject to a civil monetary penalty in an amount not to exceed $75,000 for each item of false information. (g) Public Posting.-- (1) In general.--Subject to paragraph (3), the Secretary shall post each report submitted under subsection (b) on the public website of the Department of Health and Human Services the day the price increase of a qualifying drug is scheduled to go into effect. (2) Format.--In developing the format in which reports will be publicly posted under paragraph (1), the Secretary shall consult with stakeholders, including beneficiary groups, and shall seek feedback from consumer advocates and readability experts on the format and presentation of the content of such reports to ensure that such reports are-- (A) user-friendly to the public; and (B) written in plain language that consumers can readily understand. (3) Protected information.--Nothing in this section shall be construed to authorize the public disclosure of information submitted by a manufacturer that is prohibited from disclosure by applicable laws concerning the protection of trade secrets, commercial information, and other information covered under such laws. SEC. 399OO-1. ANNUAL REPORT TO CONGRESS. (a) In General.--Subject to subsection (b), the Secretary shall submit to Congress, and post on the public website of the Department of Health and Human Services in a way that is user- friendly to the public and written in plain language that consumers can readily understand, an annual report-- (1) summarizing the information reported pursuant to section 399OO; (2) including copies of the reports and supporting detailed economic analyses submitted pursuant to such section; (3) detailing the costs and expenditures incurred by the Department of Health and Human Services in carrying out section 399OO; and (4) explaining how the Department of Health and Human Services is improving consumer and provider information about drug value and drug price transparency. (b) Protected Information.--Nothing in this section shall be construed to authorize the public disclosure of information submitted by a manufacturer that is prohibited from disclosure by applicable laws concerning the protection of trade secrets, commercial information, and other information covered under such laws. * * * * * * * TITLE XXX--HEALTH INFORMATION TECHNOLOGY AND QUALITY * * * * * * * Subtitle C--Other Provisions * * * * * * * SEC. 3022. INFORMATION BLOCKING. (a) Definition.-- (1) In general.--In this section, the term ``information blocking'' means a practice that-- (A) except as required by law or specified by the Secretary pursuant to rulemaking under paragraph (3), is likely to interfere with, prevent, or materially discourage access, exchange, or use of electronic health information; and (B)(i) if conducted by a health information technology developer, exchange, or network, such developer, exchange, or network knows, or should know, that such practice is likely to interfere with, prevent, or materially discourage the access, exchange, or use of electronic health information; or (ii) if conducted by a health care provider, such provider knows that such practice is unreasonable and is likely to interfere with, prevent, or materially discourage access, exchange, or use of electronic health information. (2) Practices described.--The information blocking practices described in paragraph (1) may include-- (A) practices that restrict authorized access, exchange, or use under applicable State or Federal law of such information for treatment and other permitted purposes under such applicable law, including transitions between certified health information technologies; (B) implementing health information technology in nonstandard ways that are likely to substantially increase the complexity or burden of accessing, exchanging, or using electronic health information; and (C) implementing health information technology in ways that are likely to-- (i) restrict the access, exchange, or use of electronic health information with respect to exporting complete information sets or in transitioning between health information technology systems; or (ii) lead to fraud, waste, or abuse, or impede innovations and advancements in health information access, exchange, and use, including care delivery enabled by health information technology. (3) Rulemaking.--The Secretary, through rulemaking, shall identify reasonable and necessary activities that do not constitute information blocking for purposes of paragraph (1). (4) No enforcement before exception identified.--The term ``information blocking'' does not include any practice or conduct occurring prior to the date that is 30 days after the date of enactment of the 21st Century Cures Act. (5) Consultation.--The Secretary may consult with the Federal Trade Commission in promulgating regulations under this subsection, to the extent that such regulations define practices that are necessary to promote competition and consumer welfare. (6) Application.--The term ``information blocking'', with respect to an individual or entity, shall not include an act or practice other than an act or practice committed by such individual or entity. (7) Clarification.--In carrying out this section, the Secretary shall ensure that health care providers are not penalized for the failure of developers of health information technology or other entities offering health information technology to such providers to ensure that such technology meets the requirements to be certified under this title. (b) Inspector General Authority.-- (1) In general.--The inspector general of the Department of Health and Human Services (referred to in this section as the ``Inspector General'') may investigate any claim that-- (A) a health information technology developer of certified health information technology or other entity offering certified health information technology-- (i) submitted a false attestation under section 3001(c)(5)(D)(vii); or (ii) engaged in information blocking; (B) a health care provider engaged in information blocking; or (C) a health information exchange or network engaged in information blocking. (2) Penalties.-- (A) Developers, networks, and exchanges.--Any individual or entity described in subparagraph (A) or (C) of paragraph (1) that the Inspector General, following an investigation conducted under this subsection, determines to have committed information blocking shall be subject to a civil monetary penalty determined by the Secretary for all such violations identified through such investigation, which may not exceed $1,000,000 per violation. Such determination shall take into account factors such as the nature and extent of the information blocking and harm resulting from such information blocking, including, where applicable, the number of patients affected, the number of providers affected, and the number of days the information blocking persisted. (B) Providers.--Any individual or entity described in subparagraph (B) of paragraph (1) determined by the Inspector General to have committed information blocking shall be referred to the appropriate agency to be subject to appropriate disincentives using authorities under applicable Federal law, as the Secretary sets forth through notice and comment rulemaking. (C) Procedure.--The provisions of section 1128A of the Social Security Act (other than subsections (a) and (b) of such section) shall apply to a civil money penalty applied under this paragraph in the same manner as such provisions apply to a civil money penalty or proceeding under such section 1128A(a). (D) Recovered penalty funds.--The amounts recovered under this paragraph shall be allocated as follows: (i) Annual operating expenses.--Each year following the establishment of the authority under this subsection, the Office of the Inspector General shall provide to the Secretary an estimate of the costs to carry out investigations under this section. Such estimate may include reasonable reserves to account for variance in annual amounts recovered under this paragraph. There is authorized to be appropriated for purposes of carrying out this section an amount equal to the amount specified in such estimate for the fiscal year. (ii) Application to other programs.-- The amounts recovered under this paragraph and remaining after amounts are made available under clause (i) shall be transferred to the Federal Hospital Insurance Trust Fund under section 1817 of the Social Security Act and the Federal Supplementary Medical Insurance Trust Fund under section 1841 of such Act, in such proportion as the Secretary determines appropriate. (E) Authorization of appropriations.--There is authorized to be appropriated to the Office of the Inspector General to carry out this section $10,000,000, to remain available until expended. (3) Resolution of claims.-- (A) In general.--The Office of the Inspector General, if such Office determines that a consultation regarding the health privacy and security rules promulgated under section 264(c) of the Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. 1320d-2 note) will resolve an information blocking claim, may refer such instances of information blocking to the Office for Civil Rights of the Department of Health and Human Services for resolution. (B) Limitation on liability.--If a health care provider or health information technology developer makes information available based on a good faith reliance on consultations with the Office for Civil Rights of the Department of Health and Human Services pursuant to a referral under subparagraph (A), with respect to such information, the health care provider or developer shall not be liable for such disclosure or disclosures made pursuant to subparagraph (A). (4) Application of authorities under inspector general act of 1978.--In carrying out this subsection, the Inspector General shall have the same authorities as provided under section 6 of the Inspector General Act of 1978 (5 U.S.C. App.). (c) Identifying Barriers To Exchange of Certified Health Information Technology.-- (1) Trusted exchange defined.--In this section, the term ``trusted exchange'' with respect to certified electronic health records means that the certified electronic health record technology has the technical capability to enable secure health information exchange between users and multiple certified electronic health record technology systems. (2) Guidance.--The National Coordinator, in consultation with the Office for Civil Rights of the Department of Health and Human Services, shall issue guidance on common legal, governance, and security barriers that prevent the trusted exchange of electronic health information. (3) Referral.--The National Coordinator and the Office for Civil Rights of the Department of Health and Human Services may refer to the Inspector General instances or patterns of refusal to exchange health information with an individual or entity using certified electronic health record technology that is technically capable of trusted exchange and under conditions when exchange is legally permissible. (d) Additional Provisions.-- (1) Information sharing provisions.--The National Coordinator may serve as a technical consultant to the Inspector General and the Federal Trade Commission for purposes of carrying out this section. The National Coordinator may, notwithstanding any other provision of law, share information related to claims or investigations under subsection (b) with the Federal Trade Commission for purposes of such investigations and shall share information with the Inspector General, as required by law. (2) Protection from disclosure of information.--Any information that is received by the National Coordinator in connection with a claim or suggestion of possible information blocking and that could reasonably be expected to facilitate identification of the source of the information-- (A) shall not be disclosed by the National Coordinator except as may be necessary to carry out the purpose of this section; (B) shall be exempt from mandatory disclosure under section 552 of title 5, United States Code, as provided by subsection (b)(3) of such section; and (C) may be used by the Inspector General or Federal Trade Commission for reporting purposes to the extent that such information could not reasonably be expected to facilitate identification of the source of such information. (3) Standardized process.-- (A) In general.--The National Coordinator shall implement a standardized process for the public to submit reports on claims of-- (i) health information technology products or developers of such products (or other entities offering such products to health care providers) not being interoperable or resulting in information blocking; (ii) actions described in subsection (b)(1) that result in information blocking as described in subsection (a); and (iii) any other act described in subsection (a). (B) Collection of information.--The standardized process implemented under subparagraph (A) shall provide for the collection of such information as the originating institution, location, type of transaction, system and version, timestamp, terminating institution, locations, system and version, failure notice, and other related information. (4) Nonduplication of penalty structures.--In carrying out this subsection, the Secretary shall, to the extent possible, ensure that penalties do not duplicate penalty structures that would otherwise apply with respect to information blocking and the type of individual or entity involved as of the day before the date of the enactment of this section. ---------- SOCIAL SECURITY ACT * * * * * * * TITLE XI--GENERAL PROVISIONS, PEER REVIEW, AND ADMINISTRATIVE SIMPLIFICATION * * * * * * * Part A--General Provisions * * * * * * * SEC. 1128H. REPORTING OF INFORMATION RELATING TO DRUG SAMPLES. (a) In General.--Not later than April 1 of each year (beginning with 2012), each manufacturer and authorized distributor of record of an applicable drug shall submit to the Secretary (in a form and manner specified by the Secretary) the following information with respect to the preceding year: (1) In the case of a manufacturer or authorized distributor of record which makes distributions by mail or common carrier under subsection (d)(2) of section 503 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 353), the identity and quantity of drug samples requested and the identity and quantity of drug samples distributed under such subsection during that year, aggregated by-- (A) the name, address, professional designation, and signature of the practitioner making the request under subparagraph (A)(i) of such subsection, or of any individual who makes or signs for the request on behalf of the practitioner; and (B) any other category of information determined appropriate by the Secretary. (2) In the case of a manufacturer or authorized distributor of record which makes distributions by means other than mail or common carrier under subsection (d)(3) of such section 503, the identity and quantity of drug samples requested and the identity and quantity of drug samples distributed under such subsection during that year, aggregated by-- (A) the name, address, professional designation, and signature of the practitioner making the request under subparagraph (A)(i) of such subsection, or of any individual who makes or signs for the request on behalf of the practitioner; and (B) any other category of information determined appropriate by the Secretary. (b) Data Sharing Agreements.-- (1) In general.--The Secretary shall enter into agreements with the specified data sharing individuals and entities described in paragraph (2) under which-- (A) upon request of such an individual or entity, as applicable, the Secretary makes available to such individual or entity the information submitted under subsection (a) by manufacturers and authorized distributors of record; and (B) such individual or entity agrees to not disclose publicly or to another individual or entity any information that identifies a particular practitioner or health care facility. (2) Specified data sharing individuals and entities.--For purposes of paragraph (1), the specified data sharing individuals and entities described in this paragraph are the following: (A) Oversight agencies.--Health oversight agencies (as defined in section 164.501 of title 45, Code of Federal Regulations), including the Centers for Medicare & Medicaid Services, the Office of the Inspector General of the Department of Health and Human Services, the Government Accountability Office, the Congressional Budget Office, the Medicare Payment Advisory Commission, and the Medicaid and CHIP Payment and Access Commission. (B) Researchers.--Individuals who conduct scientific research (as defined in section 164.501 of title 45, Code of Federal Regulations) in relevant areas as determined by the Secretary. (C) Payers.--Private and public health care payers, including group health plans, health insurance coverage offered by health insurance issuers, Federal health programs, and State health programs. (3) Exemption from freedom of information act.-- Except as described in paragraph (1), the Secretary may not be compelled to disclose the information submitted under subsection (a) to any individual or entity. For purposes of section 552 of title 5, United States Code (commonly referred to as the Freedom of Information Act), this paragraph shall be considered a statute described in subsection (b)(3)(B) of such section. (c) Penalties.-- (1) Data sharing agreements.--Subject to paragraph (3), any specified data sharing individual or entity described in subsection (b)(2) that violates the terms of a data sharing agreement the individual or entity has with the Secretary under subsection (b)(1) shall be subject to a civil money penalty of not less than $1,000, but not more than $10,000, for each such violation. Such penalty shall be imposed and collected in the same manner as civil money penalties under subsection (a) of section 1128A are imposed and collected under that section. (2) Failure to report.--Subject to paragraph (3), any manufacturer or authorized distributor of record of an applicable drug under subsection (a) that fails to submit information required under such subsection in a timely manner in accordance with rules or regulations promulgated to carry out such subsection shall be subject to a civil money penalty of not less than $1,000, but not more than $10,000, for each such failure. Such penalty shall be imposed and collected in the same manner as civil money penalties under subsection (a) of section 1128A are imposed and collected under that section. (3) Limitation.--The total amount of civil money penalties imposed under paragraph (1) or (2) with respect to a year and an individual or entity described in subparagraph (A) or a manufacturer or distributor described in subparagraph (B), respectively, shall not exceed $150,000. (d) Drug Sample Distribution Information.-- (1) In general.--Not later than January 1 of each year (beginning with 2021), the Secretary shall maintain a list containing information related to the distribution of samples of applicable drugs. Such list shall provide the following information with respect to the preceding year: (A) The name of the manufacturer or authorized distributor of record of an applicable drug for which samples were requested or distributed under this section. (B) The quantity and class of drug samples requested. (C) The quantity and class of drug samples distributed. (2) Public availability.--The Secretary shall make the information in such list available to the public on the Internet Web site of the Food and Drug Administration. [(b)] (e) Definitions.--In this section: (1) Applicable drug.--The term ``applicable drug'' means a drug-- (A) which is subject to subsection (b) of such section 503; and (B) for which payment is available under title XVIII or a State plan under title XIX or XXI (or a waiver of such a plan). (2) Authorized distributor of record.--The term ``authorized distributor of record'' has the meaning given that term in subsection (e)(3)(A) of such section. (3) Manufacturer.--The term ``manufacturer'' has the meaning given that term for purposes of subsection (d) of such section. * * * * * * * SEC. 1150A. PHARMACY BENEFIT MANAGERS TRANSPARENCY REQUIREMENTS. (a) Provision of Information.--A health benefits plan or any entity that provides pharmacy benefits management services on behalf of a health benefits plan (in this section referred to as a ``PBM'') that manages prescription drug coverage under a contract with-- (1) a PDP sponsor of a prescription drug plan or an MA organization offering an MA-PD plan under part D of title XVIII; or (2) a qualified health benefits plan offered through an exchange established by a State under section 1311 of the Patient Protection and Affordable Care Act, shall provide the information described in subsection (b) to the Secretary and, in the case of a PBM, to the plan with which the PBM is under contract with, at such times, and in such form and manner, as the Secretary shall specify. (b) Information Described.--The information described in this subsection is the following with respect to services provided by a health benefits plan or PBM for a contract year: (1) The percentage of all prescriptions that were provided through retail pharmacies compared to mail order pharmacies, and the percentage of prescriptions for which a generic drug was available and dispensed (generic dispensing rate), by pharmacy type (which includes an independent pharmacy, chain pharmacy, supermarket pharmacy, or mass merchandiser pharmacy that is licensed as a pharmacy by the State and that dispenses medication to the general public), that is paid by the health benefits plan or PBM under the contract. (2) The aggregate amount, and the type of rebates, discounts, or price concessions (excluding bona fide service fees, which include but are not limited to distribution service fees, inventory management fees, product stocking allowances, and fees associated with administrative services agreements and patient care programs (such as medication compliance programs and patient education programs)) that the PBM negotiates that are attributable to patient utilization under the plan, and the aggregate amount of the rebates, discounts, or price concessions that are passed through to the plan sponsor, and the total number of prescriptions that were dispensed. (3) The aggregate amount of the difference between the amount the health benefits plan pays the PBM and the amount that the PBM pays retail pharmacies, and mail order pharmacies, and the total number of prescriptions that were dispensed. (c) Confidentiality.--Information disclosed by a health benefits plan or PBM under this section is confidential and shall not be disclosed by the Secretary (other than as permitted under subsection (e)) or by a plan receiving the information, except that the Secretary may disclose the information in a form which does not disclose the identity of a specific PBM, plan, or prices charged for drugs, for the following purposes: (1) As the Secretary determines to be necessary to carry out this section or part D of title XVIII. (2) To permit the Comptroller General to review the information provided. (3) To permit the Director of the Congressional Budget Office to review the information provided. (4) To States to carry out section 1311 of the Patient Protection and Affordable Care Act. (d) Penalties.--The provisions of subsection (b)(3)(C) of section 1927 shall apply to a health benefits plan or PBM that fails to provide information required under subsection (a) on a timely basis or that knowingly provides false information in the same manner as such provisions apply to a manufacturer with an agreement under that section. (e) Public Availability of Certain Information.-- (1) In general.--In order to allow the comparison of PBMs' ability to negotiate rebates, discounts, direct and indirect remuneration fees, administrative fees, and price concessions and the amount of such rebates, discounts, direct and indirect remuneration fees, administrative fees, and price concessions that are passed through to plan sponsors, beginning January 1, 2020, the Secretary shall make available on the Internet website of the Department of Health and Human Services the information with respect to the second preceding calendar year provided to the Secretary on generic dispensing rates (as described in paragraph (1) of subsection (b)) and information provided to the Secretary under paragraphs (2) and (3) of such subsection that, as determined by the Secretary, is with respect to each PBM. (2) Availability of data.--In carrying out paragraph (1), the Secretary shall ensure the following: (A) Confidentiality.--The information described in such paragraph is displayed in a manner that prevents the disclosure of information, with respect to an individual drug or an individual plan, on rebates, discounts, direct and indirect remuneration fees, administrative fees, and price concessions. (B) Class of drug.--The information described in such paragraph is made available by class of drug, using an existing classification system, but only if the class contains such number of drugs, as specified by the Secretary (but not fewer than three drugs), to ensure confidentiality of proprietary information or other information that is prevented to be disclosed under subparagraph (A). * * * * * * * TITLE XVIII--HEALTH INSURANCE FOR THE AGED AND DISABLED * * * * * * * Part B--Supplementary Medical Insurance Benefits for the Aged and Disabled * * * * * * * use of average sales price payment methodology Sec. 1847A. (a) Application.-- (1) In general.--Except as provided in paragraph (2), this section shall apply to payment for drugs and biologicals that are described in section 1842(o)(1)(C) and that are furnished on or after January 1, 2005. (2) Election.--This section shall not apply in the case of a physician who elects under subsection (a)(1)(A)(ii) of section 1847B for that section to apply instead of this section for the payment for drugs and biologicals. (b) Payment Amount.-- (1) In general.--Subject to paragraph (7) and subsections (d)(3)(C) and (e), the amount of payment determined under this section for the billing and payment code for a drug or biological (based on a minimum dosage unit) is, subject to applicable deductible and coinsurance-- (A) in the case of a multiple source drug (as defined in subsection (c)(6)(C)), 106 percent of the amount determined under paragraph (3) for a multiple source drug furnished before April 1, 2008, or 106 percent of the amount determined under paragraph (6) for a multiple source drug furnished on or after April 1, 2008; (B) in the case of a single source drug or biological (as defined in subsection (c)(6)(D)), 106 percent of the amount determined under paragraph (4); or (C) in the case of a biosimilar biological product (as defined in subsection (c)(6)(H)), the amount determined under paragraph (8). (2) Specification of unit.-- (A) Specification by manufacturer.--The manufacturer of a drug or biological shall specify the unit associated with each National Drug Code (including package size) as part of the submission of data under section 1927(b)(3)(A)(iii) or subsection (f)(2), as applicable. (B) Unit defined.--In this section, the term ``unit'' means, with respect to each National Drug Code (including package size) associated with a drug or biological, the lowest identifiable quantity (such as a capsule or tablet, milligram of molecules, or grams) of the drug or biological that is dispensed, exclusive of any diluent without reference to volume measures pertaining to liquids. For years after 2004, the Secretary may establish the unit for a manufacturer to report and methods for counting units as the Secretary determines appropriate to implement this section. (3) Multiple source drug.--For all drug products included within the same multiple source drug billing and payment code, the amount specified in this paragraph is the volume-weighted average of the average sales prices reported under section 1927(b)(3)(A)(iii) or subsection (f)(2), as applicable, determined by-- (A) computing the sum of the products (for each National Drug Code assigned to such drug products) of-- (i) the manufacturer's average sales price (as defined in subsection (c)); and (ii) the total number of units specified under paragraph (2) sold; and (B) dividing the sum determined under subparagraph (A) by the sum of the total number of units under subparagraph (A)(ii) for all National Drug Codes assigned to such drug products. (4) Single source drug or biological.--The amount specified in this paragraph for a single source drug or biological is the lesser of the following: (A) Average sales price.--The average sales price as determined using the methodology applied under paragraph (3) for single source drugs and biologicals furnished before April 1, 2008, and using the methodology applied under paragraph (6) for single source drugs and biologicals furnished on or after April 1, 2008, for all National Drug Codes assigned to such drug or biological product. (B) Wholesale acquisition cost (wac).--The wholesale acquisition cost (as defined in subsection (c)(6)(B)) using the methodology applied under paragraph (3) for single source drugs and biologicals furnished before April 1, 2008, and using the methodology applied under paragraph (6) for single source drugs and biologicals furnished on or after April 1, 2008, for all National Drug Codes assigned to such drug or biological product. (5) Basis for payment amount.--The payment amount shall be determined under this subsection based on information reported under subsection (f) and without regard to any special packaging, labeling, or identifiers on the dosage form or product or package. (6) Use of volume-weighted average sales prices in calculation of average sales price.-- (A) In general.--For all drug products included within the same multiple source drug billing and payment code, the amount specified in this paragraph is the volume-weighted average of the average sales prices reported under section 1927(b)(3)(A)(iii) or subsection (f)(2), as applicable, determined by-- (i) computing the sum of the products (for each National Drug Code assigned to such drug products) of-- (I) the manufacturer's average sales price (as defined in subsection (c)), determined by the Secretary without dividing such price by the total number of billing units for the National Drug Code for the billing and payment code; and (II) the total number of units specified under paragraph (2) sold; and (ii) dividing the sum determined under clause (i) by the sum of the products (for each National Drug Code assigned to such drug products) of-- (I) the total number of units specified under paragraph (2) sold; and (II) the total number of billing units for the National Drug Code for the billing and payment code. (B) Billing unit defined.--For purposes of this subsection, the term ``billing unit'' means the identifiable quantity associated with a billing and payment code, as established by the Secretary. (7) Special rule.--Beginning with April 1, 2008, the payment amount for-- (A) each single source drug or biological described in section 1842(o)(1)(G) that is treated as a multiple source drug because of the application of subsection (c)(6)(C)(ii) is the lower of-- (i) the payment amount that would be determined for such drug or biological applying such subsection; or (ii) the payment amount that would have been determined for such drug or biological if such subsection were not applied; and (B) a multiple source drug described in section 1842(o)(1)(G) (excluding a drug or biological that is treated as a multiple source drug because of the application of such subsection) is the lower of-- (i) the payment amount that would be determined for such drug or biological taking into account the application of such subsection; or (ii) the payment amount that would have been determined for such drug or biological if such subsection were not applied. (8) Biosimilar biological product.--The amount specified in this paragraph for a biosimilar biological product described in paragraph (1)(C) is the sum of-- (A) the average sales price as determined using the methodology described under paragraph (6) applied to a biosimilar biological product for all National Drug Codes assigned to such product in the same manner as such paragraph is applied to drugs described in such paragraph; and (B) 6 percent of the amount determined under paragraph (4) for the reference biological product (as defined in subsection (c)(6)(I)). (c) Manufacturer's Average Sales Price.-- (1) In general.--For purposes of this section, subject to paragraphs (2) and (3), the manufacturer's ``average sales price'' means, of a drug or biological for a National Drug Code for a calendar quarter for a manufacturer for a unit-- (A) the manufacturer's sales to all purchasers (excluding sales exempted in paragraph (2)) in the United States for such drug or biological in the calendar quarter; divided by (B) the total number of such units of such drug or biological sold by the manufacturer in such quarter. (2) Certain sales exempted from computation.--In calculating the manufacturer's average sales price under this subsection, the following sales shall be excluded: (A) Sales exempt from best price.--Sales exempt from the inclusion in the determination of ``best price' under section 1927(c)(1)(C)(i). (B) Sales at nominal charge.--Such other sales as the Secretary identifies as sales to an entity that are merely nominal in amount (as applied for purposes of section 1927(c)(1)(C)(ii)(III), except as the Secretary may otherwise provide). (3) Sale price net of discounts.--In calculating the manufacturer's average sales price under this subsection, such price shall include volume discounts, prompt pay discounts, cash discounts, free goods that are contingent on any purchase requirement, chargebacks, and rebates (other than rebates under section 1927). For years after 2004, the Secretary may include in such price other price concessions, which may be based on recommendations of the Inspector General, that would result in a reduction of the cost to the purchaser. (4) Payment methodology in cases where average sales price during first quarter of sales is unavailable.--In the case of a drug or biological during an initial period (not to exceed a full calendar quarter) in which data on the prices for sales for the drug or biological is not sufficiently available from the manufacturer to compute an average sales price for the drug or biological, the Secretary may determine the amount payable under this section for the drug or biological based on-- (A) the wholesale acquisition cost; or (B) the methodologies in effect under this part on November 1, 2003, to determine payment amounts for drugs or biologicals. (5) Frequency of determinations.-- (A) In general on a quarterly basis.--The manufacturer's average sales price, for a drug or biological of a manufacturer, shall be calculated by such manufacturer under this subsection on a quarterly basis. In making such calculation insofar as there is a lag in the reporting of the information on rebates and chargebacks under paragraph (3) so that adequate data are not available on a timely basis, the manufacturer shall apply a methodology based on a 12-month rolling average for the manufacturer to estimate costs attributable to rebates and chargebacks. For years after 2004, the Secretary may establish a uniform methodology under this subparagraph to estimate and apply such costs. (B) Updates in payment amounts.--The payment amounts under subsection (b) shall be updated by the Secretary on a quarterly basis and shall be applied based upon the manufacturer's average sales price calculated for the most recent calendar quarter for which data is available. (C) Use of contractors; implementation.--The Secretary may contract with appropriate entities to calculate the payment amount under subsection (b). Notwithstanding any other provision of law, the Secretary may implement, by program instruction or otherwise, any of the provisions of this section. (6) Definitions and other rules.--In this section: (A) Manufacturer.--The term ``manufacturer'' means, with respect to a drug or biological, the manufacturer (as defined in section 1927(k)(5))[.], except that, for purposes of subsection (f)(2), the Secretary may, if the Secretary determines appropriate, exclude repackagers of a drug or biological from such term. (B) Wholesale acquisition cost.--The term ``wholesale acquisition cost'' means, with respect to a drug or biological, the manufacturer's list price for the drug or biological to wholesalers or direct purchasers in the United States, not including prompt pay or other discounts, rebates or reductions in price, for the most recent month for which the information is available, as reported in wholesale price guides or other publications of drug or biological pricing data. (C) Multiple source drug.-- (i) In general.--The term ``multiple source drug'' means, for a calendar quarter, a drug for which there are 2 or more drug products which-- (I) are rated as therapeutically equivalent (under the Food and Drug Administration's most recent publication of ``Approved Drug Products with Therapeutic Equivalence Evaluations''), (II) except as provided in subparagraph (E), are pharmaceutically equivalent and bioequivalent, as determined under subparagraph (F) and as determined by the Food and Drug Administration, and (III) are sold or marketed in the United States during the quarter. (ii) Exception.--With respect to single source drugs or biologicals that are within the same billing and payment code as of October 1, 2003, the Secretary shall treat such single source drugs or biologicals as if the single source drugs or biologicals were multiple source drugs. (D) Single source drug or biological.--The term ``single source drug or biological'' means-- (i) a biological; or (ii) a drug which is not a multiple source drug and which is produced or distributed under a new drug application approved by the Food and Drug Administration, including a drug product marketed by any cross-licensed producers or distributors operating under the new drug application. (E) Exception from pharmaceutical equivalence and bioequivalence requirement.--Subparagraph (C)(ii) shall not apply if the Food and Drug Administration changes by regulation the requirement that, for purposes of the publication described in subparagraph (C)(i), in order for drug products to be rated as therapeutically equivalent, they must be pharmaceutically equivalent and bioequivalent, as defined in subparagraph (F). (F) Determination of pharmaceutical equivalence and bioequivalence.--For purposes of this paragraph-- (i) drug products are pharmaceutically equivalent if the products contain identical amounts of the same active drug ingredient in the same dosage form and meet compendial or other applicable standards of strength, quality, purity, and identity; and (ii) drugs are bioequivalent if they do not present a known or potential bioequivalence problem, or, if they do present such a problem, they are shown to meet an appropriate standard of bioequivalence. (G) Inclusion of vaccines.--In applying provisions of section 1927 under this section, ``other than a vaccine'' is deemed deleted from section 1927(k)(2)(B). (H) Biosimilar biological product.--The term ``biosimilar biological product'' means a biological product approved under an abbreviated application for a license of a biological product that relies in part on data or information in an application for another biological product licensed under section 351 of the Public Health Service Act. (I) Reference biological product.--The term ``reference biological product'' means the biological product licensed under such section 351 that is referred to in the application described in subparagraph (H) of the biosimilar biological product. (d) Monitoring of Market Prices.-- (1) In general.--The Inspector General of the Department of Health and Human Services shall conduct studies, which may include surveys, to determine the widely available market prices of drugs and biologicals to which this section applies, as the Inspector General, in consultation with the Secretary, determines to be appropriate. (2) Comparison of prices.--Based upon such studies and other data for drugs and biologicals, the Inspector General shall compare the average sales price under this section for drugs and biologicals with-- (A) the widely available market price for such drugs and biologicals (if any); and (B) the average manufacturer price (as determined under section 1927(k)(1)) for such drugs and biologicals. (3) Limitation on average sales price.-- (A) In general.--The Secretary may disregard the average sales price for a drug or biological that exceeds the widely available market price or the average manufacturer price for such drug or biological by the applicable threshold percentage (as defined in subparagraph (B)). (B) Applicable threshold percentage defined.--In this paragraph, the term ``applicable threshold percentage'' means-- (i) in 2005, in the case of an average sales price for a drug or biological that exceeds widely available market price or the average manufacturer price, 5 percent; and (ii) in 2006 and subsequent years, the percentage applied under this subparagraph subject to such adjustment as the Secretary may specify for the widely available market price or the average manufacturer price, or both. (C) Authority to adjust average sales price.--If the Inspector General finds that the average sales price for a drug or biological exceeds such widely available market price or average manufacturer price for such drug or biological by the applicable threshold percentage, the Inspector General shall inform the Secretary (at such times as the Secretary may specify to carry out this subparagraph) and the Secretary shall, effective as of the next quarter, substitute for the amount of payment otherwise determined under this section for such drug or biological the lesser of-- (i) the widely available market price for the drug or biological (if any); or (ii) 103 percent of the average manufacturer price (as determined under section 1927(k)(1)) for the drug or biological. (4) Civil money penalty.-- (A) [In general] Misrepresentation.--If the Secretary determines that a manufacturer has made a misrepresentation in the reporting of the manufacturer's average sales price for a drug or biological, the Secretary may apply a civil money penalty in an amount of up to $10,000 for each such price misrepresentation and for each day in which such price misrepresentation was applied. (B) Failure to provide timely information.-- If the Secretary determines that a manufacturer described in subsection (f)(2) has failed to report on information described in section 1927(b)(3)(A)(iii) with respect to a drug or biological in accordance with such subsection, the Secretary shall apply a civil money penalty in an amount of $10,000 for each day the manufacturer has failed to report such information and such amount shall be paid to the Treasury. (C) False information.--Any manufacturer required to submit information under subsection (f)(2) that knowingly provides false information is subject to a civil money penalty in an amount not to exceed $100,000 for each item of false information. Such civil money penalties are in addition to other penalties as may be prescribed by law. [(B)] (D) Procedures.--The provisions of section 1128A (other than subsections (a) and (b)) shall apply to civil money penalties under [subparagraph (B)] subparagraph (A), (B), or (C) in the same manner as they apply to a penalty or proceeding under section 1128A(a). (5) Widely available market price.-- (A) In general.--In this subsection, the term ``widely available market price'' means the price that a prudent physician or supplier would pay for the drug or biological. In determining such price, the Inspector General shall take into account the discounts, rebates, and other price concessions routinely made available to such prudent physicians or suppliers for such drugs or biologicals. (B) Considerations.--In determining the price under subparagraph (A), the Inspector General shall consider information from one or more of the following sources: (i) Manufacturers. (ii) Wholesalers. (iii) Distributors. (iv) Physician supply houses. (v) Specialty pharmacies. (vi) Group purchasing arrangements. (vii) Surveys of physicians. (viii) Surveys of suppliers. (ix) Information on such market prices from insurers. (x) Information on such market prices from private health plans. (e) Authority To Use Alternative Payment in Response to Public Health Emergency.--In the case of a public health emergency under section 319 of the Public Health Service Act in which there is a documented inability to access drugs and biologicals, and a concomitant increase in the price, of a drug or biological which is not reflected in the manufacturer's average sales price for one or more quarters, the Secretary may use the wholesale acquisition cost (or other reasonable measure of drug or biological price) instead of the manufacturer's average sales price for such quarters and for subsequent quarters until the price and availability of the drug or biological has stabilized and is substantially reflected in the applicable manufacturer's average sales price. (f) Quarterly Report on Average Sales Price.--[For requirements] (1) In general._For requirements for reporting the manufacturer's average sales price (and, if required to make payment, the manufacturer's wholesale acquisition cost) for the drug or biological under this section, see section 1927(b)(3). (2) Manufacturers without a rebate agreement under title xix.-- (A) In general.--If the manufacturer of a drug or biological described in subparagraph (C), (E), or (G) of section 1842(o)(1) or in section 1881(b)(14)(B) that is payable under this part has not entered into and does not have in effect a rebate agreement described in subsection (b) of section 1927, for calendar quarters beginning on or after January 1, 2020, such manufacturer shall report to the Secretary the information described in subsection (b)(3)(A)(iii) of such section 1927 with respect to such drug or biological in a time and manner specified by the Secretary. For purposes of applying this paragraph, a drug or biological described in the previous sentence includes items, services, supplies, and products that are payable under this part as a drug or biological. (B) Audit.--Information reported under subparagraph (A) is subject to audit by the Inspector General of the Department of Health and Human Services. (C) Verification.--The Secretary may survey wholesalers and manufacturers that directly distribute drugs described in subparagraph (A), when necessary, to verify manufacturer prices and manufacturer's average sales prices (including wholesale acquisition cost) if required to make payment reported under subparagraph (A). The Secretary may impose a civil monetary penalty in an amount not to exceed $100,000 on a wholesaler, manufacturer, or direct seller, if the wholesaler, manufacturer, or direct seller of such a drug refuses a request for information about charges or prices by the Secretary in connection with a survey under this subparagraph or knowingly provides false information. The provisions of section 1128A (other than subsections (a) (with respect to amounts of penalties or additional assessments) and (b)) shall apply to a civil money penalty under this subparagraph in the same manner as such provisions apply to a penalty or proceeding under section 1128A(a). (D) Confidentiality.--Notwithstanding any other provision of law, information disclosed by manufacturers or wholesalers under this paragraph (other than the wholesale acquisition cost for purposes of carrying out this section) is confidential and shall not be disclosed by the Secretary in a form which discloses the identity of a specific manufacturer or wholesaler or prices charged for drugs by such manufacturer or wholesaler, except-- (i) as the Secretary determines to be necessary to carry out this section (including the determination and implementation of the payment amount), or to carry out section 1847B; (ii) to permit the Comptroller General of the United States to review the information provided; and (iii) to permit the Director of the Congressional Budget Office to review the information provided. (g) Judicial Review.--There shall be no administrative or judicial review under section 1869, section 1878, or otherwise, of-- (1) determinations of payment amounts under this section, including the assignment of National Drug Codes to billing and payment codes; (2) the identification of units (and package size) under subsection (b)(2); (3) the method to allocate rebates, chargebacks, and other price concessions to a quarter if specified by the Secretary; (4) the manufacturer's average sales price when it is used for the determination of a payment amount under this section; and (5) the disclosure of the average manufacturer price by reason of an adjustment under subsection (d)(3)(C) or (e). * * * * * * * Part D--Voluntary Prescription Drug Benefit Program Subpart 1--Part D Eligible Individuals and Prescription Drug Benefits * * * * * * * beneficiary protections for qualified prescription drug coverage Sec. 1860D-4. (a) Dissemination of Information.-- (1) General information.-- (A) Application of ma information.--A PDP sponsor shall disclose, in a clear, accurate, and standardized form to each enrollee with a prescription drug plan offered by the sponsor under this part at the time of enrollment and at least annually thereafter, the information described in section 1852(c)(1) relating to such plan, insofar as the Secretary determines appropriate with respect to benefits provided under this part, and, subject to subparagraph (C), including the information described in subparagraph (B). (B) Drug specific information.--The information described in this subparagraph is information concerning the following: (i) Access to specific covered part D drugs, including access through pharmacy networks. (ii) How any formulary (including any tiered formulary structure) used by the sponsor functions, including a description of how a part D eligible individual may obtain information on the formulary consistent with paragraph (3). (iii) Beneficiary cost-sharing requirements and how a part D eligible individual may obtain information on such requirements, including tiered or other copayment level applicable to each drug (or class of drugs), consistent with paragraph (3). (iv) The medication therapy management program required under subsection (c). (v) The drug management program for at-risk beneficiaries under subsection (c)(5). (vi) For plan year 2021 and each subsequent plan year, subject to subparagraph (C), with respect to the treatment of pain-- (I) the risks associated with prolonged opioid use; and (II) coverage of nonpharmacological therapies, devices, and nonopioid medications-- (aa) in the case of an MA-PD plan under part C, under such plan; and (bb) in the case of a prescription drug plan, under such plan and under parts A and B. (C) Targeted provision of information.--A PDP sponsor of a prescription drug plan may, in lieu of disclosing the information described in subparagraph (B)(vi) to each enrollee under the plan, disclose such information through mail or electronic communications to a subset of enrollees under the plan, such as enrollees who have been prescribed an opioid in the previous 2-year period. (2) Disclosure upon request of general coverage, utilization, and grievance information.--Upon request of a part D eligible individual who is eligible to enroll in a prescription drug plan, the PDP sponsor offering such plan shall provide information similar (as determined by the Secretary) to the information described in subparagraphs (A), (B), and (C) of section 1852(c)(2) to such individual. (3) Provision of specific information.-- (A) Response to beneficiary questions.--Each PDP sponsor offering a prescription drug plan shall have a mechanism for providing specific information on a timely basis to enrollees upon request. Such mechanism shall include access to information through the use of a toll-free telephone number and, upon request, the provision of such information in writing. (B) Availability of information on changes in formulary through the internet.--A PDP sponsor offering a prescription drug plan shall make available on a timely basis through an Internet website information on specific changes in the formulary under the plan (including changes to tiered or preferred status of covered part D drugs). (4) Claims information.--A PDP sponsor offering a prescription drug plan must furnish to each enrollee in a form easily understandable to such enrollees-- (A) an explanation of benefits (in accordance with section 1806(a) or in a comparable manner); and (B) when prescription drug benefits are provided under this part, a notice of the benefits in relation to-- (i) the initial coverage limit for the current year; and (ii) the annual out-of-pocket threshold for the current year. Notices under subparagraph (B) need not be provided more often than as specified by the Secretary and notices under subparagraph (B)(ii) shall take into account the application of section 1860D-2(b)(4)(C) to the extent practicable, as specified by the Secretary. (b) Access to Covered Part D Drugs.-- (1) Assuring pharmacy access.-- (A) Participation of any willing pharmacy.--A prescription drug plan shall permit the participation of any pharmacy that meets the terms and conditions under the plan. (B) Discounts allowed for network pharmacies.--For covered part D drugs dispensed through in-network pharmacies, a prescription drug plan may, notwithstanding subparagraph (A), reduce coinsurance or copayments for part D eligible individuals enrolled in the plan below the level otherwise required. In no case shall such a reduction result in an increase in payments made by the Secretary under section 1860D-15 to a plan. (C) Convenient access for network pharmacies.-- (i) In general.--The PDP sponsor of the prescription drug plan shall secure the participation in its network of a sufficient number of pharmacies that dispense (other than by mail order) drugs directly to patients to ensure convenient access (consistent with rules established by the Secretary). (ii) Application of tricare standards.--The Secretary shall establish rules for convenient access to in-network pharmacies under this subparagraph that are no less favorable to enrollees than the rules for convenient access to pharmacies included in the statement of work of solicitation (#MDA906-03-R-0002) of the Department of Defense under the TRICARE Retail Pharmacy (TRRx) as of March 13, 2003. (iii) Adequate emergency access.-- Such rules shall include adequate emergency access for enrollees. (iv) Convenient access in long-term care facilities.--Such rules may include standards with respect to access for enrollees who are residing in long-term care facilities and for pharmacies operated by the Indian Health Service, Indian tribes and tribal organizations, and urban Indian organizations (as defined in section 4 of the Indian Health Care Improvement Act). (D) Level playing field.--Such a sponsor shall permit enrollees to receive benefits (which may include a 90-day supply of drugs or biologicals) through a pharmacy (other than a mail order pharmacy), with any differential in charge paid by such enrollees. (E) Not required to accept insurance risk.-- The terms and conditions under subparagraph (A) may not require participating pharmacies to accept insurance risk as a condition of participation. (2) Use of standardized technology.-- (A) In general.--The PDP sponsor of a prescription drug plan shall issue (and reissue, as appropriate) such a card (or other technology) that may be used by an enrollee to assure access to negotiated prices under section 1860D-2(d). (B) Standards.-- (i) In general.--The Secretary shall provide for the development, adoption, or recognition of standards relating to a standardized format for the card or other technology required under subparagraph (A). Such standards shall be compatible with part C of title XI and may be based on standards developed by an appropriate standard setting organization. (ii) Consultation.--In developing the standards under clause (i), the Secretary shall consult with the National Council for Prescription Drug Programs and other standard setting organizations determined appropriate by the Secretary. (iii) Implementation.--The Secretary shall develop, adopt, or recognize the standards under clause (i) by such date as the Secretary determines shall be sufficient to ensure that PDP sponsors utilize such standards beginning January 1, 2006. (3) Requirements on development and application of formularies.--If a PDP sponsor of a prescription drug plan uses a formulary (including the use of tiered cost-sharing), the following requirements must be met: (A) Development and revision by a pharmacy and therapeutic (p&t) committee.-- (i) In general.--The formulary must be developed and reviewed by a pharmacy and therapeutic committee. A majority of the members of such committee shall consist of individuals who are practicing physicians or practicing pharmacists (or both). (ii) Inclusion of independent experts.--Such committee shall include at least one practicing physician and at least one practicing pharmacist, each of whom-- (I) is independent and free of conflict with respect to the sponsor and plan; and (II) has expertise in the care of elderly or disabled persons. (B) Formulary development.--In developing and reviewing the formulary, the committee shall-- (i) base clinical decisions on the strength of scientific evidence and standards of practice, including assessing peer-reviewed medical literature, such as randomized clinical trials, pharmacoeconomic studies, outcomes research data, and on such other information as the committee determines to be appropriate; and (ii) take into account whether including in the formulary (or in a tier in such formulary) particular covered part D drugs has therapeutic advantages in terms of safety and efficacy. (C) Inclusion of drugs in all therapeutic categories and classes.-- (i) In general.--Subject to subparagraph (G), the formulary must include drugs within each therapeutic category and class of covered part D drugs, although not necessarily all drugs within such categories and classes. (ii) Model guidelines.--The Secretary shall request the United States Pharmacopeia to develop, in consultation with pharmaceutical benefit managers and other interested parties, a list of categories and classes that may be used by prescription drug plans under this paragraph and to revise such classification from time to time to reflect changes in therapeutic uses of covered part D drugs and the additions of new covered part D drugs. (iii) Limitation on changes in therapeutic classification.--The PDP sponsor of a prescription drug plan may not change the therapeutic categories and classes in a formulary other than at the beginning of each plan year except as the Secretary may permit to take into account new therapeutic uses and newly approved covered part D drugs. (D) Provider and patient education.--The PDP sponsor shall establish policies and procedures to educate and inform health care providers and enrollees concerning the formulary. (E) Notice before removing drug from formulary or changing preferred or tier status of drug.--Any removal of a covered part D drug from a formulary and any change in the preferred or tiered cost-sharing status of such a drug shall take effect only after appropriate notice is made available (such as under subsection (a)(3)) to the Secretary, affected enrollees, physicians, pharmacies, and pharmacists. (F) Periodic evaluation of protocols.--In connection with the formulary, the sponsor of a prescription drug plan shall provide for the periodic evaluation and analysis of treatment protocols and procedures. (G) Required inclusion of drugs in certain categories and classes.-- (i) Formulary requirements.-- (I) In general.--Subject to subclause (II), a PDP sponsor offering a prescription drug plan shall be required to include all covered part D drugs in the categories and classes identified by the Secretary under clause (ii)(I). (II) Exceptions.--The Secretary may establish exceptions that permit a PDP sponsor offering a prescription drug plan to exclude from its formulary a particular covered part D drug in a category or class that is otherwise required to be included in the formulary under subclause (I) (or to otherwise limit access to such a drug, including through prior authorization or utilization management). (ii) Identification of drugs in certain categories and classes.-- (I) In general.--Subject to clause (iv), the Secretary shall identify, as appropriate, categories and classes of drugs for which the Secretary determines are of clinical concern. (II) Criteria.--The Secretary shall use criteria established by the Secretary in making any determination under subclause (I). (iii) Implementation.--The Secretary shall establish the criteria under clause (ii)(II) and any exceptions under clause (i)(II) through the promulgation of a regulation which includes a public notice and comment period. (iv) Requirement for certain categories and classes until criteria established.--Until such time as the Secretary establishes the criteria under clause (ii)(II) the following categories and classes of drugs shall be identified under clause (ii)(I): (I) Anticonvulsants. (II) Antidepressants. (III) Antineoplastics. (IV) Antipsychotics. (V) Antiretrovirals. (VI) Immunosuppressants for the treatment of transplant rejection. (H) Use of single, uniform exceptions and appeals process.--Notwithstanding any other provision of this part, each PDP sponsor of a prescription drug plan shall-- (i) use a single, uniform exceptions and appeals process (including, to the extent the Secretary determines feasible, a single, uniform model form for use under such process) with respect to the determination of prescription drug coverage for an enrollee under the plan; and (ii) provide instant access to such process by enrollees through a toll- free telephone number and an Internet website. (c) Cost and Utilization Management; Quality Assurance; Medication Therapy Management Program.-- (1) In general.--The PDP sponsor shall have in place, directly or through appropriate arrangements, with respect to covered part D drugs, the following: (A) A cost-effective drug utilization management program, including incentives to reduce costs when medically appropriate, such as through the use of multiple source drugs (as defined in section 1927(k)(7)(A)(i)). (B) Quality assurance measures and systems to reduce medication errors and adverse drug interactions and improve medication use. (C) A medication therapy management program described in paragraph (2). (D) A program to control fraud, abuse, and waste. (E) A utilization management tool to prevent drug abuse (as described in paragraph (6)(A)). (F) With respect to plan years beginning on or after January 1, 2022, a drug management program for at-risk beneficiaries described in paragraph (5). Nothing in this section shall be construed as impairing a PDP sponsor from utilizing cost management tools (including differential payments) under all methods of operation. (2) Medication therapy management program.-- (A) Description.-- (i) In general.--A medication therapy management program described in this paragraph is a program of drug therapy management that may be furnished by a pharmacist and that is designed to assure, with respect to targeted beneficiaries described in clause (ii), that covered part D drugs under the prescription drug plan are appropriately used to optimize therapeutic outcomes through improved medication use, and to reduce the risk of adverse events, including adverse drug interactions. Such a program may distinguish between services in ambulatory and institutional settings. (ii) Targeted beneficiaries described.--Targeted beneficiaries described in this clause are the following: (I) Part D eligible individuals who-- (aa) have multiple chronic diseases (such as diabetes, asthma, hypertension, hyperlipidemia, and congestive heart failure); (bb) are taking multiple covered part D drugs; and (cc) are identified as likely to incur annual costs for covered part D drugs that exceed a level specified by the Secretary. (II) Beginning January 1, 2021, at-risk beneficiaries for prescription drug abuse (as defined in paragraph (5)(C)). (B) Elements.--Such program-- (i) may include elements that promote-- (I) enhanced enrollee understanding to promote the appropriate use of medications by enrollees and to reduce the risk of potential adverse events associated with medications, through beneficiary education, counseling, and other appropriate means; (II) increased enrollee adherence with prescription medication regimens through medication refill reminders, special packaging, and other compliance programs and other appropriate means; and (III) detection of adverse drug events and patterns of overuse and underuse of prescription drugs; and (ii) with respect to plan years beginning on or after January 1, 2021, shall provide for-- (I) the provision of information to the enrollee on the safe disposal of prescription drugs that are controlled substances that meets the criteria established under section 1852(n)(2), including information on drug takeback programs that meet such requirements determined appropriate by the Secretary and information on in-home disposal; and (II) cost-effective means by which an enrollee may so safely dispose of such drugs. (C) Required interventions.--For plan years beginning on or after the date that is 2 years after the date of the enactment of the Patient Protection and Affordable Care Act, prescription drug plan sponsors shall offer medication therapy management services to targeted beneficiaries described in subparagraph (A)(ii) that include, at a minimum, the following to increase adherence to prescription medications or other goals deemed necessary by the Secretary: (i) An annual comprehensive medication review furnished person-to- person or using telehealth technologies (as defined by the Secretary) by a licensed pharmacist or other qualified provider. The comprehensive medication review-- (I) shall include a review of the individual's medications and may result in the creation of a recommended medication action plan or other actions in consultation with the individual and with input from the prescriber to the extent necessary and practicable; and (II) shall include providing the individual with a written or printed summary of the results of the review. The Secretary, in consultation with relevant stakeholders, shall develop a standardized format for the action plan under subclause (I) and the summary under subclause (II). (ii) Follow-up interventions as warranted based on the findings of the annual medication review or the targeted medication enrollment and which may be provided person-to-person or using telehealth technologies (as defined by the Secretary). (D) Assessment.--The prescription drug plan sponsor shall have in place a process to assess, at least on a quarterly basis, the medication use of individuals who are at risk but not enrolled in the medication therapy management program, including individuals who have experienced a transition in care, if the prescription drug plan sponsor has access to that information. (E) Automatic enrollment with ability to opt- out.--The prescription drug plan sponsor shall have in place a process to-- (i) subject to clause (ii), automatically enroll targeted beneficiaries described in subparagraph (A)(ii), including beneficiaries identified under subparagraph (D), in the medication therapy management program required under this subsection; and (ii) permit such beneficiaries to opt-out of enrollment in such program. (E) Development of program in cooperation with licensed pharmacists.--Such program shall be developed in cooperation with licensed and practicing pharmacists and physicians. (F) Coordination with care management plans.--The Secretary shall establish guidelines for the coordination of any medication therapy management program under this paragraph with respect to a targeted beneficiary with any care management plan established with respect to such beneficiary under a chronic care improvement program under section 1807. (G) Considerations in pharmacy fees.--The PDP sponsor of a prescription drug plan shall take into account, in establishing fees for pharmacists and others providing services under such plan, the resources used, and time required to, implement the medication therapy management program under this paragraph. Each such sponsor shall disclose to the Secretary upon request the amount of any such management or dispensing fees. The provisions of section 1927(b)(3)(D) apply to information disclosed under this subparagraph. (3) Reducing wasteful dispensing of outpatient prescription drugs in long-term care facilities.--The Secretary shall require PDP sponsors of prescription drug plans to utilize specific, uniform dispensing techniques, as determined by the Secretary, in consultation with relevant stakeholders (including representatives of nursing facilities, residents of nursing facilities, pharmacists, the pharmacy industry (including retail and long-term care pharmacy), prescription drug plans, MA-PD plans, and any other stakeholders the Secretary determines appropriate), such as weekly, daily, or automated dose dispensing, when dispensing covered part D drugs to enrollees who reside in a long-term care facility in order to reduce waste associated with 30-day fills. (4) Requiring valid prescriber national provider identifiers on pharmacy claims.-- (A) In general.--For plan year 2016 and subsequent plan years, the Secretary shall require a claim for a covered part D drug for a part D eligible individual enrolled in a prescription drug plan under this part or an MA-PD plan under part C to include a prescriber National Provider Identifier that is determined to be valid under the procedures established under subparagraph (B)(i). (B) Procedures.-- (i) Validity of prescriber national provider identifiers.--The Secretary, in consultation with appropriate stakeholders, shall establish procedures for determining the validity of prescriber National Provider Identifiers under subparagraph (A). (ii) Informing beneficiaries of reason for denial.--The Secretary shall establish procedures to ensure that, in the case that a claim for a covered part D drug of an individual described in subparagraph (A) is denied because the claim does not meet the requirements of this paragraph, the individual is properly informed at the point of service of the reason for the denial. (C) Report.--Not later than January 1, 2018, the Inspector General of the Department of Health and Human Services shall submit to Congress a report on the effectiveness of the procedures established under subparagraph (B)(i). (D) Notification and additional requirements with respect to outlier prescribers of opioids.-- (i) Notification.--Not later than January 1, 2021, the Secretary shall, in the case of a prescriber identified by the Secretary under clause (ii) to be an outlier prescriber of opioids, provide, subject to clause (iv), an annual notification to such prescriber that such prescriber has been so identified and that includes resources on proper prescribing methods and other information as specified in accordance with clause (iii). (ii) Identification of outlier prescribers of opioids.-- (I) In general.--The Secretary shall, subject to subclause (III), using the valid prescriber National Provider Identifiers included pursuant to subparagraph (A) on claims for covered part D drugs for part D eligible individuals enrolled in prescription drug plans under this part or MA-PD plans under part C and based on the thresholds established under subclause (II), identify prescribers that are outlier opioids prescribers for a period of time specified by the Secretary. (II) Establishment of thresholds.--For purposes of subclause (I) and subject to subclause (III), the Secretary shall, after consultation with stakeholders, establish thresholds, based on prescriber specialty and geographic area, for identifying whether a prescriber in a specialty and geographic area is an outlier prescriber of opioids as compared to other prescribers of opioids within such specialty and area. (III) Exclusions.--The following shall not be included in the analysis for identifying outlier prescribers of opioids under this clause: (aa) Claims for covered part D drugs for part D eligible individuals who are receiving hospice care under this title. (bb) Claims for covered part D drugs for part D eligible individuals who are receiving oncology services under this title. (cc) Prescribers who are the subject of an investigation by the Centers for Medicare & Medicaid Services or the Inspector General of the Department of Health and Human Services. (iii) Contents of notification.--The Secretary shall include the following information in the notifications provided under clause (i): (I) Information on how such prescriber compares to other prescribers within the same specialty and geographic area. (II) Information on opioid prescribing guidelines, based on input from stakeholders, that may include the Centers for Disease Control and Prevention guidelines for prescribing opioids for chronic pain and guidelines developed by physician organizations. (III) Other information determined appropriate by the Secretary. (iv) Modifications and expansions.-- (I) Frequency.--Beginning 5 years after the date of the enactment of this subparagraph, the Secretary may change the frequency of the notifications described in clause (i) based on stakeholder input and changes in opioid prescribing utilization and trends. (II) Expansion to other prescriptions.--The Secretary may expand notifications under this subparagraph to include identifications and notifications with respect to concurrent prescriptions of covered Part D drugs used in combination with opioids that are considered to have adverse side effects when so used in such combination, as determined by the Secretary. (v) Additional requirements for persistent outlier prescribers.--In the case of a prescriber who the Secretary determines is persistently identified under clause (ii) as an outlier prescriber of opioids, the following shall apply: (I) Such prescriber may be required to enroll in the program under this title under section 1866(j) if such prescriber is not otherwise required to enroll, but only after other appropriate remedies have been provided, such as the provision of education funded through section 6052 of the SUPPORT for Patients and Communities Act, for a period determined by the Secretary as sufficient to correct the prescribing patterns that lead to identification of such prescriber as a persistent outlier prescriber of opioids. The Secretary shall determine the length of the period for which such prescriber is required to maintain such enrollment, which shall be the minimum period necessary to correct such prescribing patterns. (II) Not less frequently than annually (and in a form and manner determined appropriate by the Secretary), the Secretary, consistent with clause(iv)(I), shall communicate information on such prescribers to sponsors of a prescription drug plan and Medicare Advantage organizations offering an MA-PD plan. (vi) Public availability of information.--The Secretary shall make aggregate information under this subparagraph available on the internet website of the Centers for Medicare & Medicaid Services. Such information shall be in a form and manner determined appropriate by the Secretary and shall not identify any specific prescriber. In carrying out this clause, the Secretary shall consult with interested stakeholders. (vii) Opioids defined.--For purposes of this subparagraph, the term ``opioids'' has such meaning as specified by the Secretary. (viii) Other activities.--Nothing in this subparagraph shall preclude the Secretary from conducting activities that provide prescribers with information as to how they compare to other prescribers that are in addition to the activities under this subparagraph, including activities that were being conducted as of the date of the enactment of this subparagraph. (5) Drug management program for at-risk beneficiaries.-- (A) Authority to establish.--A PDP sponsor may (and for plan years beginning on or after January 1, 2022, a PDP sponsor shall) establish a drug management program for at-risk beneficiaries under which, subject to subparagraph (B), the PDP sponsor may, in the case of an at-risk beneficiary for prescription drug abuse who is an enrollee in a prescription drug plan of such PDP sponsor, limit such beneficiary's access to coverage for frequently abused drugs under such plan to frequently abused drugs that are prescribed for such beneficiary by one or more prescribers selected under subparagraph (D), and dispensed for such beneficiary by one or more pharmacies selected under such subparagraph. (B) Requirement for notices.-- (i) In general.--A PDP sponsor may not limit the access of an at-risk beneficiary for prescription drug abuse to coverage for frequently abused drugs under a prescription drug plan until such sponsor-- (I) provides to the beneficiary an initial notice described in clause (ii) and a second notice described in clause (iii); and (II) verifies with the providers of the beneficiary that the beneficiary is an at- risk beneficiary for prescription drug abuse. (ii) Initial notice.--An initial notice described in this clause is a notice that provides to the beneficiary-- (I) notice that the PDP sponsor has identified the beneficiary as potentially being an at-risk beneficiary for prescription drug abuse; (II) information describing all State and Federal public health resources that are designed to address prescription drug abuse to which the beneficiary has access, including mental health services and other counseling services; (III) notice of, and information about, the right of the beneficiary to appeal such identification under subsection (h), including notice that if on reconsideration a PDP sponsor affirms its denial, in whole or in part, the case shall be automatically forwarded to the independent, outside entity contracted with the Secretary for review and resolution; (IV) a request for the beneficiary to submit to the PDP sponsor preferences for which prescribers and pharmacies the beneficiary would prefer the PDP sponsor to select under subparagraph (D) in the case that the beneficiary is identified as an at-risk beneficiary for prescription drug abuse as described in clause (iii)(I); (V) an explanation of the meaning and consequences of the identification of the beneficiary as potentially being an at-risk beneficiary for prescription drug abuse, including an explanation of the drug management program established by the PDP sponsor pursuant to subparagraph (A); (VI) clear instructions that explain how the beneficiary can contact the PDP sponsor in order to submit to the PDP sponsor the preferences described in subclause (IV) and any other communications relating to the drug management program for at-risk beneficiaries established by the PDP sponsor; and (VII) contact information for other organizations that can provide the beneficiary with assistance regarding such drug management program (similar to the information provided by the Secretary in other standardized notices provided to part D eligible individuals enrolled in prescription drug plans under this part). (iii) Second notice.--A second notice described in this clause is a notice that provides to the beneficiary notice-- (I) that the PDP sponsor has identified the beneficiary as an at-risk beneficiary for prescription drug abuse; (II) that such beneficiary is subject to the requirements of the drug management program for at-risk beneficiaries established by such PDP sponsor for such plan; (III) of the prescriber (or prescribers) and pharmacy (or pharmacies) selected for such individual under subparagraph (D); (IV) of, and information about, the beneficiary's right to appeal such identification under subsection (h), including notice that if on reconsideration a PDP sponsor affirms its denial, in whole or in part, the case shall be automatically forwarded to the independent, outside entity contracted with the Secretary for review and resolution; (V) that the beneficiary can, in the case that the beneficiary has not previously submitted to the PDP sponsor preferences for which prescribers and pharmacies the beneficiary would prefer the PDP sponsor select under subparagraph (D), submit such preferences to the PDP sponsor; and (VI) that includes clear instructions that explain how the beneficiary can contact the PDP sponsor. (iv) Timing of notices.-- (I) In general.--Subject to subclause (II), a second notice described in clause (iii) shall be provided to the beneficiary on a date that is not less than 30 days after an initial notice described in clause (ii) is provided to the beneficiary. (II) Exception.--In the case that the PDP sponsor, in conjunction with the Secretary, determines that concerns identified through rulemaking by the Secretary regarding the health or safety of the beneficiary or regarding significant drug diversion activities require the PDP sponsor to provide a second notice described in clause (iii) to the beneficiary on a date that is earlier than the date described in subclause (I), the PDP sponsor may provide such second notice on such earlier date. (C) At-risk beneficiary for prescription drug abuse.-- (i) In general.--Except as provided in clause (v), for purposes of this paragraph, the term ``at-risk beneficiary for prescription drug abuse'' means a part D eligible individual who is not an exempted individual described in clause (ii) and-- (I) who is identified as such an at-risk beneficiary through the use of clinical guidelines that indicate misuse or abuse of prescription drugs described in subparagraph (G) and that are developed by the Secretary in consultation with PDP sponsors and other stakeholders, including individuals entitled to benefits under part A or enrolled under part B, advocacy groups representing such individuals, physicians, pharmacists, and other clinicians, retail pharmacies, plan sponsors, entities delegated by plan sponsors, and biopharmaceutical manufacturers; or (II) with respect to whom the PDP sponsor of a prescription drug plan, upon enrolling such individual in such plan, received notice from the Secretary that such individual was identified under this paragraph to be an at-risk beneficiary for prescription drug abuse under the prescription drug plan in which such individual was most recently previously enrolled and such identification has not been terminated under subparagraph (F). (ii) Exempted individual described.-- An exempted individual described in this clause is an individual who-- (I) receives hospice care under this title; (II) is a resident of a long- term care facility, of a facility described in section 1905(d), or of another facility for which frequently abused drugs are dispensed for residents through a contract with a single pharmacy; or (III) the Secretary elects to treat as an exempted individual for purposes of clause (i). (iii) Program size.--The Secretary shall establish policies, including the guidelines developed under clause (i)(I) and the exemptions under clause (ii)(III), to ensure that the population of enrollees in a drug management program for at-risk beneficiaries operated by a prescription drug plan can be effectively managed by such plans. (iv) Clinical contact.--With respect to each at-risk beneficiary for prescription drug abuse enrolled in a prescription drug plan offered by a PDP sponsor, the PDP sponsor shall contact the beneficiary's providers who have prescribed frequently abused drugs regarding whether prescribed medications are appropriate for such beneficiary's medical conditions. (v) Treatment of enrollees with a history of opioid-related overdose.-- (I) In general.--For plan years beginning not later than January 1, 2021, a part D eligible individual who is not an exempted individual described in clause (ii) and who is identified under this clause as a part D eligible individual with a history of opioid-related overdose (as defined by the Secretary) shall be included as a potentially at-risk beneficiary for prescription drug abuse under the drug management program under this paragraph. (II) Identification and notice.--For purposes of this clause, the Secretary shall-- (aa) identify part D eligible individuals with a history of opioid-related overdose (as so defined); and (bb) notify the PDP sponsor of the prescription drug plan in which such an individual is enrolled of such identification. (D) Selection of prescribers and pharmacies.-- (i) In general.--With respect to each at-risk beneficiary for prescription drug abuse enrolled in a prescription drug plan offered by such sponsor, a PDP sponsor shall, based on the preferences submitted to the PDP sponsor by the beneficiary pursuant to clauses (ii)(IV) and (iii)(V) of subparagraph (B) (except as otherwise provided in this subparagraph) select-- (I) one, or, if the PDP sponsor reasonably determines it necessary to provide the beneficiary with reasonable access under clause (ii), more than one, individual who is authorized to prescribe frequently abused drugs (referred to in this paragraph as a ``prescriber'') who may write prescriptions for such drugs for such beneficiary; and (II) one, or, if the PDP sponsor reasonably determines it necessary to provide the beneficiary with reasonable access under clause (ii), more than one, pharmacy that may dispense such drugs to such beneficiary. For purposes of subclause (II), in the case of a pharmacy that has multiple locations that share real-time electronic data, all such locations of the pharmacy shall collectively be treated as one pharmacy. (ii) Reasonable access.--In making the selections under this subparagraph-- (I) a PDP sponsor shall ensure that the beneficiary continues to have reasonable access to frequently abused drugs (as defined in subparagraph (G)), taking into account geographic location, beneficiary preference, impact on costsharing, and reasonable travel time; and (II) a PDP sponsor shall ensure such access (including access to prescribers and pharmacies with respect to frequently abused drugs) in the case of individuals with multiple residences, in the case of natural disasters and similar situations, and in the case of the provision of emergency services. (iii) Beneficiary preferences.--If an at-risk beneficiary for prescription drug abuse submits preferences for which in-network prescribers and pharmacies the beneficiary would prefer the PDP sponsor select in response to a notice under subparagraph (B), the PDP sponsor shall-- (I) review such preferences; (II) select or change the selection of prescribers and pharmacies for the beneficiary based on such preferences; and (III) inform the beneficiary of such selection or change of selection. (iv) Exception regarding beneficiary preferences.--In the case that the PDP sponsor determines that a change to the selection of prescriber or pharmacy under clause (iii)(II) by the PDP sponsor is contributing or would contribute to prescription drug abuse or drug diversion by the beneficiary, the PDP sponsor may change the selection of prescriber or pharmacy for the beneficiary without regard to the preferences of the beneficiary described in clause (iii). If the PDP sponsor changes the selection pursuant to the preceding sentence, the PDP sponsor shall provide the beneficiary with-- (I) at least 30 days written notice of the change of selection; and (II) a rationale for the change. (v) Confirmation.--Before selecting a prescriber or pharmacy under this subparagraph, a PDP sponsor must notify the prescriber and pharmacy that the beneficiary involved has been identified for inclusion in the drug management program for at-risk beneficiaries and that the prescriber and pharmacy has been selected as the beneficiary's designated prescriber and pharmacy. (E) Terminations and appeals.--The identification of an individual as an at-risk beneficiary for prescription drug abuse under this paragraph, a coverage determination made under a drug management program for at-risk beneficiaries, the selection of prescriber or pharmacy under subparagraph (D), and information to be shared under subparagraph (I), with respect to such individual, shall be subject to reconsideration and appeal under subsection (h) and if on reconsideration a PDP sponsor affirms its denial, in whole or in part, the case shall be automatically forwarded to the independent, outside entity contracted with the Secretary for review and resolution. (F) Termination of identification.-- (i) In general.--The Secretary shall develop standards for the termination of identification of an individual as an at-risk beneficiary for prescription drug abuse under this paragraph. Under such standards such identification shall terminate as of the earlier of-- (I) the date the individual demonstrates that the individual is no longer likely, in the absence of the restrictions under this paragraph, to be an at-risk beneficiary for prescription drug abuse described in subparagraph (C)(i); and (II) the end of such maximum period of identification as the Secretary may specify. (ii) Rule of construction.--Nothing in clause (i) shall be construed as preventing a plan from identifying an individual as an at-risk beneficiary for prescription drug abuse under subparagraph (C)(i) after such termination on the basis of additional information on drug use occurring after the date of notice of such termination. (G) Frequently abused drug.--For purposes of this subsection, the term ``frequently abused drug'' means a drug that is a controlled substance that the Secretary determines to be frequently abused or diverted. (H) Data disclosure.-- (i) Data on decision to impose limitation.--In the case of an at-risk beneficiary for prescription drug abuse (or an individual who is a potentially at-risk beneficiary for prescription drug abuse) whose access to coverage for frequently abused drugs under a prescription drug plan has been limited by a PDP sponsor under this paragraph, the Secretary shall establish rules and procedures to require the PDP sponsor to disclose data, including any necessary individually identifiable health information, in a form and manner specified by the Secretary, about the decision to impose such limitations and the limitations imposed by the sponsor under this part. (ii) Data to reduce fraud, abuse, and waste.--The Secretary shall establish rules and procedures to require PDP sponsors operating a drug management program for at-risk beneficiaries under this paragraph to provide the Secretary with such data as the Secretary determines appropriate for purposes of identifying patterns of prescription drug utilization for plan enrollees that are outside normal patterns and that may indicate fraudulent, medically unnecessary, or unsafe use. (I) Sharing of information for subsequent plan enrollments.--The Secretary shall establish procedures under which PDP sponsors who offer prescription drug plans shall share information with respect to individuals who are at-risk beneficiaries for prescription drug abuse (or individuals who are potentially at- risk beneficiaries for prescription drug abuse) and enrolled in a prescription drug plan and who subsequently disenroll from such plan and enroll in another prescription drug plan offered by another PDP sponsor. (J) Privacy issues.--Prior to the implementation of the rules and procedures under this paragraph, the Secretary shall clarify privacy requirements, including requirements under the regulations promulgated pursuant to section 264(c) of the Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. 1320d-2 note), related to the sharing of data under subparagraphs (H) and (I) by PDP sponsors. Such clarification shall provide that the sharing of such data shall be considered to be protected health information in accordance with the requirements of the regulations promulgated pursuant to such section 264(c). (K) Education.--The Secretary shall provide education to enrollees in prescription drug plans of PDP sponsors and providers regarding the drug management program for at-risk beneficiaries described in this paragraph, including education-- (i) provided by Medicare administrative contractors through the improper payment outreach and education program described in section 1874A(h); and (ii) through current education efforts (such as State health insurance assistance programs described in subsection (a)(1)(A) of section 119 of the Medicare Improvements for Patients and Providers Act of 2008 (42 U.S.C. 1395b-3 note)) and materials directed toward such enrollees. (L) Application under ma-pd plans.--Pursuant to section 1860D-21(c)(1), the provisions of this paragraph apply under part D to MA organizations offering MA-PD plans to MA eligible individuals in the same manner as such provisions apply under this part to a PDP sponsor offering a prescription drug plan to a part D eligible individual. (M) CMS compliance review.--The Secretary shall ensure that existing plan sponsor compliance reviews and audit processes include the drug management programs for at-risk beneficiaries under this paragraph, including appeals processes under such programs. (6) Utilization management tool to prevent drug abuse.-- (A) In general.--A tool described in this paragraph is any of the following: (i) A utilization tool designed to prevent the abuse of frequently abused drugs by individuals and to prevent the diversion of such drugs at pharmacies. (ii) Retrospective utilization review to identify-- (I) individuals that receive frequently abused drugs at a frequency or in amounts that are not clinically appropriate; and (II) providers of services or suppliers that may facilitate the abuse or diversion of frequently abused drugs by beneficiaries. (iii) Consultation with the contractor described in subparagraph (B) to verify if an individual enrolling in a prescription drug plan offered by a PDP sponsor has been previously identified by another PDP sponsor as an individual described in clause (ii)(I). (B) Reporting.--A PDP sponsor offering a prescription drug plan (and an MA organization offering an MA-PD plan) in a State shall submit to the Secretary and the Medicare drug integrity contractor with which the Secretary has entered into a contract under section 1893 with respect to such State a report, on a monthly basis, containing information on-- (i) any provider of services or supplier described in subparagraph (A)(ii)(II) that is identified by such plan sponsor (or organization) during the 30-day period before such report is submitted; and (ii) the name and prescription records of individuals described in paragraph (5)(C). (C) CMS compliance review.--The Secretary shall ensure that plan sponsor compliance reviews and program audits biennially include a certification that utilization management tools under this paragraph are in compliance with the requirements for such tools. (6) Providing prescription drug plans with parts a and b claims data to promote the appropriate use of medications and improve health outcomes.-- (A) Process.--Subject to subparagraph (B), the Secretary shall establish a process under which a PDP sponsor of a prescription drug plan may submit a request for the Secretary to provide the sponsor, on a periodic basis and in an electronic format, beginning in plan year 2020, data described in subparagraph (D) with respect to enrollees in such plan. Such data shall be provided without regard to whether such enrollees are described in clause (ii) of paragraph (2)(A). (B) Purposes.--A PDP sponsor may use the data provided to the sponsor pursuant to subparagraph (A) for any of the following purposes: (i) To optimize therapeutic outcomes through improved medication use, as such phrase is used in clause (i) of paragraph (2)(A). (ii) To improving care coordination so as to prevent adverse health outcomes, such as preventable emergency department visits and hospital readmissions. (iii) For any other purpose determined appropriate by the Secretary. (C) Limitations on data use.--A PDP sponsor shall not use data provided to the sponsor pursuant to subparagraph (A) for any of the following purposes: (i) To inform coverage determinations under this part. (ii) To conduct retroactive reviews of medically accepted indications determinations. (iii) To facilitate enrollment changes to a different prescription drug plan or an MA-PD plan offered by the same parent organization. (iv) To inform marketing of benefits. (v) For any other purpose that the Secretary determines is necessary to include in order to protect the identity of individuals entitled to, or enrolled for, benefits under this title and to protect the security of personal health information. (D) Data described.--The data described in this clause are standardized extracts (as determined by the Secretary) of claims data under parts A and B for items and services furnished under such parts for time periods specified by the Secretary. Such data shall include data as current as practicable. (d) Consumer Satisfaction Surveys.--In order to provide for comparative information under section 1860D-1(c)(3)(A)(v), the Secretary shall conduct consumer satisfaction surveys with respect to PDP sponsors and prescription drug plans in a manner similar to the manner such surveys are conducted for MA organizations and MA plans under part C. (e) Electronic Prescription Program.-- (1) Application of standards.--As of such date as the Secretary may specify, but not later than 1 year after the date of promulgation of final standards under paragraph (4)(D), prescriptions and other information described in paragraph (2)(A) for covered part D drugs prescribed for part D eligible individuals that are transmitted electronically shall be transmitted only in accordance with such standards under an electronic prescription drug program that meets the requirements of paragraph (2). (2) Program requirements.--Consistent with uniform standards established under paragraph (3)-- (A) Provision of information to prescribing health care professional and dispensing pharmacies and pharmacists.--An electronic prescription drug program shall provide for the electronic transmittal to the prescribing health care professional and to the dispensing pharmacy and pharmacist of the prescription and information on eligibility and benefits (including the drugs included in the applicable formulary, any tiered formulary structure, and any requirements for prior authorization) and of the following information with respect to the prescribing and dispensing of a covered part D drug: (i) Information on the drug being prescribed or dispensed and other drugs listed on the medication history, including information on drug-drug interactions, warnings or cautions, and, when indicated, dosage adjustments. (ii) Information on the availability of lower cost, therapeutically appropriate alternatives (if any) for the drug prescribed. (B) Application to medical history information.--Effective on and after such date as the Secretary specifies and after the establishment of appropriate standards to carry out this subparagraph, the program shall provide for the electronic transmittal in a manner similar to the manner under subparagraph (A) of information that relates to the medical history concerning the individual and related to a covered part D drug being prescribed or dispensed, upon request of the professional or pharmacist involved. (C) Limitations.--Information shall only be disclosed under subparagraph (A) or (B) if the disclosure of such information is permitted under the Federal regulations (concerning the privacy of individually identifiable health information) promulgated under section 264(c) of the Health Insurance Portability and Accountability Act of 1996. (D) Timing.--[To the extent] Except as provided in subparagraph (F), to the extent feasible, the information exchanged under this paragraph shall be on an interactive, real-time basis. (E) Electronic prior authorization.-- (i) In general.--Not later than January 1, 2021, the program shall provide for the secure electronic transmission of-- (I) a prior authorization request from the prescribing health care professional for coverage of a covered part D drug for a part D eligible individual enrolled in a part D plan (as defined in section 1860D-23(a)(5)) to the PDP sponsor or Medicare Advantage organization offering such plan; and (II) a response, in accordance with this subparagraph, from such PDP sponsor or Medicare Advantage organization, respectively, to such professional. (ii) Electronic transmission.-- (I) Exclusions.--For purposes of this subparagraph, a facsimile, a proprietary payer portal that does not meet standards specified by the Secretary, or an electronic form shall not be treated as an electronic transmission described in clause (i). (II) Standards.--In order to be treated, for purposes of this subparagraph, as an electronic transmission described in clause (i), such transmission shall comply with technical standards adopted by the Secretary in consultation with the National Council for Prescription Drug Programs, other standard setting organizations determined appropriate by the Secretary, and stakeholders including PDP sponsors, Medicare Advantage organizations, health care professionals, and health information technology software vendors. (III) Application.-- Notwithstanding any other provision of law, for purposes of this subparagraph, the Secretary may require the use of such standards adopted under subclause (II) in lieu of any other applicable standards for an electronic transmission described in clause (i) for a covered part D drug for a part D eligible individual. (F) Real-time benefit information.-- (i) In general.--Not later than January 1, 2021, the program shall implement real-time benefit tools that are capable of integrating with a prescribing health care professional's electronic prescribing or electronic health record system for the transmission of formulary and benefit information in real time to prescribing health care professionals. With respect to a covered part D drug, such tools shall be capable of transmitting such information specific to an individual enrolled in a prescription drug plan. Such information shall include the following: (I) A list of any clinically- appropriate alternatives to such drug included in the formulary of such plan. (II) Cost-sharing information for such drug and such alternatives, including a description of any variance in cost sharing based on the pharmacy dispensing such drug or such alternatives. (III) Information relating to whether such drug is included in the formulary of such plan and any prior authorization or other utilization management requirements applicable to such drug and such alternatives so included. (ii) Electronic transmission.--The provisions of subclauses (I) and (II) of clause (ii) of subparagraph (E) shall apply to an electronic transmission described in clause (i) in the same manner as such provisions apply with respect to an electronic transmission described in clause (i) of such subparagraph. (iii) Special rule for 2021.--The program shall be deemed to be in compliance with clause (i) for 2021 if the program complies with the provisions of section 423.160(b)(7) of title 42, Code of Federal Regulations (or a successor regulation), for such year. (iv) Rule of construction.--Nothing in this subparagraph shall be construed as to allow a real time benefits tool to steer an individual, without the consent of the individual, to a particular pharmacy or pharmacy setting over their preferred pharmacy setting nor prohibit the designation of a preferred pharmacy under such tool. (3) Standards.-- (A) In general.--The Secretary shall provide consistent with this subsection for the promulgation of uniform standards relating to the requirements for electronic prescription drug programs under paragraph (2). (B) Objectives.--Such standards shall be consistent with the objectives of improving-- (i) patient safety; (ii) the quality of care provided to patients; and (iii) efficiencies, including cost savings, in the delivery of care. (C) Design criteria.--Such standards shall-- (i) be designed so that, to the extent practicable, the standards do not impose an undue administrative burden on prescribing health care professionals and dispensing pharmacies and pharmacists; (ii) be compatible with standards established under part C of title XI, standards established under subsection (b)(2)(B)(i), and with general health information technology standards; and (iii) be designed so that they permit electronic exchange of drug labeling and drug listing information maintained by the Food and Drug Administration and the National Library of Medicine. (D) Permitting use of appropriate messaging.--Such standards shall allow for the messaging of information only if it relates to the appropriate prescribing of drugs, including quality assurance measures and systems referred to in subsection (c)(1)(B). (E) Permitting patient designation of dispensing pharmacy.-- (i) In general.--Consistent with clause (ii), such standards shall permit a part D eligible individual to designate a particular pharmacy to dispense a prescribed drug. (ii) No change in benefits.--Clause (i) shall not be construed as affecting-- (I) the access required to be provided to pharmacies by a prescription drug plan; or (II) the application of any differences in benefits or payments under such a plan based on the pharmacy dispensing a covered part D drug. (4) Development, promulgation, and modification of standards.-- (A) Initial standards.--Not later than September 1, 2005, the Secretary shall develop, adopt, recognize, or modify initial uniform standards relating to the requirements for electronic prescription drug programs described in paragraph (2) taking into consideration the recommendations (if any) from the National Committee on Vital and Health Statistics (as established under section 306(k) of the Public Health Service Act (42 U.S.C. 242k(k))) under subparagraph (B). (B) Role of ncvhs.--The National Committee on Vital and Health Statistics shall develop recommendations for uniform standards relating to such requirements in consultation with the following: (i) Standard setting organizations (as defined in section 1171(8)) (ii) Practicing physicians. (iii) Hospitals. (iv) Pharmacies. (v) Practicing pharmacists. (vi) Pharmacy benefit managers. (vii) State boards of pharmacy. (viii) State boards of medicine. (ix) Experts on electronic prescribing. (x) Other appropriate Federal agencies. (C) Pilot project to test initial standards.-- (i) In general.--During the 1-year period that begins on January 1, 2006, the Secretary shall conduct a pilot project to test the initial standards developed under subparagraph (A) prior to the promulgation of the final uniform standards under subparagraph (D) in order to provide for the efficient implementation of the requirements described in paragraph (2). (ii) Exception.--Pilot testing of standards is not required under clause (i) where there already is adequate industry experience with such standards, as determined by the Secretary after consultation with effected standard setting organizations and industry users. (iii) Voluntary participation of physicians and pharmacies.--In order to conduct the pilot project under clause (i), the Secretary shall enter into agreements with physicians, physician groups, pharmacies, hospitals, PDP sponsors, MA organizations, and other appropriate entities under which health care professionals electronically transmit prescriptions to dispensing pharmacies and pharmacists in accordance with such standards. (iv) Evaluation and report.-- (I) Evaluation.--The Secretary shall conduct an evaluation of the pilot project conducted under clause (i). (II) Report to congress.--Not later than April 1, 2007, the Secretary shall submit to Congress a report on the evaluation conducted under subclause (I). (D) Final standards.--Based upon the evaluation of the pilot project under subparagraph (C)(iv)(I) and not later than April 1, 2008, the Secretary shall promulgate uniform standards relating to the requirements described in paragraph (2). (5) Relation to state laws.--The standards promulgated under this subsection shall supersede any State law or regulation that-- (A) is contrary to the standards or restricts the ability to carry out this part; and (B) pertains to the electronic transmission of medication history and of information on eligibility, benefits, and prescriptions with respect to covered part D drugs under this part. (6) Establishment of safe harbor.--The Secretary, in consultation with the Attorney General, shall promulgate regulations that provide for a safe harbor from sanctions under paragraphs (1) and (2) of section 1128B(b) and an exception to the prohibition under subsection (a)(1) of section 1877 with respect to the provision of nonmonetary remuneration (in the form of hardware, software, or information technology and training services) necessary and used solely to receive and transmit electronic prescription information in accordance with the standards promulgated under this subsection-- (A) in the case of a hospital, by the hospital to members of its medical staff; (B) in the case of a group practice (as defined in section 1877(h)(4)), by the practice to prescribing health care professionals who are members of such practice; and (C) in the case of a PDP sponsor or MA organization, by the sponsor or organization to pharmacists and pharmacies participating in the network of such sponsor or organization, and to prescribing health care professionals. (7) Requirement of e-prescribing for controlled substances.-- (A) In general.--Subject to subparagraph (B), a prescription for a covered part D drug under a prescription drug plan (or under an MA-PD plan) for a schedule II, III, IV, or V controlled substance shall be transmitted by a health care practitioner electronically in accordance with an electronic prescription drug program that meets the requirements of paragraph (2). (B) Exception for certain circumstances.--The Secretary shall, through rulemaking, specify circumstances and processes by which the Secretary may waive the requirement under subparagraph (A), with respect to a covered part D drug, including in the case of-- (i) a prescription issued when the practitioner and dispensing pharmacy are the same entity; (ii) a prescription issued that cannot be transmitted electronically under the most recently implemented version of the National Council for Prescription Drug Programs SCRIPT Standard; (iii) a prescription issued by a practitioner who received a waiver or a renewal thereof for a period of time as determined by the Secretary, not to exceed one year, from the requirement to use electronic prescribing due to demonstrated economic hardship, technological limitations that are not reasonably within the control of the practitioner, or other exceptional circumstance demonstrated by the practitioner; (iv) a prescription issued by a practitioner under circumstances in which, notwithstanding the practitioner's ability to submit a prescription electronically as required by this subsection, such practitioner reasonably determines that it would be impractical for the individual involved to obtain substances prescribed by electronic prescription in a timely manner, and such delay would adversely impact the individual's medical condition involved; (v) a prescription issued by a practitioner prescribing a drug under a research protocol; (vi) a prescription issued by a practitioner for a drug for which the Food and Drug Administration requires a prescription to contain elements that are not able to be included in electronic prescribing, such as a drug with risk evaluation and mitigation strategies that include elements to assure safe use; (vii) a prescription issued by a practitioner-- (I) for an individual who receives hospice care under this title; and (II) that is not covered under the hospice benefit under this title; and (viii) a prescription issued by a practitioner for an individual who is-- (I) a resident of a nursing facility (as defined in section 1919(a)); and (II) dually eligible for benefits under this title and title XIX. (C) Dispensing.--(i) Nothing in this paragraph shall be construed as requiring a sponsor of a prescription drug plan under this part, MA organization offering an MA-PD plan under part C, or a pharmacist to verify that a practitioner, with respect to a prescription for a covered part D drug, has a waiver (or is otherwise exempt) under subparagraph (B) from the requirement under subparagraph (A). (ii) Nothing in this paragraph shall be construed as affecting the ability of the plan to cover or the pharmacists' ability to continue to dispense covered part D drugs from otherwise valid written, oral, or fax prescriptions that are consistent with laws and regulations. (iii) Nothing in this paragraph shall be construed as affecting the ability of an individual who is being prescribed a covered part D drug to designate a particular pharmacy to dispense the covered part D drug to the extent consistent with the requirements under subsection (b)(1) and under this paragraph. (D) Enforcement.--The Secretary shall, through rulemaking, have authority to enforce and specify appropriate penalties for non- compliance with the requirement under subparagraph (A). (f) Grievance Mechanism.--Each PDP sponsor shall provide meaningful procedures for hearing and resolving grievances between the sponsor (including any entity or individual through which the sponsor provides covered benefits) and enrollees with prescription drug plans of the sponsor under this part in accordance with section 1852(f). (g) Coverage Determinations and Reconsiderations.-- (1) Application of coverage determination and reconsideration provisions.--A PDP sponsor shall meet the requirements of paragraphs (1) through (3) of section 1852(g) with respect to covered benefits under the prescription drug plan it offers under this part in the same manner as such requirements apply to an MA organization with respect to benefits it offers under an MA plan under part C. (2) Request for a determination for the treatment of tiered formulary drug.--In the case of a prescription drug plan offered by a PDP sponsor that provides for tiered cost-sharing for drugs included within a formulary and provides lower cost-sharing for preferred drugs included within the formulary, a part D eligible individual who is enrolled in the plan may request an exception to the tiered cost-sharing structure. Under such an exception, a nonpreferred drug could be covered under the terms applicable for preferred drugs if the prescribing physician determines that the preferred drug for treatment of the same condition either would not be as effective for the individual or would have adverse effects for the individual or both. A PDP sponsor shall have an exceptions process under this paragraph consistent with guidelines established by the Secretary for making a determination with respect to such a request. Denial of such an exception shall be treated as a coverage denial for purposes of applying subsection (h). (h) Appeals.-- (1) In general.--Subject to paragraph (2), a PDP sponsor shall meet the requirements of paragraphs (4) and (5) of section 1852(g) with respect to benefits (including a determination related to the application of tiered cost-sharing described in subsection (g)(2)) in a manner similar (as determined by the Secretary) to the manner such requirements apply to an MA organization with respect to benefits under the original medicare fee-for-service program option it offers under an MA plan under part C. In applying this paragraph only the part D eligible individual shall be entitled to bring such an appeal. (2) Limitation in cases on nonformulary determinations.--A part D eligible individual who is enrolled in a prescription drug plan offered by a PDP sponsor may appeal under paragraph (1) a determination not to provide for coverage of a covered part D drug that is not on the formulary under the plan only if the prescribing physician determines that all covered part D drugs on any tier of the formulary for treatment of the same condition would not be as effective for the individual as the nonformulary drug, would have adverse effects for the individual, or both. (3) Treatment of nonformulary determinations.--If a PDP sponsor determines that a plan provides coverage for a covered part D drug that is not on the formulary of the plan, the drug shall be treated as being included on the formulary for purposes of section 1860D-2(b)(4)(C)(i). (i) Privacy, Confidentiality, and Accuracy of Enrollee Records.--The provisions of section 1852(h) shall apply to a PDP sponsor and prescription drug plan in the same manner as it applies to an MA organization and an MA plan. (j) Treatment of Accreditation.--Subparagraph (A) of section 1852(e)(4) (relating to treatment of accreditation) shall apply to a PDP sponsor under this part with respect to the following requirements, in the same manner as it applies to an MA organization with respect to the requirements in subparagraph (B) (other than clause (vii) thereof) of such section: (1) Subsection (b) of this section (relating to access to covered part D drugs). (2) Subsection (c) of this section (including quality assurance and medication therapy management). (3) Subsection (i) of this section (relating to confidentiality and accuracy of enrollee records). (k) Public Disclosure of Pharmaceutical Prices for Equivalent Drugs.-- (1) In general.--A PDP sponsor offering a prescription drug plan shall provide that each pharmacy that dispenses a covered part D drug shall inform an enrollee of any differential between the price of the drug to the enrollee and the price of the lowest priced generic covered part D drug under the plan that is therapeutically equivalent and bioequivalent and available at such pharmacy. (2) Timing of notice.-- (A) In general.--Subject to subparagraph (B), the information under paragraph (1) shall be provided at the time of purchase of the drug involved, or, in the case of dispensing by mail order, at the time of delivery of such drug. (B) Waiver.--The Secretary may waive subparagraph (A) in such circumstances as the Secretary may specify. (l) Requirements with Respect to Sales and Marketing Activities.--The following provisions shall apply to a PDP sponsor (and the agents, brokers, and other third parties representing such sponsor) in the same manner as such provisions apply to a Medicare Advantage organization (and the agents, brokers, and other third parties representing such organization): (1) The prohibition under section 1851(h)(4)(C) on conducting activities described in section 1851(j)(1). (2) The requirement under section 1851(h)(4)(D) to conduct activities described in section 1851(j)(2) in accordance with the limitations established under such subsection. (3) The inclusion of the plan type in the plan name under section 1851(h)(6). (4) The requirements regarding the appointment of agents and brokers and compliance with State information requests under subparagraphs (A) and (B), respectively, of section 1851(h)(7). (m) Prohibition on Limiting Certain Information on Drug Prices.--A PDP sponsor and a Medicare Advantage organization shall ensure that each prescription drug plan or MA-PD plan offered by the sponsor or organization does not restrict a pharmacy that dispenses a prescription drug or biological from informing, nor penalize such pharmacy for informing, an enrollee in such plan of any differential between the negotiated price of, or copayment or coinsurance for, the drug or biological to the enrollee under the plan and a lower price the individual would pay for the drug or biological if the enrollee obtained the drug without using any health insurance coverage. (m) Program Integrity Transparency Measures.--For program integrity transparency measures applied with respect to prescription drug plan and MA plans, see section 1859(i). * * * * * * * TITLE XIX--GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS * * * * * * * payment for covered outpatient drugs Sec. 1927. (a) Requirement for Rebate Agreement.-- (1) In general.--In order for payment to be available under section 1903(a) or under part B of title XVIII for covered outpatient drugs of a manufacturer, the manufacturer must have entered into and have in effect a rebate agreement described in subsection (b) with the Secretary, on behalf of States (except that, the Secretary may authorize a State to enter directly into agreements with a manufacturer), and must meet the requirements of paragraph (5) (with respect to drugs purchased by a covered entity on or after the first day of the first month that begins after the date of the enactment of title VI of the Veterans Health Care Act of 1992) and paragraph (6). Any agreement between a State and a manufacturer prior to April 1, 1991, shall be deemed to have been entered into on January 1, 1991, and payment to such manufacturer shall be retroactively calculated as if the agreement between the manufacturer and the State had been entered into on January 1, 1991. If a manufacturer has not entered into such an agreement before March 1, 1991, such an agreement, subsequently entered into, shall become effective as of the date on which the agreement is entered into or, at State option, on any date thereafter on or before the first day of the calendar quarter that begins more than 60 days after the date the agreement is entered into. (2) Effective date.--Paragraph (1) shall first apply to drugs dispensed under this title on or after January 1, 1991. (3) Authorizing payment for drugs not covered under rebate agreements.--Paragraph (1), and section 1903(i)(10)(A), shall not apply to the dispensing of a single source drug or innovator multiple source drug if (A)(i) the State has made a determination that the availability of the drug is essential to the health of beneficiaries under the State plan for medical assistance; (ii) such drug has been given a rating of 1-A by the Food and Drug Administration; and (iii)(I) the physician has obtained approval for use of the drug in advance of its dispensing in accordance with a prior authorization program described in subsection (d), or (II) the Secretary has reviewed and approved the State's determination under subparagraph (A); or (B) the Secretary determines that in the first calendar quarter of 1991, there were extenuating circumstances. (4) Effect on existing agreements.--In the case of a rebate agreement in effect between a State and a manufacturer on the date of the enactment of this section, such agreement, for the initial agreement period specified therein, shall be considered to be a rebate agreement in compliance with this section with respect to that State, if the State agrees to report to the Secretary any rebates paid pursuant to the agreement and such agreement provides for a minimum aggregate rebate of 10 percent of the State's total expenditures under the State plan for coverage of the manufacturer's drugs under this title. If, after the initial agreement period, the State establishes to the satisfaction of the Secretary that an agreement in effect on the date of the enactment of this section provides for rebates that are at least as large as the rebates otherwise required under this section, and the State agrees to report any rebates under the agreement to the Secretary, the agreement shall be considered to be a rebate agreement in compliance with the section for the renewal periods of such agreement. (5) Limitation on prices of drugs purchased by covered entities.-- (A) Agreement with secretary.--A manufacturer meets the requirements of this paragraph if the manufacturer has entered into an agreement with the Secretary that meets the requirements of section 340B of the Public Health Service Act with respect to covered outpatient drugs purchased by a covered entity on or after the first day of the first month that begins after the date of the enactment of this paragraph. (B) Covered entity defined.--In this subsection, the term ``covered entity'' means an entity described in section 340B(a)(4) of the Public Health Service Act. (C) Establishment of alternative mechanism to ensure against duplicate discounts or rebates.--If the Secretary does not establish a mechanism under section 340B(a)(5)(A) of the Public Health Service Act within 12 months of the date of the enactment of such section, the following requirements shall apply: (i) Entities.--Each covered entity shall inform the single State agency under section 1902(a)(5) when it is seeking reimbursement from the State plan for medical assistance described in section 1905(a)(12) with respect to a unit of any covered outpatient drug which is subject to an agreement under section 340B(a) of such Act. (ii) State agency.--Each such single State agency shall provide a means by which a covered entity shall indicate on any drug reimbursement claims form (or format, where electronic claims management is used) that a unit of the drug that is the subject of the form is subject to an agreement under section 340B of such Act, and not submit to any manufacturer a claim for a rebate payment under subsection (b) with respect to such a drug. (D) Effect of subsequent amendments.--In determining whether an agreement under subparagraph (A) meets the requirements of section 340B of the Public Health Service Act, the Secretary shall not take into account any amendments to such section that are enacted after the enactment of title VI of the Veterans Health Care Act of 1992. (E) Determination of compliance.--A manufacturer is deemed to meet the requirements of this paragraph if the manufacturer establishes to the satisfaction of the Secretary that the manufacturer would comply (and has offered to comply) with the provisions of section 340B of the Public Health Service Act (as in effect immediately after the enactment of this paragraph, and would have entered into an agreement under such section (as such section was in effect at such time), but for a legislative change in such section after the date of the enactment of this paragraph. (6) Requirements relating to master agreements for drugs procured by department of veterans affairs and certain other federal agencies.-- (A) In general.--A manufacturer meets the requirements of this paragraph if the manufacturer complies with the provisions of section 8126 of title 38, United States Code, including the requirement of entering into a master agreement with the Secretary of Veterans Affairs under such section. (B) Effect of subsequent amendments.--In determining whether a master agreement described in subparagraph (A) meets the requirements of section 8126 of title 38, United States Code, the Secretary shall not take into account any amendments to such section that are enacted after the enactment of title VI of the Veterans Health Care Act of 1992. (C) Determination of compliance.--A manufacturer is deemed to meet the requirements of this paragraph if the manufacturer establishes to the satisfaction of the Secretary that the manufacturer would comply (and has offered to comply) with the provisions of section 8126 of title 38, United States Code (as in effect immediately after the enactment of this paragraph) and would have entered into an agreement under such section (as such section was in effect at such time), but for a legislative change in such section after the date of the enactment of this paragraph. (7) Requirement for submission of utilization data for certain physician administered drugs.-- (A) Single source drugs.--In order for payment to be available under section 1903(a) for a covered outpatient drug that is a single source drug that is physician administered under this title (as determined by the Secretary), and that is administered on or after January 1, 2006, the State shall provide for the collection and submission of such utilization data and coding (such as J-codes and National Drug Code numbers) for each such drug as the Secretary may specify as necessary to identify the manufacturer of the drug in order to secure rebates under this section for drugs administered for which payment is made under this title. (B) Multiple source drugs.-- (i) Identification of most frequently physician administered multiple source drugs.--Not later than January 1, 2007, the Secretary shall publish a list of the 20 physician administered multiple source drugs that the Secretary determines have the highest dollar volume of physician administered drugs dispensed under this title. The Secretary may modify such list from year to year to reflect changes in such volume. (ii) Requirement.--In order for payment to be available under section 1903(a) for a covered outpatient drug that is a multiple source drug that is physician administered (as determined by the Secretary), that is on the list published under clause (i), and that is administered on or after January 1, 2008, the State shall provide for the submission of such utilization data and coding (such as J-codes and National Drug Code numbers) for each such drug as the Secretary may specify as necessary to identify the manufacturer of the drug in order to secure rebates under this section. (C) Use of ndc codes.--Not later than January 1, 2007, the information shall be submitted under subparagraphs (A) and (B)(ii) using National Drug Code codes unless the Secretary specifies that an alternative coding system should be used. (D) Hardship waiver.--The Secretary may delay the application of subparagraph (A) or (B)(ii), or both, in the case of a State to prevent hardship to States which require additional time to implement the reporting system required under the respective subparagraph. (b) Terms of Rebate Agreement.-- (1) Periodic rebates.-- (A) In general.--A rebate agreement under this subsection shall require the manufacturer to provide, to each State plan approved under this title, a rebate for a rebate period in an amount specified in subsection (c) for covered outpatient drugs of the manufacturer dispensed after December 31, 1990, for which payment was made under the State plan for such period, including such drugs dispensed to individuals enrolled with a medicaid managed care organization if the organization is responsible for coverage of such drugs. Such rebate shall be paid by the manufacturer not later than 30 days after the date of receipt of the information described in paragraph (2) for the period involved. (B) Offset against medical assistance.-- Amounts received by a State under this section (or under an agreement authorized by the Secretary under subsection (a)(1) or an agreement described in subsection (a)(4)) in any quarter, including amounts received by a State under subsection (c)(4), 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). (C) Special rule for increased minimum rebate percentage.-- (i) In general.--In addition to the amounts applied as a reduction under subparagraph (B), for rebate periods beginning on or after January 1, 2010, during a fiscal year, the Secretary shall reduce payments to a State under section 1903(a) in the manner specified in clause (ii), in an amount equal to the product of-- (I) 100 percent minus the Federal medical assistance percentage applicable to the rebate period for the State; and (II) the amounts received by the State under such subparagraph that are attributable (as estimated by the Secretary based on utilization and other data) to the increase in the minimum rebate percentage effected by the amendments made by subsections (a)(1), (b), and (d) of section 2501 of the Patient Protection and Affordable Care Act, taking into account the additional drugs included under the amendments made by subsection (c) of section 2501 of such Act. The Secretary shall adjust such payment reduction for a calendar quarter to the extent the Secretary determines, based upon subsequent utilization and other data, that the reduction for such quarter was greater or less than the amount of payment reduction that should have been made. (ii) Manner of payment reduction.-- The amount of the payment reduction under clause (i) for a State for a quarter shall be deemed an overpayment to the State under this title to be disallowed against the State's regular quarterly draw for all Medicaid spending under section 1903(d)(2). Such a disallowance is not subject to a reconsideration under section 1116(d). (2) State provision of information.-- (A) State responsibility.--Each State agency under this title shall report to each manufacturer not later than 60 days after the end of each rebate period and in a form consistent with a standard reporting format established by the Secretary, information on the total number of units of each dosage form and strength and package size of each covered outpatient drug dispensed after December 31, 1990, for which payment was made under the plan during the period, including such information reported by each medicaid managed care organization, and shall promptly transmit a copy of such report to the Secretary. (B) Audits.--A manufacturer may audit the information provided (or required to be provided) under subparagraph (A). Adjustments to rebates shall be made to the extent that information indicates that utilization was greater or less than the amount previously specified. (3) Manufacturer provision of price and drug product information.-- (A) In general.--Each manufacturer with an agreement in effect under this section shall report to the Secretary-- (i) not later than 30 days after the last day of each rebate period under the agreement-- (I) on the average manufacturer price (as defined in subsection (k)(1)) for covered outpatient drugs for the rebate period under the agreement (including for all such drugs that are sold under a new drug application approved under section 505(c) of the Federal Food, Drug, and Cosmetic Act); and (II) for single source drugs and innovator multiple source drugs (including all such drugs that are sold under a new drug application approved under section 505(c) of the Federal Food, Drug, and Cosmetic Act), on the manufacturer's best price (as defined in subsection (c)(1)(C)) for such drugs for the rebate period under the agreement; (ii) not later than 30 days after the date of entering into an agreement under this section on the average manufacturer price (as defined in subsection (k)(1)) as of October 1, 1990 for each of the manufacturer's covered outpatient drugs (including for such drugs that are sold under a new drug application approved under section 505(c) of the Federal Food, Drug, and Cosmetic Act); (iii) for calendar quarters beginning on or after January 1, 2004, in conjunction with reporting required under clause (i) and by National Drug Code (including package size)-- (I) the manufacturer's average sales price (as defined in section 1847A(c)) and the total number of units specified under section 1847A(b)(2)(A); (II) if required to make payment under section 1847A, the manufacturer's wholesale acquisition cost, as defined in subsection (c)(6) of such section; and (III) information on those sales that were made at a nominal price or otherwise described in section 1847A(c)(2)(B); for a drug or biological described in subparagraph (C), (D), (E), or (G) of section 1842(o)(1) or [section 1881(b)(13)(A)(ii)] section 1881(b)(14)(B), and, for calendar quarters beginning on or after January 1, 2007 and only with respect to the information described in subclause (III), for covered outpatient drugs; (iv) not later than 30 days after the last day of each month of a rebate period under the agreement, on the manufacturer's total number of units that are used to calculate the monthly average manufacturer price for each covered outpatient drug; and (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. Information reported under this subparagraph is subject to audit by the Inspector General of the Department of Health and Human Services. Beginning July 1, 2006, the Secretary shall provide on a monthly basis to States under subparagraph (D)(iv) the most recently reported average manufacturer prices for single source drugs and for multiple source drugs and shall, on at least a quarterly basis, update the information posted on the website under subparagraph (D)(v) (relating to the weighted average of the most recently reported monthly average manufacturer prices). For purposes of applying clause (iii), a drug or biological described in the flush matter following such clause includes items, services, supplies, and products that are payable under this part as a drug or biological. (B) Verification surveys of average manufacturer price and manufacturer's average sales price.--The Secretary may survey wholesalers and manufacturers that directly distribute their covered outpatient drugs, when necessary, to verify manufacturer prices and manufacturer's average sales prices (including wholesale acquisition cost) if required to make payment reported under subparagraph (A). The Secretary may impose a civil monetary penalty in an amount not to exceed $100,000 on a wholesaler, manufacturer, or direct seller, if the wholesaler, manufacturer, or direct seller of a covered outpatient drug refuses a request for information about charges or prices by the Secretary in connection with a survey under this subparagraph or knowingly provides false information. The provisions of section 1128A (other than subsections (a) (with respect to amounts of penalties or additional assessments) and (b)) shall apply to a civil money penalty under this subparagraph in the same manner as such provisions apply to a penalty or proceeding under section 1128A(a). (C) Penalties.-- (i) Failure to provide timely information.--In the case of a manufacturer with an agreement under this section that fails to provide information required under subparagraph (A) on a timely basis, the amount of the penalty shall be increased by $10,000 for each day in which such information has not been provided and such amount shall be paid to the Treasury, and, if such information is not reported within 90 days of the deadline imposed, the agreement shall be suspended for services furnished after the end of such 90-day period and until the date such information is reported (but in no case shall such suspension be for a period of less than 30 days). (ii) False information.--Any manufacturer with an agreement under this section that knowingly provides false information, including information related to drug pricing, drug product information, and data related to drug pricing or drug product information, is subject to a civil money penalty in an amount not to exceed $100,000 for each item of false information. Such civil money penalties are in addition to other penalties as may be prescribed by law. The provisions of section 1128A (other than subsections (a), (b), (f)(3), and (f)(4)) shall apply to a civil money penalty under this subparagraph in the same manner as such provisions apply to a penalty or proceeding under section 1128A(a). (iii) Misclassified drug product 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 product 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 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 using drug product information provided by the manufacturer, 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, 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. (D) Confidentiality of information.-- Notwithstanding any other provision of law, information disclosed by manufacturers or wholesalers under this paragraph or under an agreement with the Secretary of Veterans Affairs described in subsection (a)(6)(A)(ii) (other than the wholesale acquisition cost for purposes of carrying out section 1847A) is confidential and shall not be disclosed by the Secretary or the Secretary of Veterans Affairs or a State agency (or contractor therewith) in a form which discloses the identity of a specific manufacturer or wholesaler, prices charged for drugs by such manufacturer or wholesaler, except-- (i) as the Secretary determines to be necessary to carry out this section, to carry out section 1847A (including the determination and implementation of the payment amount), or to carry out section 1847B, (ii) to permit the Comptroller General to review the information provided, (iii) to permit the Director of the Congressional Budget Office to review the information provided, (iv) to States to carry out this title, (v) to the Secretary to disclose (through a website accessible to the public) the weighted average of the most recently reported monthly average manufacturer prices and the average retail survey price determined for each multiple source drug in accordance with subsection (f), and (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 this clause. The previous sentence shall also apply to information disclosed under section 1860D- 2(d)(2) or 1860D-4(c)(2)(E) and drug pricing data reported under the first sentence of section 1860D-31(i)(1). (4) Length of agreement.-- (A) In general.--A rebate agreement shall be effective for an initial period of not less than 1 year and shall be automatically renewed for a period of not less than one year unless terminated under subparagraph (B). (B) Termination.-- (i) By the secretary.--The Secretary may provide for termination of a rebate agreement for violation of the requirements of the agreement or other good cause shown. Such termination shall not be effective earlier than 60 days after the date of notice of such termination. The Secretary shall provide, upon request, a manufacturer with a hearing concerning such a termination, but such hearing shall not delay the effective date of the termination. (ii) By a manufacturer.--A manufacturer may terminate a rebate agreement under this section for any reason. Any such termination shall not be effective until the calendar quarter beginning at least 60 days after the date the manufacturer provides notice to the Secretary. (iii) Effectiveness of termination.-- Any termination under this subparagraph shall not affect rebates due under the agreement before the effective date of its termination. (iv) Notice to states.--In the case of a termination under this subparagraph, the Secretary shall provide notice of such termination to the States within not less than 30 days before the effective date of such termination. (v) Application to terminations of other agreements.--The provisions of this subparagraph shall apply to the terminations of agreements described in section 340B(a)(1) of the Public Health Service Act and master agreements described in section 8126(a) of title 38, United States Code. (C) Delay before reentry.--In the case of any rebate agreement with a manufacturer under this section which is terminated, another such agreement with the manufacturer (or a successor manufacturer) may not be entered into until a period of 1 calendar quarter has elapsed since the date of the termination, unless the Secretary finds good cause for an earlier reinstatement of such an agreement. (c) Determination of Amount of Rebate.-- (1) Basic rebate for single source drugs and innovator multiple source drugs.-- (A) In general.--Except as provided in paragraph (2), the amount of the rebate specified in this subsection for a rebate period (as defined in subsection (k)(8)) with respect to each dosage form and strength of a single source drug or an innovator multiple source drug shall be equal to the product of-- (i) the total number of units of each dosage form and strength paid for under the State plan in the rebate period (as reported by the State); and (ii) subject to subparagraph (B)(ii), the greater of-- (I) the difference between the average manufacturer price and the best price (as defined in subparagraph (C)) for the dosage form and strength of the drug, or (II) the minimum rebate percentage (specified in subparagraph (B)(i)) of such average manufacturer price, of or the rebate period. (B) Range of rebates required.-- (i) Minimum rebate percentage.--For purposes of subparagraph (A)(ii)(II), the ``minimum rebate percentage'' for rebate periods beginning-- (I) after December 31, 1990, and before October 1, 1992, is 12.5 percent; (II) after September 30, 1992, and before January 1, 1994, is 15.7 percent; (III) after December 31, 1993, and before January 1, 1995, is 15.4 percent; (IV) after December 31, 1994, and before January 1, 1996, is 15.2 percent; (V) after December 31, 1995, and before January 1, 2010 is 15.1 percent;and (VI) except as provided in clause (iii), after December 31, 2009, 23.1 percent. (ii) Temporary limitation on maximum rebate amount.--In no case shall the amount applied under subparagraph (A)(ii) for a rebate period beginning-- (I) before January 1, 1992, exceed 25 percent of the average manufacturer price; or (II) after December 31, 1991, and before January 1, 1993, exceed 50 percent of the average manufacturer price. (iii) Minimum rebate percentage for certain drugs.-- (I) In general.--In the case of a single source drug or an innovator multiple source drug described in subclause (II), the minimum rebate percentage for rebate periods specified in clause (i)(VI) is 17.1 percent. (II) Drug described.--For purposes of subclause (I), a single source drug or an innovator multiple source drug described in this subclause is any of the following drugs: (aa) A clotting factor for which a separate furnishing payment is made under section 1842(o)(5) and which is included on a list of such factors specified and updated regularly by the Secretary. (bb) A drug approved by the Food and Drug Administration exclusively for pediatric indications. (C) Best price defined.--For purposes of this section-- (i) In general.--The term ``best price'' means, with respect to a single source drug or innovator multiple source drug of a manufacturer (including the lowest price available to any entity for any such drug of a manufacturer that is sold under a new drug application approved under section 505(c) of the Federal Food, Drug, and Cosmetic Act), the lowest price available from the manufacturer during the rebate period to any wholesaler, retailer, provider, health maintenance organization, nonprofit entity, or governmental entity within the United States, excluding-- (I) any prices charged on or after October 1, 1992, to the Indian Health Service, the Department of Veterans Affairs, a State home receiving funds under section 1741 of title 38, United States Code, the Department of Defense, the Public Health Service, or a covered entity described in subsection (a)(5)(B) (including inpatient prices charged to hospitals described in section 340B(a)(4)(L) of the Public Health Service Act); (II) any prices charged under the Federal Supply Schedule of the General Services Administration; (III) any prices used under a State pharmaceutical assistance program; (IV) any depot prices and single award contract prices, as defined by the Secretary, of any agency of the Federal Government; (V) the prices negotiated from drug manufacturers for covered discount card drugs under an endorsed discount card program under section 1860D-31; and (VI) any prices charged which are negotiated by a prescription drug plan under part D of title XVIII, by an MA-PD plan under part C of such title with respect to covered part D drugs or by a qualified retiree prescription drug plan (as defined in section 1860D- 22(a)(2)) with respect to such drugs on behalf of individuals entitled to benefits under part A or enrolled under part B of such title, or any discounts provided by manufacturers under the Medicare coverage gap discount program under section 1860D-14A. (ii) Special rules.--The term ``best price''-- (I) shall be inclusive of cash discounts, free goods that are contingent on any purchase requirement, volume discounts, and rebates (other than rebates under this section); (II) shall be determined without regard to special packaging, labeling, or identifiers on the dosage form or product or package; (III) shall not take into account prices that are merely nominal in amount; and (IV) in the case of a manufacturer that approves, allows, or otherwise permits any other drug of the manufacturer to be sold under a new drug application approved under section 505(c) of the Federal Food, Drug, and Cosmetic Act, shall be inclusive of the lowest price for such authorized drug available from the manufacturer during the rebate period to any manufacturer, wholesaler, retailer, provider, health maintenance organization, nonprofit entity, or governmental entity within the United States, excluding those prices described in subclauses (I) through (IV) of clause (i). (iii) Application of auditing and recordkeeping requirements.--With respect to a covered entity described in section 340B(a)(4)(L) of the Public Health Service Act, any drug purchased for inpatient use shall be subject to the auditing and recordkeeping requirements described in section 340B(a)(5)(C) of the Public Health Service Act. (D) Limitation on sales at a nominal price.-- (i) In general.--For purposes of subparagraph (C)(ii)(III) and subsection (b)(3)(A)(iii)(III), only sales by a manufacturer of covered outpatient drugs at nominal prices to the following shall be considered to be sales at a nominal price or merely nominal in amount: (I) A covered entity described in section 340B(a)(4) of the Public Health Service Act. (II) An intermediate care facility for the mentally retarded. (III) A State-owned or operated nursing facility. (IV) An entity that-- (aa) is described in section 501(c)(3) of the Internal Revenue Code of 1986 and exempt from tax under section 501(a) of such Act or is State-owned or operated; and (bb) would be a covered entity described in section 340(B)(a)(4) of the Public Health Service Act insofar as the entity provides the same type of services to the same type of populations as a covered entity described in such section provides, but does not receive funding under a provision of law referred to in such section; (V) A public or nonprofit entity, or an entity based at an institution of higher learning whose primary purpose is to provide health care services to students of that institution, that provides a service or services described under section 1001(a) of the Public Health Service Act, 42 U.S.C. 300. (VI) Any other facility or entity that the Secretary determines is a safety net provider to which sales of such drugs at a nominal price would be appropriate based on the factors described in clause (ii). (ii) Factors.--The factors described in this clause with respect to a facility or entity are the following: (I) The type of facility or entity. (II) The services provided by the facility or entity. (III) The patient population served by the facility or entity. (IV) The number of other facilities or entities eligible to purchase at nominal prices in the same service area. (iii) Nonapplication.--Clause (i) shall not apply with respect to sales by a manufacturer at a nominal price of covered outpatient drugs pursuant to a master agreement under section 8126 of title 38, United States Code. (iv) Rule of Construction.--Nothing in this subparagraph shall be construed to alter any existing statutory or regulatory prohibition on services with respect to an entity described in clause (i)(IV), including the prohibition set forth in section 1008 of the Public Health Service Act. (2) Additional rebate for single source and innovator multiple source drugs.-- (A) In general.--The amount of the rebate specified in this subsection for a rebate period, with respect to each dosage form and strength of a single source drug or an innovator multiple source drug, shall be increased by an amount equal to the product of-- (i) the total number of units of such dosage form and strength dispensed after December 31, 1990, for which payment was made under the State plan for the rebate period; and (ii) the amount (if any) by which-- (I) the average manufacturer price for the dosage form and strength of the drug for the period, exceeds (II) the average manufacturer price for such dosage form and strength for the calendar quarter beginning July 1, 1990 (without regard to whether or not the drug has been sold or transferred to an entity, including a division or subsidiary of the manufacturer, after the first day of such quarter), increased by the percentage by which the consumer price index for all urban consumers (United States city average) for the month before the month in which the rebate period begins exceeds such index for September 1990. (B) Treatment of subsequently approved drugs.--In the case of a covered outpatient drug approved by the Food and Drug Administration after October 1, 1990, clause (ii)(II) of subparagraph (A) shall be applied by substituting ``the first full calendar quarter after the day on which the drug was first marketed'' for ``the calendar quarter beginning July 1, 1990'' and ``the month prior to the first month of the first full calendar quarter after the day on which the drug was first marketed'' for ``September 1990''. (C) Treatment of new formulations.-- (i) In general.--In the case of a drug that is a line extension of a single source drug or an innovator multiple source drug that is an oral solid dosage form, the rebate obligation for a rebate period with respect to such drug under this subsection shall be the greater of the amount described in clause (ii) for such drug or the amount described in clause (iii) for such drug. (ii) Amount 1.--For purposes of clause (i), the amount described in this clause with respect to a drug described in clause (i) and rebate period is the amount computed under paragraph (1) for such drug, increased by the amount computed under subparagraph (A) and, as applicable, subparagraph (B) for such drug and rebate period. (iii) Amount 2.--For purposes of clause (i), the amount described in this clause with respect to a drug described in clause (i) and rebate period is the amount computed under paragraph (1) for such drug, increased by the product of-- (I) the average manufacturer price for the rebate period of the line extension of a single source drug or an innovator multiple source drug that is an oral solid dosage form; (II) the highest additional rebate (calculated as a percentage of average manufacturer price) under this paragraph for the rebate period for any strength of the original single source drug or innovator multiple source drug; and (III) the total number of units of each dosage form and strength of the line extension product paid for under the State plan in the rebate period (as reported by the State). In this subparagraph, the term ``line extension'' means, with respect to a drug, a new formulation of the drug, such as an extended release formulation, but does not include an abuse-deterrent formulation of the drug (as determined by the Secretary), regardless of whether such abuse-deterrent formulation is an extended release formulation. (D) Maximum rebate amount.--In no case shall the sum of the amounts applied under paragraph (1)(A)(ii) and this paragraph with respect to each dosage form and strength of a single source drug or an innovator multiple source drug for a rebate period beginning after December 31, 2009, exceed 100 percent of the average manufacturer price of the drug. (3) Rebate for other drugs.-- (A) In general.--Except as provided in subparagraph (C), the amount of the rebate paid to a State for a rebate period with respect to each dosage form and strength of covered outpatient drugs (other than single source drugs and innovator multiple source drugs) shall be equal to the product of-- (i) the applicable percentage (as described in subparagraph (B)) of the average manufacturer price for the dosage form and strength for the rebate period, and (ii) the total number of units of such dosage form and strength dispensed after December 31, 1990, for which payment was made under the State plan for the rebate period. (B) Applicable percentage defined.--For purposes of subparagraph (A)(i), the ``applicable percentage'' for rebate periods beginning-- (i) before January 1, 1994, is 10 percent, (ii) after December 31, 1993, and before January 1, 2010, is 11 percent; and (iii) after December 31, 2009, is 13 percent. (C) Additional rebate.-- (i) In general.--The amount of the rebate specified in this paragraph for a rebate period, with respect to each dosage form and strength of a covered outpatient drug other than a single source drug or an innovator multiple source drug of a manufacturer, shall be increased in the manner that the rebate for a dosage form and strength of a single source drug or an innovator multiple source drug is increased under subparagraphs (A) and (D) of paragraph (2), except as provided in clause (ii). (ii) Special rules for application of provision.--In applying subparagraphs (A) and (D) of paragraph (2) under clause (i)-- (I) the reference in subparagraph (A)(i) of such paragraph to ``1990'' shall be deemed a reference to ``2014''; (II) subject to clause (iii), the reference in subparagraph (A)(ii) of such paragraph to ``the calendar quarter beginning July 1, 1990'' shall be deemed a reference to ``the calendar quarter beginning July 1, 2014''; and (III) subject to clause (iii), the reference in subparagraph (A)(ii) of such paragraph to ``September 1990'' shall be deemed a reference to ``September 2014''; (IV) the references in subparagraph (D) of such paragraph to ``paragraph (1)(A)(ii)'', ``this paragraph'', and ``December 31, 2009'' shall be deemed references to ``subparagraph (A)'', ``this subparagraph'', and ``December 31, 2014'', respectively; and (V) any reference in such paragraph to a ``single source drug or an innovator multiple source drug'' shall be deemed to be a reference to a drug to which clause (i) applies. (iii) Special rule for certain noninnovator multiple source drugs.--In applying paragraph (2)(A)(ii)(II) under clause (i) with respect to a covered outpatient drug that is first marketed as a drug other than a single source drug or an innovator multiple source drug after April 1, 2013, such paragraph shall be applied-- (I) by substituting ``the applicable quarter'' for ``the calendar quarter beginning July 1, 1990''; and (II) by substituting ``the last month in such applicable quarter'' for ``September 1990''. (iv) Applicable quarter defined.--In this subsection, the term ``applicable quarter'' means, with respect to a drug described in clause (iii), the fifth full calendar quarter after which the drug is marketed as a drug other than a single source drug or an innovator multiple source drug. (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 do any or all of the following: (I) Correct the misclassification, using drug product information provided by the manufacturer, 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, and exclude the misclassified drug from Federal financial participation in accordance with section 1903(i)(10)(E). (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, any 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. (d) Limitations on Coverage of Drugs.-- (1) Permissible restrictions.--(A) A State may subject to prior authorization any covered outpatient drug. Any such prior authorization program shall comply with the requirements of paragraph (5). (B) A State may exclude or otherwise restrict coverage of a covered outpatient drug if-- (i) the prescribed use is not for a medically accepted indication (as defined in subsection (k)(6)); (ii) the drug is contained in the list referred to in paragraph (2); (iii) the drug is subject to such restrictions pursuant to an agreement between a manufacturer and a State authorized by the Secretary under subsection (a)(1) or in effect pursuant to subsection (a)(4); or (iv) the State has excluded coverage of the drug from its formulary established in accordance with paragraph (4). (2) List of drugs subject to restriction.--The following drugs or classes of drugs, or their medical uses, may be excluded from coverage or otherwise restricted: (A) Agents when used for anorexia, weight loss, or weight gain. (B) Agents when used to promote fertility. (C) Agents when used for cosmetic purposes or hair growth. (D) Agents when used for the symptomatic relief of cough and colds. (E) Prescription vitamins and mineral products, except prenatal vitamins and fluoride preparations. (F) Nonprescription drugs, except, in the case of pregnant women when recommended in accordance with the Guideline referred to in section 1905(bb)(2)(A), agents approved by the Food and Drug Administration under the over- the-counter monograph process for purposes of promoting, and when used to promote, tobacco cessation. (G) Covered outpatient drugs which the manufacturer seeks to require as a condition of sale that associated tests or monitoring services be purchased exclusively from the manufacturer or its designee. (H) Agents when used for the treatment of sexual or erectile dysfunction, unless such agents are used to treat a condition, other than sexual or erectile dysfunction, for which the agents have been approved by the Food and Drug Administration. (3) Update of drug listings.--The Secretary shall, by regulation, periodically update the list of drugs or classes of drugs described in paragraph (2) or their medical uses, which the Secretary has determined, based on data collected by surveillance and utilization review programs of State medical assistance programs, to be subject to clinical abuse or inappropriate use. (4) Requirements for formularies.--A State may establish a formulary if the formulary meets the following requirements: (A) The formulary is developed by a committee consisting of physicians, pharmacists, and other appropriate individuals appointed by the Governor of the State (or, at the option of the State, the State's drug use review board established under subsection (g)(3)). (B) Except as provided in subparagraph (C), the formulary includes the covered outpatient drugs of any manufacturer which has entered into and complies with an agreement under subsection (a) (other than any drug excluded from coverage or otherwise restricted under paragraph (2)). (C) A covered outpatient drug may be excluded with respect to the treatment of a specific disease or condition for an identified population (if any) only if, based on the drug's labeling (or, in the case of a drug the prescribed use of which is not approved under the Federal Food, Drug, and Cosmetic Act but is a medically accepted indication, based on information from the appropriate compendia described in subsection (k)(6)), the excluded drug does not have a significant, clinically meaningful therapeutic advantage in terms of safety, effectiveness, or clinical outcome of such treatment for such population over other drugs included in the formulary and there is a written explanation (available to the public) of the basis for the exclusion. (D) The State plan permits coverage of a drug excluded from the formulary (other than any drug excluded from coverage or otherwise restricted under paragraph (2)) pursuant to a prior authorization program that is consistent with paragraph (5). (E) The formulary meets such other requirements as the Secretary may impose in order to achieve program savings consistent with protecting the health of program beneficiaries. A prior authorization program established by a State under paragraph (5) is not a formulary subject to the requirements of this paragraph. (5) Requirements of prior authorization programs.--A State plan under this title may require, as a condition of coverage or payment for a covered outpatient drug for which Federal financial participation is available in accordance with this section, with respect to drugs dispensed on or after July 1, 1991, the approval of the drug before its dispensing for any medically accepted indication (as defined in subsection (k)(6)) only if the system providing for such approval-- (A) provides response by telephone or other telecommunication device within 24 hours of a request for prior authorization; and (B) except with respect to the drugs on the list referred to in paragraph (2), provides for the dispensing of at least 72-hour supply of a covered outpatient prescription drug in an emergency situation (as defined by the Secretary). (6) Other permissible restrictions.--A State may impose limitations, with respect to all such drugs in a therapeutic class, on the minimum or maximum quantities per prescription or on the number of refills, if such limitations are necessary to discourage waste, and may address instances of fraud or abuse by individuals in any manner authorized under this Act. (7) Non-excludable drugs.--The following drugs or classes of drugs, or their medical uses, shall not be excluded from coverage: (A) Agents when used to promote smoking cessation, including agents approved by the Food and Drug Administration under the over- the-counter monograph process for purposes of promoting, and when used to promote, tobacco cessation. (B) Barbiturates. (C) Benzodiazepines. (e) Treatment of Pharmacy Reimbursement Limits.-- (1) In general.--During the period beginning on January 1, 1991, and ending on December 31, 1994-- (A) a State may not reduce the payment limits established by regulation under this title or any limitation described in paragraph (3) with respect to the ingredient cost of a covered outpatient drug or the dispensing fee for such a drug below the limits in effect as of January 1, 1991, and (B) except as provided in paragraph (2), the Secretary may not modify by regulation the formula established under sections 447.331 through 447.334 of title 42, Code of Federal Regulations, in effect on November 5, 1990, to reduce the limits described in subparagraph (A). (2) Special rule.--If a State is not in compliance with the regulations described in paragraph (1)(B), paragraph (1)(A) shall not apply to such State until such State is in compliance with such regulations. (3) Effect on state maximum allowable cost limitations.--This section shall not supersede or affect provisions in effect prior to January 1, 1991, or after December 31, 1994, relating to any maximum allowable cost limitation established by a State for payment by the State for covered outpatient drugs, and rebates shall be made under this section without regard to whether or not payment by the State for such drugs is subject to such a limitation or the amount of such a limitation. (4) Establishment of upper payment Limits.--Subject to paragraph (5), the Secretary shall establish a Federal upper reimbursement limit for each multiple source drug for which the FDA has rated three or more products therapeutically and pharmaceutically equivalent, regardless of whether all such additional formulations are rated as such and shall use only such formulations when determining any such upper limit. (5) Use of amp in upper payment limits.--The Secretary shall calculate the Federal upper reimbursement limit established under paragraph (4) as no less than 175 percent of the weighted average (determined on the basis of utilization) of the most recently reported monthly average manufacturer prices for pharmaceutically and therapeutically equivalent multiple source drug products that are available for purchase by retail community pharmacies on a nationwide basis. The Secretary shall implement a smoothing process for average manufacturer prices. Such process shall be similar to the smoothing process used in determining the average sales price of a drug or biological under section 1847A. (f) Survey of Retail Prices; State Payment and Utilization Rates; and Performance Rankings.-- (1) Survey of retail prices.-- (A) Use of vendor.--The Secretary may contract services for-- (i) with respect to a retail community pharmacy, the determination on a monthly basis of retail survey prices for covered outpatient drugs that represent a nationwide average of consumer purchase prices for such drugs, net of all discounts and rebates (to the extent any information with respect to such discounts and rebates is available); and (ii) the notification of the Secretary when a drug product that is therapeutically and pharmaceutically equivalent and bioequivalent becomes generally available. (B) Secretary response to notification of availability of multiple source products.--If contractor notifies the Secretary under subparagraph (A)(ii) that a drug product described in such subparagraph has become generally available, the Secretary shall make a determination, within 7 days after receiving such notification, as to whether the product is now described in subsection (e)(4). (C) Use of competitive bidding.--In contracting for such services, the Secretary shall competitively bid for an outside vendor that has a demonstrated history in-- (i) surveying and determining, on a representative nationwide basis, retail prices for ingredient costs of prescription drugs; (ii) working with retail community pharmacies, commercial payers, and States in obtaining and disseminating such price information; and (iii) collecting and reporting such price information on at least a monthly basis. In contracting for such services, the Secretary may waive such provisions of the Federal Acquisition Regulation as are necessary for the efficient implementation of this subsection, other than provisions relating to confidentiality of information and such other provisions as the Secretary determines appropriate. (D) Additional provisions.--A contract with a vendor under this paragraph shall include such terms and conditions as the Secretary shall specify, including the following: (i) The vendor must monitor the marketplace and report to the Secretary each time there is a new covered outpatient drug generally available. (ii) The vendor must update the Secretary no less often than monthly on the retail survey prices for covered outpatient drugs. (iii) The contract shall be effective for a term of 2 years. (E) Availability of information to states.-- Information on retail survey prices obtained under this paragraph, including applicable information on single source drugs, shall be provided to States on at least a monthly basis. The Secretary shall devise and implement a means for providing access to each State agency designated under section 1902(a)(5) with responsibility for the administration or supervision of the administration of the State plan under this title of the retail survey price determined under this paragraph. (2) Annual state report.--Each State shall annually report to the Secretary information on-- (A) the payment rates under the State plan under this title for covered outpatient drugs; (B) the dispensing fees paid under such plan for such drugs; and (C) utilization rates for noninnovator multiple source drugs under such plan. (3) Annual state performance rankings.-- (A) Comparative analysis.--The Secretary annually shall compare, for the 50 most widely prescribed drugs identified by the Secretary, the national retail sales price data (collected under paragraph (1)) for such drugs with data on prices under this title for each such drug for each State. (B) Availability of information.--The Secretary shall submit to Congress and the States full information regarding the annual rankings made under subparagraph (A). (4) Appropriation.--Out of any funds in the Treasury not otherwise appropriated, there is appropriated to the Secretary of Health and Human Services $5,000,000 for each of fiscal years 2006 through 2010 to carry out this subsection. (g) Drug Use Review.-- (1) In general.-- (A) In order to meet the requirement of section 1903(i)(10)(B), a State shall provide, by not later than January 1, 1993, for a drug use review program described in paragraph (2) for covered outpatient drugs in order to assure that prescriptions (i) are appropriate, (ii) are medically necessary, and (iii) are not likely to result in adverse medical results. The program shall be designed to educate physicians and pharmacists to identify and reduce the frequency of patterns of fraud, abuse, gross overuse, or inappropriate or medically unnecessary care, among physicians, pharmacists, and patients, or associated with specific drugs or groups of drugs, as well as potential and actual severe adverse reactions to drugs including education on therapeutic appropriateness, overutilization and underutilization, appropriate use of generic products, therapeutic duplication, drug-disease contraindications, drug-drug interactions, incorrect drug dosage or duration of drug treatment, drug-allergy interactions, and clinical abuse/misuse. (B) The program shall assess data on drug use against predetermined standards, consistent with the following: (i) compendia which shall consist of the following: (I) American Hospital Formulary Service Drug Information; (II) United States Pharmacopeia-Drug Information (or its successor publications); and (III) the DRUGDEX Information System; and (ii) the peer-reviewed medical literature. (C) The Secretary, under the procedures established in section 1903, shall pay to each State an amount equal to 75 per centum of so much of the sums expended by the State plan during calendar years 1991 through 1993 as the Secretary determines is attributable to the statewide adoption of a drug use review program which conforms to the requirements of this subsection. (D) States shall not be required to perform additional drug use reviews with respect to drugs dispensed to residents of nursing facilities which are in compliance with the drug regimen review procedures prescribed by the Secretary for such facilities in regulations implementing section 1919, currently at section 483.60 of title 42, Code of Federal Regulations. (2) Description of program.--Each drug use review program shall meet the following requirements for covered outpatient drugs: (A) Prospective drug review.--(i) The State plan shall provide for a review of drug therapy before each prescription is filled or delivered to an individual receiving benefits under this title, typically at the point-of-sale or point of distribution. The review shall include screening for potential drug therapy problems due to therapeutic duplication, drug-disease contraindications, drug-drug interactions (including serious interactions with nonprescription or over-the-counter drugs), incorrect drug dosage or duration of drug treatment, drug-allergy interactions, and clinical abuse/misuse. Each State shall use the compendia and literature referred to in paragraph (1)(B) as its source of standards for such review. (ii) As part of the State's prospective drug use review program under this subparagraph applicable State law shall establish standards for counseling of individuals receiving benefits under this title by pharmacists which includes at least the following: (I) The pharmacist must offer to discuss with each individual receiving benefits under this title or caregiver of such individual (in person, whenever practicable, or through access to a telephone service which is toll-free for long-distance calls) who presents a prescription, matters which in the exercise of the pharmacist's professional judgment (consistent with State law respecting the provision of such information), the pharmacist deems significant including the following: (aa) The name and description of the medication. (bb) The route, dosage form, dosage, route of administration, and duration of drug therapy. (cc) Special directions and precautions for preparation, administration and use by the patient. (dd) Common severe side or adverse effects or interactions and therapeutic contraindications that may be encountered, including their avoidance, and the action required if they occur. (ee) Techniques for self- monitoring drug therapy. (ff) Proper storage. (gg) Prescription refill information. (hh) Action to be taken in the event of a missed dose. (II) A reasonable effort must be made by the pharmacist to obtain, record, and maintain at least the following information regarding individuals receiving benefits under this title: (aa) Name, address, telephone number, date of birth (or age) and gender. (bb) Individual history where significant, including disease state or states, known allergies and drug reactions, and a comprehensive list of medications and relevant devices. (cc) Pharmacist comments relevant to the individual's drug therapy. Nothing in this clause shall be construed as requiring a pharmacist to provide consultation when an individual receiving benefits under this title or caregiver of such individual refuses such consultation, or to require verification of the offer to provide consultation or a refusal of such offer. (B) Retrospective drug use review.--The program shall provide, through its mechanized drug claims processing and information retrieval systems (approved by the Secretary under section 1903(r)) or otherwise, for the ongoing periodic examination of claims data and other records in order to identify patterns of fraud, abuse, gross overuse, or inappropriate or medically unnecessary care, among physicians, pharmacists and individuals receiving benefits under this title, or associated with specific drugs or groups of drugs. (C) Application of standards.--The program shall, on an ongoing basis, assess data on drug use against explicit predetermined standards (using the compendia and literature referred to in subsection (1)(B) as the source of standards for such assessment) including but not limited to monitoring for therapeutic appropriateness, overutilization and underutilization, appropriate use of generic products, therapeutic duplication, drug-disease contraindications, drug-drug interactions, incorrect drug dosage or duration of drug treatment, and clinical abuse/misuse and, as necessary, introduce remedial strategies, in order to improve the quality of care and to conserve program funds or personal expenditures. (D) Educational program.--The program shall, through its State drug use review board established under paragraph (3), either directly or through contracts with accredited health care educational institutions, State medical societies or State pharmacists associations/societies or other organizations as specified by the State, and using data provided by the State drug use review board on common drug therapy problems, provide for active and ongoing educational outreach programs (including the activities described in paragraph (3)(C)(iii) of this subsection) to educate practitioners on common drug therapy problems with the aim of improving prescribing or dispensing practices. (3) State drug use review board.-- (A) Establishment.--Each State shall provide for the establishment of a drug use review board (hereinafter referred to as the ``DUR Board'') either directly or through a contract with a private organization. (B) Membership.--The membership of the DUR Board shall include health care professionals who have recognized knowledge and expertise in one or more of the following: (i) The clinically appropriate prescribing of covered outpatient drugs. (ii) The clinically appropriate dispensing and monitoring of covered outpatient drugs. (iii) Drug use review, evaluation, and intervention. (iv) Medical quality assurance. The membership of the DUR Board shall be made up at least \1/3\ but no more than 51 percent licensed and actively practicing physicians and at least \1/3\ licensed and actively practicing pharmacists. (C) Activities.--The activities of the DUR Board shall include but not be limited to the following: (i) Retrospective DUR as defined in section (2)(B). (ii) Application of standards as defined in section (2)(C). (iii) Ongoing interventions for physicians and pharmacists, targeted toward therapy problems or individuals identified in the course of retrospective drug use reviews performed under this subsection. Intervention programs shall include, in appropriate instances, at least: (I) information dissemination sufficient to ensure the ready availability to physicians and pharmacists in the State of information concerning its duties, powers, and basis for its standards; (II) written, oral, or electronic reminders containing patient-specific or drug- specific (or both) information and suggested changes in prescribing or dispensing practices, communicated in a manner designed to ensure the privacy of patient-related information; (III) use of face-to-face discussions between health care professionals who are experts in rational drug therapy and selected prescribers and pharmacists who have been targeted for educational intervention, including discussion of optimal prescribing, dispensing, or pharmacy care practices, and follow-up face-to-face discussions; and (IV) intensified review or monitoring of selected prescribers or dispensers. The Board shall re-evaluate interventions after an appropriate period of time to determine if the intervention improved the quality of drug therapy, to evaluate the success of the interventions and make modifications as necessary. (D) Annual report.--Each State shall require the DUR Board to prepare a report on an annual basis. The State shall submit a report on an annual basis to the Secretary which shall include a description of the activities of the Board, including the nature and scope of the prospective and retrospective drug use review programs, a summary of the interventions used, an assessment of the impact of these educational interventions on quality of care, and an estimate of the cost savings generated as a result of such program. The Secretary shall utilize such report in evaluating the effectiveness of each State's drug use review program. (h) Electronic Claims Management.-- (1) In general.--In accordance with chapter 35 of title 44, United States Code (relating to coordination of Federal information policy), the Secretary shall encourage each State agency to establish, as its principal means of processing claims for covered outpatient drugs under this title, a point-of-sale electronic claims management system, for the purpose of performing on-line, real time eligibility verifications, claims data capture, adjudication of claims, and assisting pharmacists (and other authorized persons) in applying for and receiving payment. (2) Encouragement.--In order to carry out paragraph (1)-- (A) for calendar quarters during fiscal years 1991 and 1992, expenditures under the State plan attributable to development of a system described in paragraph (1) shall receive Federal financial participation under section 1903(a)(3)(A)(i) (at a matching rate of 90 percent) if the State acquires, through applicable competitive procurement process in the State, the most cost-effective telecommunications network and automatic data processing services and equipment; and (B) the Secretary may permit, in the procurement described in subparagraph (A) in the application of part 433 of title 42, Code of Federal Regulations, and parts 95, 205, and 307 of title 45, Code of Federal Regulations, the substitution of the State's request for proposal in competitive procurement for advance planning and implementation documents otherwise required. (i) Annual Report.-- (1) In general.--Not later than May 1 of each year the Secretary shall transmit to the Committee on Finance of the Senate, the Committee on Energy and Commerce of the House of Representatives, and the Committees on Aging of the Senate and the House of Representatives a report on the operation of this section in the preceding fiscal year. (2) Details.--Each report shall include information on-- (A) ingredient costs paid under this title for single source drugs, multiple source drugs, and nonprescription covered outpatient drugs; (B) the total value of rebates received and number of manufacturers providing such rebates; (C) how the size of such rebates compare with the size or rebates offered to other purchasers of covered outpatient drugs; (D) the effect of inflation on the value of rebates required under this section; (E) trends in prices paid under this title for covered outpatient drugs; and (F) Federal and State administrative costs associated with compliance with the provisions of this title. (j) Exemption of Organized Health Care Settings.-- (1) Covered outpatient drugs are not subject to the requirements of this section if such drugs are-- (A) dispensed by health maintenance organizations, including Medicaid managed care organizations that contract under section 1903(m); and (B) subject to discounts under section 340B of the Public Health Service Act. (2) The State plan shall provide that a hospital (providing medical assistance under such plan) that dispenses covered outpatient drugs using drug formulary systems, and bills the plan no more than the hospital's purchasing costs for covered outpatient drugs (as determined under the State plan) shall not be subject to the requirements of this section. (3) Nothing in this subsection shall be construed as providing that amounts for covered outpatient drugs paid by the institutions described in this subsection should not be taken into account for purposes of determining the best price as described in subsection (c). (k) Definitions.--In the section-- (1) Average manufacturer price.-- (A) In general.--Subject to subparagraph (B), the term ``average manufacturer price'' means, with respect to a covered outpatient drug of a manufacturer for a rebate period, the average price paid to the manufacturer for the drug in the United States by-- (i) wholesalers for drugs distributed to retail community pharmacies; and (ii) retail community pharmacies that purchase drugs directly from the manufacturer. (B) Exclusion of customary prompt pay discounts and other payments.-- (i) In general.--The average manufacturer price for a covered outpatient drug shall exclude-- (I) customary prompt pay discounts extended to wholesalers; (II) bona fide service fees paid by manufacturers to wholesalers or retail community pharmacies, including (but not limited to) distribution service fees, inventory management fees, product stocking allowances, and fees associated with administrative services agreements and patient care programs (such as medication compliance programs and patient education programs); (III) reimbursement by manufacturers for recalled, damaged, expired, or otherwise unsalable returned goods, including (but not limited to) reimbursement for the cost of the goods and any reimbursement of costs associated with return goods handling and processing, reverse logistics, and drug destruction; (IV) payments received from, and rebates or discounts provided to, pharmacy benefit managers, managed care organizations, health maintenance organizations, insurers, hospitals, clinics, mail order pharmacies, long term care providers, manufacturers, or any other entity that does not conduct business as a wholesaler or a retail community pharmacy, unless the drug is an inhalation, infusion, instilled, implanted, or injectable drug that is not generally dispensed through a retail community pharmacy; and (V) discounts provided by manufacturers under section 1860D-14A. (ii) Inclusion of other discounts and payments.--Notwithstanding clause (i), any other discounts, rebates, payments, or other financial transactions that are received by, paid by, or passed through to, retail community pharmacies shall be included in the average manufacturer price for a covered outpatient drug. (C) Inclusion of section 505(c) drugs.--In the case of a manufacturer that approves, allows, or otherwise permits any drug of the manufacturer to be sold under a new drug application approved under section 505(c) of the Federal Food, Drug, and Cosmetic Act, such term shall be inclusive of the average price paid for such drug by wholesalers for drugs distributed to retail community pharmacies. (2) Covered outpatient drug.--Subject to the exceptions in paragraph (3), the term ``covered outpatient drug'' means-- (A) of those drugs which are treated as prescribed drugs for purposes of section 1905(a)(12), a drug which may be dispensed only upon prescription (except as provided in paragraph (4)), and-- (i) which is approved for safety and effectiveness as a prescription drug under section 505 or 507 of the Federal Food, Drug, and Cosmetic Act or which is approved under section 505(j) of such Act; (ii)(I) which was commercially used or sold in the United States before the date of the enactment of the Drug Amendments of 1962 or which is identical, similar, or related (within the meaning of section 310.6(b)(1) of title 21 of the Code of Federal Regulations) to such a drug, and (II) which has not been the subject of a final determination by the Secretary that it is a ``new drug'' (within the meaning of section 201(p) of the Federal Food, Drug, and Cosmetic Act) or an action brought by the Secretary under section 301, 302(a), or 304(a) of such Act to enforce section 502(f) or 505(a) of such Act; or (iii)(I) which is described in section 107(c)(3) of the Drug Amendments of 1962 and for which the Secretary has determined there is a compelling justification for its medical need, or is identical, similar, or related (within the meaning of section 310.6(b)(1) of title 21 of the Code of Federal Regulations) to such a drug, and (II) for which the Secretary has not issued a notice of an opportunity for a hearing under section 505(e) of the Federal Food, Drug, and Cosmetic Act on a proposed order of the Secretary to withdraw approval of an application for such drug under such section because the Secretary has determined that the drug is less than effective for some or all conditions of use prescribed, recommended, or suggested in its labeling; and (B) a biological product, other than a vaccine which-- (i) may only be dispensed upon prescription, (ii) is licensed under section 351 of the Public Health Service Act, and (iii) is produced at an establishment licensed under such section to produce such product; and (C) insulin certified under section 506 of the Federal Food, Drug, and Cosmetic Act. (3) Limiting definition.--The term ``covered outpatient drug'' does not include any drug, biological product, or insulin provided as part of, or as incident to and in the same setting as, any of the following (and for which payment may be made under this title as part of payment for the following and not as direct reimbursement for the drug): (A) Inpatient hospital services. (B) Hospice services. (C) Dental services, except that drugs for which the State plan authorizes direct reimbursement to the dispensing dentist are covered outpatient drugs. (D) Physicians' services. (E) Outpatient hospital services. (F) Nursing facility services and services provided by an intermediate care facility for the mentally retarded. (G) Other laboratory and x-ray services. (H) Renal dialysis. Such term also does not include any such drug or product for which a National Drug Code number is not required by the Food and Drug Administration or a drug or biological used for a medical indication which is not a medically accepted indication. Any drug, biological product, or insulin excluded from the definition of such term as a result of this paragraph shall be treated as a covered outpatient drug for purposes of determining the best price (as defined in subsection (c)(1)(C)) for such drug, biological product, or insulin. (4) Nonprescription drugs.--If a State plan for medical assistance under this title includes coverage of prescribed drugs as described in section 1905(a)(12) and permits coverage of drugs which may be sold without a prescription (commonly referred to as ``over-the- counter'' drugs), if they are prescribed by a physician (or other person authorized to prescribe under State law), such a drug shall be regarded as a covered outpatient drug. (5) Manufacturer.--The term ``manufacturer'' means any entity which is engaged in-- (A) the production, preparation, propagation, compounding, conversion, or processing of prescription drug products, either directly or indirectly by extraction from substances of natural origin, or independently by means of chemical synthesis, or by a combination of extraction and chemical synthesis, or (B) in the packaging, repackaging, labeling, relabeling, or distribution of prescription drug products. Such term does not include a wholesale distributor of drugs or a retail pharmacy licensed under State law. (6) Medically accepted indication.--The term ``medically accepted indication'' means any use for a covered outpatient drug which is approved under the Federal Food, Drug, and Cosmetic Act, or the use of which is supported by one or more citations included or approved for inclusion in any of the compendia described in subsection (g)(1)(B)(i). (7) Multiple source drug; innovator multiple source drug; noninnovator multiple source drug; single source drug.-- (A) Defined.-- (i) Multiple source drug.--The term ``multiple source drug'' means, with respect to a rebate period, a covered outpatient drug, including a drug product approved for marketing as a non-prescription drug that is regarded as a covered outpatient drug under paragraph (4), for which there at least 1 other drug product which-- (I) is rated as therapeutically equivalent (under the Food and Drug Administration's most recent publication of ``Approved Drug Products with Therapeutic Equivalence Evaluations''), (II) except as provided in subparagraph (B), is pharmaceutically equivalent and bioequivalent, as defined in subparagraph (C) and as determined by the Food and Drug Administration, and (III) is sold or marketed in the United States during the period. (ii) Innovator multiple source drug.--The term ``innovator multiple source drug'' means a multiple source drug that is marketed under a new drug application approved by the Food and Drug Administration, unless the Secretary determines that a narrow exception applies (as described in section 447.502 of title 42, Code of Federal Regulations (or any successor regulation)). (iii) Noninnovator multiple source drug.--The term ``noninnovator multiple source drug'' means a multiple source drug that is not an innovator multiple source drug. (iv) Single source drug.--The term ``single source drug'' means a covered outpatient drug, including a drug product approved for marketing as a non-prescription drug that is regarded as a covered outpatient drug under paragraph (4), which is produced or distributed under a new drug application approved by the Food and Drug Administration, including a drug product marketed by any cross-licensed producers or distributors operating under the new drug application unless the Secretary determines that a narrow exception applies (as described in section 447.502 of title 42, Code of Federal Regulations (or any successor regulation)). 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. (B) Exception.--Subparagraph (A)(i)(II) shall not apply if the Food and Drug Administration changes by regulation the requirement that, for purposes of the publication described in subparagraph (A)(i)(I), in order for drug products to be rated as therapeutically equivalent, they must be pharmaceutically equivalent and bioequivalent, as defined in subparagraph (C). (C) Definitions.--For purposes of this paragraph-- (i) drug products are pharmaceutically equivalent if the products contain identical amounts of the same active drug ingredient in the same dosage form and meet compendial or other applicable standards of strength, quality, purity, and identity; and (ii) drugs are bioequivalent if they do not present a known or potential bioequivalence problem, or, if they do present such a problem, they are shown to meet an appropriate standard of bioequivalence. (8) Rebate period.--The term ``rebate period'' means, with respect to an agreement under subsection (a), a calendar quarter or other period specified by the Secretary with respect to the payment of rebates under such agreement. (9) State agency.--The term ``State agency'' means the agency designated under section 1902(a)(5) to administer or supervise the administration of the State plan for medical assistance. (10) Retail community pharmacy.--The term ``retail community pharmacy'' means an independent pharmacy, a chain pharmacy, a supermarket pharmacy, or a mass merchandiser pharmacy that is licensed as a pharmacy by the State and that dispenses medications to the general public at retail prices. Such term does not include a pharmacy that dispenses prescription medications to patients primarily through the mail, nursing home pharmacies, long-term care facility pharmacies, hospital pharmacies, clinics, charitable or not-for- profit pharmacies, government pharmacies, or pharmacy benefit managers. (11) Wholesaler.--The term ``wholesaler'' means a drug wholesaler that is engaged in wholesale distribution of prescription drugs to retail community pharmacies, including (but not limited to) manufacturers, repackers, distributors, own-label distributors, private-label distributors, jobbers, brokers, warehouses (including manufacturer's and distributor's warehouses, chain drug warehouses, and wholesale drug warehouses) independent wholesale drug traders, and retail community pharmacies that conduct wholesale distributions. * * * * * * * ---------- FEDERAL FOOD, DRUG, AND COSMETIC ACT * * * * * * * exemptions and consideration for certain drugs, devices, and biological products Sec. 503. (a) The Secretary is hereby directed to promulgate regulations exempting from any labeling or packaging requirement of this Act drugs and devices which are, in accordance with the practice of the trade, to be processed, labeled, or repacked in substantial quantities at establishments other than those where originally processed or packed, on condition that such drugs and devices are not adulterated or misbranded, under the provisions of this Act upon removal from such processing, labeling, or repacking establishment. (b)(1) A drug intended for use by man which-- (A) because of its toxicity or other potentiality for harmful effect, or the method of its use, or the collateral measures necessary to its use, is not safe for use except under the supervision of a practitioner licensed by law to administer such drug; or (B) is limited by an approved application under section 505 to use under the professional supervision of a practitioner licensed by law to administer such drug; shall be dispensed only (i) upon a written prescription of a practitioner licensed by law to administer such drug, or (ii) upon an oral prescription of such practitioner which is reduced promptly to writing and filed by the pharmacist, or (iii) by refilling any such written or oral prescription if such refilling is authorized by the prescriber either in the original prescription or by oral order which is reduced promptly to writing and filed by the pharmacist. The act of dispensing a drug contrary to the provisions of this paragraph shall be deemed to be an act which results in the drug being misbranded while held for sale. (2) Any drug dispensed by filling or refilling a written or oral prescription of a practitioner licensed by law to administer such drug shall be exempt from the requirements of section 502, except paragraphs (a), (i) (2) and (3), (k), and (l), and the packaging requirements of paragraphs (g), (h), and (p), if the drug bears a label containing the name and address of the dispenser, the serial number and date of the prescription or of its filling, the name of the prescriber, and, if stated in the prescription, the name of the patient, and the directions for use and cautionary statements, if any, contained in such prescription. This exemption shall not apply to any drug dispensed in the course of the conduct of a business of dispensing drugs pursuant to diagnosis by mail, or to a drug dispensed in violation of paragraph (1) of this subsection. (3) The Secretary may by regulation remove drugs subject to section 505 from the requirements of paragraph (1) of this subsection when such requirements are not necessary for the protection of the public health. (4)(A) A drug that is subject to paragraph (1) shall be deemed to be misbranded if at any time prior to dispensing the label of the drug fails to bear, at a minimum, the symbol ``Rx only''. (B) A drug to which paragraph (1) does not apply shall be deemed to be misbranded if at any time prior to dispensing the label of the drug bears the symbol described in subparagraph (A). (5) Nothing in this subsection shall be construed to relieve any person from any requirement prescribed by or under authority of law with respect to drugs now included or which may hereafter be included within the classifications stated in section 3220 of the Internal Revenue Code (26 U.S.C. 3220), or to marihuana as defined in section 3238(b) of the Internal Revenue Code (26 U.S.C. 3238(b)). (c)(1) No person may sell, purchase, or trade or offer to sell, purchase, or trade any drug sample. For purposes of this paragraph and subsection (d), the term ``drug sample'' means a unit of a drug, subject to subsection (b), which is not intended to be sold and is intended to promote the sale of the drug. Nothing in this paragraph shall subject an officer or executive of a drug manufacturer or distributor to criminal liability solely because of a sale, purchase, trade, or offer to sell, purchase, or trade in violation of this paragraph by other employees of the manufacturer or distributor. (2) No person may sell, purchase, or trade, offer to sell, purchase, or trade, or counterfeit any coupon. For purposes of this paragraph, the term ``coupon'' means a form which may be redeemed, at no cost or at a reduced cost, for a drug which is prescribed in accordance with subsection (b). (3)(A) No person may sell, purchase, or trade, or offer to sell, purchase, or trade, any drug-- (i) which is subject to subsection (b), and (ii)(I) which was purchased by a public or private hospital or other health care entity, or (II) which was donated or supplied at a reduced price to a charitable organization described in section 501(c)(3) of the Internal Revenue Code of 1954. (B) Subparagraph (A) does not apply to-- (i) the purchase or other acquisition by a hospital or other health care entity which is a member of a group purchasing organization of a drug for its own use from the group purchasing organization or from other hospitals or health care entities which are members of such organization, (ii) the sale, purchase, or trade of a drug or an offer to sell, purchase, or trade a drug by an organization described in subparagraph (A)(ii)(II) to a nonprofit affiliate of the organization to the extent otherwise permitted by law, (iii) a sale, purchase, or trade of a drug or an offer to sell, purchase, or trade a drug among hospitals or other health care entities which are under common control, (iv) a sale, purchase, or trade of a drug or an offer to sell, purchase, or trade a drug for emergency medical reasons, or (v) a sale, purchase, or trade of a drug, an offer to sell, purchase, or trade a drug, or the dispensing of a drug pursuant to a prescription executed in accordance with subsection (b). For purposes of this paragraph, the term ``entity'' does not include a wholesale distributor of drugs or a retail pharmacy licensed under State law and the term ``emergency medical reasons'' includes transfers of a drug between health care entities or from a health care entity to a retail pharmacy undertaken to alleviate temporary shortages of the drug arising from delays in or interruptions of regular distribution schedules. (d)(1) Except as provided in paragraphs (2) and (3), no person may distribute any drug sample. For purposes of this subsection, the term ``distribute'' does not include the providing of a drug sample to a patient by a-- (A) practitioner licensed to prescribe such drug, (B) health care professional acting at the direction and under the supervision of such a practitioner, or (C) pharmacy of a hospital or of another health care entity that is acting at the direction of such a practitioner and that received such sample pursuant to paragraph (2) or (3). (2)(A) The manufacturer or authorized distributor of record of a drug subject to subsection (b) may, in accordance with this paragraph, distribute drug samples by mail or common carrier to practitioners licensed to prescribe such drugs or, at the request of a licensed practitioner, to pharmacies of hospitals or other health care entities. Such a distribution of drug samples may only be made-- (i) in response to a written request for drug samples made on a form which meets the requirements of subparagraph (B), and (ii) under a system which requires the recipient of the drug sample to execute a written receipt for the drug sample upon its delivery and the return of the receipt to the manufacturer or authorized distributor of record. (B) A written request for a drug sample required by subparagraph (A)(i) shall contain-- (i) the name, address, professional designation, and signature of the practitioner making the request, (ii) the identity of the drug sample requested and the quantity requested, (iii) the name of the manufacturer of the drug sample requested, and (iv) the date of the request. (C) Each drug manufacturer or authorized distributor of record which makes distributions by mail or common carrier under this paragraph shall maintain, for a period of 3 years, the request forms submitted for such distributions and the receipts submitted for such distributions and shall maintain a record of distributions of drug samples which identifies the drugs distributed and the recipients of the distributions. Forms, receipts, and records required to be maintained under this subparagraph shall be made available by the drug manufacturer or authorized distributor of record to Federal and State officials engaged in the regulation of drugs and in the enforcement of laws applicable to drugs. (3) The manufacturer or authorized distributor of record of a drug subject to subsection (b) may, by means other than mail or common carrier, distribute drug samples only if the manufacturer or authorized distributor of record makes the distributions in accordance with subparagraph (A) and carries out the activities described in subparagraphs (B) through (F) as follows: (A) Drug samples may only be distributed-- (i) to practitioners licensed to prescribe such drugs if they make a written request for the drug samples, or (ii) at the written request of such a licensed practitioner, to pharmacies of hospitals or other health care entities. A written request for drug samples shall be made on a form which contains the practitioner's name, address, and professional designation, the identity of the drug sample requested, the quantity of drug samples requested, the name of the manufacturer or authorized distributor of record of the drug sample, the date of the request and signature of the practitioner making the request. (B) Drug manufacturers or authorized distributors of record shall store drug samples under conditions that will maintain their stability, integrity, and effectiveness and will assure that the drug samples will be free of contamination, deterioration, and adulteration. (C) Drug manufacturers or authorized distributors of record shall conduct, at least annually, a complete and accurate inventory of all drug samples in the possession of representatives of the manufacturer or authorized distributor of record. Drug manufacturers or authorized distributors of record shall maintain lists of the names and address of each of their representatives who distribute drug samples and of the sites where drug samples are stored. Drug manufacturers or authorized distributors of record shall maintain records for at least 3 years of all drug samples distributed, destroyed, or returned to the manufacturer or authorized distributor of record, of all inventories maintained under this subparagraph, of all thefts or significant losses of drug samples, and of all requests made under subparagraph (A) for drug samples. Records and lists maintained under this subparagraph shall be made available by the drug manufacturer or authorized distributor of record to the Secretary upon request. (D) Drug manufacturers or authorized distributors of record shall notify the Secretary of any significant loss of drug samples and any known theft of drug samples. (E) Drug manufacturers or authorized distributors of record shall report to the Secretary any conviction of their representatives for violations of subsection (c)(1) or a State law because of the sale, purchase, or trade of a drug sample or the offer to sell, purchase, or trade a drug sample. (F) Drug manufacturers or authorized distributors of record shall provide to the Secretary the name and telephone number of the individual responsible for responding to a request for information respecting drug samples. (4) In this subsection, the term ``authorized distributors of record'' means those distributors with whom a manufacturer has established an ongoing relationship to distribute such manufacturer's products. (5) No person may distribute a drug sample of a drug that is-- (A) an applicable drug (as defined in section 1128H(d) of the Social Security Act); (B) a controlled substance (as defined in section 102 of the Controlled Substances Act) for which the findings required under section 202(b)(2) of such Act have been made; and (C) approved under section 505 for use in the management or treatment of pain (other than for the management or treatment of a substance use disorder). (e) (1) Requirement.--Subject to section 583: (A) In general.--No person may engage in wholesale distribution of a drug subject to subsection (b)(1) in any State unless such person-- (i)(I) is licensed by the State from which the drug is distributed; or (II) if the State from which the drug is distributed has not established a licensure requirement, is licensed by the Secretary; and (ii) if the drug is distributed interstate, is licensed by the State into which the drug is distributed if the State into which the drug is distributed requires the licensure of a person that distributes drugs into the State. (B) Standards.--Each Federal and State license described in subparagraph (A) shall meet the standards, terms, and conditions established by the Secretary under section 583. (2) Reporting and database.-- (A) Reporting.--Beginning January 1, 2015, any person who owns or operates an establishment that engages in wholesale distribution shall-- (i) report to the Secretary, on an annual basis pursuant to a schedule determined by the Secretary-- (I) each State by which the person is licensed and the appropriate identification number of each such license; and (II) the name, address, and contact information of each facility at which, and all trade names under which, the person conducts business; and (ii) report to the Secretary within a reasonable period of time and in a reasonable manner, as determined by the Secretary, any significant disciplinary actions, such as the revocation or suspension of a wholesale distributor license, taken by a State or the Federal Government during the reporting period against the wholesale distributor. (B) Database.--Not later than January 1, 2015, the Secretary shall establish a database of authorized wholesale distributors. Such database shall-- (i) identify each authorized wholesale distributor by name, contact information, and each State where such wholesale distributor is appropriately licensed to engage in wholesale distribution; (ii) be available to the public on the Internet Web site of the Food and Drug Administration; and (iii) be regularly updated on a schedule determined by the Secretary. (C) Coordination.--The Secretary shall establish a format and procedure for appropriate State officials to access the information provided pursuant to subparagraph (A) in a prompt and secure manner. (D) Confidentiality.--Nothing in this paragraph shall be construed as authorizing the Secretary to disclose any information that is a trade secret or confidential information subject to section 552(b)(4) of title 5, United States Code, or section 1905 of title 18, United States Code. (3) Costs.-- (A) Authorized fees of secretary.--If a State does not establish a licensing program for persons engaged in the wholesale distribution of a drug subject to subsection (b), the Secretary shall license a person engaged in wholesale distribution located in such State and may collect a reasonable fee in such amount necessary to reimburse the Secretary for costs associated with establishing and administering the licensure program and conducting periodic inspections under this section. The Secretary shall adjust fee rates as needed on an annual basis to generate only the amount of revenue needed to perform this service. Fees authorized under this paragraph shall be collected and available for obligation only to the extent and in the amount provided in advance in appropriations Acts. Such fees are authorized to remain available until expended. Such sums as may be necessary may be transferred from the Food and Drug Administration salaries and expenses appropriation account without fiscal year limitation to such appropriation account for salaries and expenses with such fiscal year limitation. (B) State licensing fees.--Nothing in this Act shall prohibit States from collecting fees from wholesale distributors in connection with State licensing of such distributors. (4) For the purposes of this subsection and subsection (d), the term ``wholesale distribution'' means the distribution of a drug subject to subsection (b) to a person other than a consumer or patient, or receipt of a drug subject to subsection (b) by a person other than the consumer or patient, but does not include-- (A) intracompany distribution of any drug between members of an affiliate or within a manufacturer; (B) the distribution of a drug, or an offer to distribute a drug among hospitals or other health care entities which are under common control; (C) the distribution of a drug or an offer to distribute a drug for emergency medical reasons, including a public health emergency declaration pursuant to section 319 of the Public Health Service Act, except that, for purposes of this paragraph, a drug shortage not caused by a public health emergency shall not constitute an emergency medical reason; (D) the dispensing of a drug pursuant to a prescription executed in accordance with subsection (b)(1); (E) the distribution of minimal quantities of drug by a licensed retail pharmacy to a licensed practitioner for office use; (F) the distribution of a drug or an offer to distribute a drug by a charitable organization to a nonprofit affiliate of the organization to the extent otherwise permitted by law; (G) the purchase or other acquisition by a dispenser, hospital, or other health care entity of a drug for use by such dispenser, hospital, or other health care entity; (H) the distribution of a drug by the manufacturer of such drug; (I) the receipt or transfer of a drug by an authorized third-party logistics provider provided that such third-party logistics provider does not take ownership of the drug; (J) a common carrier that transports a drug, provided that the common carrier does not take ownership of the drug; (K) the distribution of a drug, or an offer to distribute a drug by an authorized repackager that has taken ownership or possession of the drug and repacks it in accordance with section 582(e); (L) salable drug returns when conducted by a dispenser; (M) the distribution of a collection of finished medical devices, which may include a product or biological product, assembled in kit form strictly for the convenience of the purchaser or user (referred to in this subparagraph as a ``medical convenience kit'') if-- (i) the medical convenience kit is assembled in an establishment that is registered with the Food and Drug Administration as a device manufacturer in accordance with section 510(b)(2); (ii) the medical convenience kit does not contain a controlled substance that appears in a schedule contained in the Comprehensive Drug Abuse Prevention and Control Act of 1970; (iii) in the case of a medical convenience kit that includes a product, the person that manufacturers the kit-- (I) purchased such product directly from the pharmaceutical manufacturer or from a wholesale distributor that purchased the product directly from the pharmaceutical manufacturer; and (II) does not alter the primary container or label of the product as purchased from the manufacturer or wholesale distributor; and (iv) in the case of a medical convenience kit that includes a product, the product is-- (I) an intravenous solution intended for the replenishment of fluids and electrolytes; (II) a product intended to maintain the equilibrium of water and minerals in the body; (III) a product intended for irrigation or reconstitution; (IV) an anesthetic; (V) an anticoagulant; (VI) a vasopressor; or (VII) a sympathomimetic; (N) the distribution of an intravenous drug that, by its formulation, is intended for the replenishment of fluids and electrolytes (such as sodium, chloride, and potassium) or calories (such as dextrose and amino acids); (O) the distribution of an intravenous drug used to maintain the equilibrium of water and minerals in the body, such as dialysis solutions; (P) the distribution of a drug that is intended for irrigation, or sterile water, whether intended for such purposes or for injection; (Q) the distribution of medical gas, as defined in section 575; (R) facilitating the distribution of a product by providing solely administrative services, including processing of orders and payments; or (S) the transfer of a product by a hospital or other health care entity, or by a wholesale distributor or manufacturer operating at the direction of the hospital or other health care entity, to a repackager described in section 581(16)(B) and registered under section 510 for the purpose of repackaging the drug for use by that hospital, or other health care entity and other health care entities that are under common control, if ownership of the drug remains with the hospital or other health care entity at all times. (5) Third-party logistics providers.--Notwithstanding paragraphs (1) through (4), each entity that meets the definition of a third-party logistics provider under section 581(22) shall obtain a license as a third-party logistics provider as described in section 584(a) and is not required to obtain a license as a wholesale distributor if the entity never assumes an ownership interest in the product it handles. (6) Affiliate.--For purposes of this subsection, the term ``affiliate'' means a business entity that has a relationship with a second business entity if, directly or indirectly-- (A) one business entity controls, or has the power to control, the other business entity; or (B) a third party controls, or has the power to control, both of the business entities. (f)(1)(A) A drug intended for use by animals other than man, other than a veterinary feed directive drug intended for use in animal feed or an animal feed bearing or containing a veterinary feed directive drug, which-- (i) because of its toxicity or other potentiality for harmful effect, or the method of its use, or the collateral measures necessary for its use, is not safe for animal use except under the professional supervision of a licensed veterinarian, or (ii) is limited by an approved application under subsection (b) of section 512, a conditionally-approved application under section 571, or an index listing under section 572 to use under the professional supervision of a licensed veterinarian, shall be dispensed only by or upon the lawful written or oral order of a licensed veterinarian in the course of the veterinarian's professional practice. (B) For purposes of subparagraph (A), an order is lawful if the order-- (i) is a prescription or other order authorized by law, (ii) is, if an oral order, promptly reduced to writing by the person lawfully filling the order, and filed by that person, and (iii) is refilled only if authorized in the original order or in a subsequent oral order promptly reduced to writing by the person lawfully filling the order, and filed by that person. (C) The act of dispensing a drug contrary to the provisions of this paragraph shall be deemed to be an act which results in the drug being misbranded while held for sale. (2) Any drug when dispensed in accordance with paragraph (1) of this subsection-- (A) Shall be exempt from the requirements of section 502, except subsections (a), (g), (h), (i)(2), (i)(3), and (p) of such section, and (B) shall be exempt from the packaging requirements of subsections (g), (h), and (p) of such section, if-- (i) when dispensed by a licensed veterinarian, the drug bears a label containing the name and address of the practitioner and any directions for use and cautionary statements specified by the practitioner, or (ii) when dispensed by filling the lawful order of a licensed veterinarian, the drug bears a label containing the name and address of the dispenser, the serial number and date of the order or of its filing, the name of the licensed veterinarian, and the directions for use and cautionary statements, if any, contained in such order. The preceding sentence shall not apply to any drug dispensed in the course of the conduct of a business of dispensing drugs pursuant to diagnosis by mail. (3) The Secretary may by regulation exempt drugs for animals other than man subject to section 512, 571, or 572 from the requirements of paragraph (1) when such requirements are not necessary for the protection of the public health. (4) A drug which is subject to paragraph (1) shall be deemed to be misbranded if at any time prior to dispensing its label fails to bear the statement ``Caution: Federal law restricts this drug to use by or on the order of a licensed veterinarian.''. A drug to which paragraph (1) does not apply shall be deemed to be misbranded if at any time prior to dispensing its label bears the statement specified in the preceding sentence. (g)(1)(A) The Secretary shall, in accordance with this subsection, assign a primary agency center to regulate products that constitute a combination of a drug, device, or biological product. (B) The Secretary shall conduct the premarket review of any combination product under a single application, whenever appropriate. (C) For purposes of this subsection, the term ``primary mode of action'' means the single mode of action of a combination product expected to make the greatest contribution to the overall intended therapeutic effects of the combination product. (D) The Secretary shall determine the primary mode of action of the combination product. If the Secretary determines that the primary mode of action is that of-- (i) a drug (other than a biological product), the agency center charged with premarket review of drugs shall have primary jurisdiction; (ii) a device, the agency center charged with premarket review of devices shall have primary jurisdiction; or (iii) a biological product, the agency center charged with premarket review of biological products shall have primary jurisdiction. (E) In determining the primary mode of action of a combination product, the Secretary shall not determine that the primary mode of action is that of a drug or biological product solely because the combination product has any chemical action within or on the human body. (F) If a sponsor of a combination product disagrees with the determination under subparagraph (D)-- (i) such sponsor may request, and the Secretary shall provide, a substantive rationale to such sponsor that references scientific evidence provided by the sponsor and any other scientific evidence relied upon by the Secretary to support such determination; and (ii)(I) the sponsor of the combination product may propose one or more studies (which may be nonclinical, clinical, or both) to establish the relevance, if any, of the chemical action in achieving the primary mode of action of such product; (II) if the sponsor proposes any such studies, the Secretary and the sponsor of such product shall collaborate and seek to reach agreement, within a reasonable time of such proposal, not to exceed 90 calendar days, on the design of such studies; and (III) if an agreement is reached under subclause (II) and the sponsor conducts one or more of such studies, the Secretary shall consider the data resulting from any such study when reevaluating the determination of the primary mode of action of such product, and unless and until such reevaluation has occurred and the Secretary issues a new determination, the determination of the Secretary under subparagraph (D) shall remain in effect. (2)(A)(i) To establish clarity and certainty for the sponsor, the sponsor of a combination product may request a meeting on such combination product. If the Secretary concludes that a determination of the primary mode of action pursuant to paragraph (1)(D) is necessary, the sponsor may request such meeting only after the Secretary makes such determination. If the sponsor submits a written meeting request, the Secretary shall, not later than 75 calendar days after receiving such request, meet with the sponsor of such combination product. (ii) A meeting under clause (i) may-- (I) address the standards and requirements for market approval or clearance of the combination product; (II) address other issues relevant to such combination product, such as requirements related to postmarket modification of such combination product and good manufacturing practices applicable to such combination product; and (III) identify elements under subclauses (I) and (II) that may be more appropriate for discussion and agreement with the Secretary at a later date given that scientific or other information is not available, or agreement is otherwise not feasible regarding such elements, at the time a request for such meeting is made. (iii) Any agreement under this subparagraph shall be in writing and made part of the administrative record by the Secretary. (iv) Any such agreement shall remain in effect, except-- (I) upon the written agreement of the Secretary and the sponsor or applicant; or (II) pursuant to a decision by the director of the reviewing division of the primary agency center, or a person more senior than such director, in consultation with consulting centers and the Office, as appropriate, that an issue essential to determining whether the standard for market clearance or other applicable standard under this Act or the Public Health Service Act applicable to the combination product has been identified since the agreement was reached, or that deviating from the agreement is otherwise justifiable based on scientific evidence, for public health reasons. (3) For purposes of conducting the premarket review of a combination product that contains an approved constituent part described in paragraph (4), the Secretary may require that the sponsor of such combination product submit to the Secretary only data or information that the Secretary determines is necessary to meet the standard for clearance or approval, as applicable, under this Act or the Public Health Service Act, including any incremental risks and benefits posed by such combination product, using a risk-based approach and taking into account any prior finding of safety and effectiveness or substantial equivalence for the approved constituent part relied upon by the applicant in accordance with paragraph (5). (4) For purposes of paragraph (3), an approved constituent part is-- (A) a drug constituent part of a combination product being reviewed in a single application or request under section 515, 510(k), or 513(f)(2) (submitted in accordance with paragraph (5)), that is an approved drug, provided such application or request complies with paragraph (5); (B) a device constituent part approved under section 515 that is referenced by the sponsor and that is available for use by the Secretary under section 520(h)(4); or (C) any constituent part that was previously approved, cleared, or classified under section 505, 510(k), 513(f)(2), or 515 of this Act for which the sponsor has a right of reference or any constituent part that is a nonprescription drug, as defined in section 760(a)(2). (5)(A) If an application is submitted under section 515 or 510(k) or a request is submitted under section 513(f)(2), consistent with any determination made under paragraph (1)(D), for a combination product containing as a constituent part an approved drug-- (i) the application or request shall include the certification or statement described in section 505(b)(2); and (ii) the applicant or requester shall provide notice as described in section 505(b)(3). (B) For purposes of this paragraph and paragraph (4), the term ``approved drug'' means an active ingredient-- (i) that was in an application previously approved under section 505(c); (ii) where such application is relied upon by the applicant submitting the application or request described in subparagraph (A); (iii) for which full reports of investigations that have been made to show whether such drug is safe for use and whether such drug is effective in use were not conducted by or for the applicant submitting the application or request described in subparagraph (A); and (iv) for which the applicant submitting the application or request described in subparagraph (A) has not obtained a right of reference or use from the person by or for whom the investigations described in clause (iii) were conducted. (C) The following provisions shall apply with respect to an application or request described in subparagraph (A) to the same extent and in the same manner as if such application or request were an application described in section 505(b)(2) that referenced the approved drug: (i) Subparagraphs (A), (B), (C), and (D) of section 505(c)(3). (ii) Clauses (ii), (iii), and (iv) of section 505(c)(3)(E). (iii) Subsections (b) and (c) of section 505A. (iv) Section 505E(a). (v) Section 527(a). (D) Notwithstanding any other provision of this subsection, an application or request for classification for a combination product described in subparagraph (A) shall be considered an application submitted under section 505(b)(2) for purposes of section 271(e)(2)(A) of title 35, United States Code. (6) Nothing in this subsection shall be construed as prohibiting a sponsor from submitting separate applications for the constituent parts of a combination product, unless the Secretary determines that a single application is necessary. (7) Nothing in this subsection shall prevent the Secretary from using any agency resources of the Food and Drug Administration necessary to ensure adequate review of the safety, effectiveness, or substantial equivalence of an article. (8)(A) Not later than 60 days after the date of the enactment of this paragraph, the Secretary shall establish within the Office of the Commissioner of Food and Drugs an office to ensure the prompt assignment of combination products to agency centers, the timely and effective premarket review of such products, and consistent and appropriate postmarket regulation of like products subject to the same statutory requirements to the extent permitted by law. Additionally, the office shall, in determining whether a product is to be designated a combination product, consult with the component within the Office of the Commissioner of Food and Drugs that is responsible for such determinations. Such office (referred to in this paragraph as the ``Office'') shall have appropriate scientific and medical expertise, and shall be headed by a director. (B) In carrying out this subsection, the Office shall, for each combination product, promptly assign an agency center with primary jurisdiction in accordance with paragraph (1) for the premarket review of such product. (C)(i) In carrying out this subsection, the Office shall help to ensure timely and effective premarket review that involves more than one agency center by coordinating such reviews, overseeing the timeliness of such reviews, and overseeing the alignment of feedback regarding such reviews. (ii) In order to ensure the timeliness and alignment of the premarket review of a combination product, the agency center with primary jurisdiction for the product, and the consulting agency center, shall be responsible to the Office with respect to the timeliness and alignment of the premarket review. (iii) The Office shall ensure that, with respect to a combination product, a designated person or persons in the primary agency center is the primary point or points of contact for the sponsor of such combination product. The Office shall also coordinate communications to and from any consulting center involved in such premarket review, if requested by such primary agency center or any such consulting center. Agency communications and commitments, to the extent consistent with other provisions of law and the requirements of all affected agency centers, from the primary agency center shall be considered as communication from the Secretary on behalf of all agency centers involved in the review. (iv) The Office shall, with respect to the premarket review of a combination product-- (I) ensure that any meeting between the Secretary and the sponsor of such product is attended by each agency center involved in the review, as appropriate; (II) ensure that each consulting agency center has completed its premarket review and provided the results of such review to the primary agency center in a timely manner; and (III) ensure that each consulting center follows the guidance described in clause (vi) and advises, as appropriate, on other relevant regulations, guidances, and policies. (v) In seeking agency action with respect to a combination product, the sponsor of such product-- (I) shall identify the product as a combination product; and (II) may request in writing the participation of representatives of the Office in meetings related to such combination product, or to have the Office otherwise engage on such regulatory matters concerning the combination product. (vi) Not later than 4 years after the date of enactment of the 21st Century Cures Act, and after a public comment period of not less than 60 calendar days, the Secretary shall issue a final guidance that describes-- (I) the structured process for managing pre- submission interactions with sponsors developing combination products; (II) the best practices for ensuring that the feedback in such pre-submission interactions represents the Agency's best advice based on the information provided during such pre-submission interactions; (III) the information that is required to be submitted with a meeting request under paragraph (2), how such meetings relate to other types of meetings in the Food and Drug Administration, and the form and content of any agreement reached through a meeting under such paragraph (2); (D) In carrying out this subsection, the Office shall ensure the consistency and appropriateness of postmarket regulation of like products subject to the same statutory requirements to the extent permitted by law. (E)(i) Any dispute regarding the timeliness of the premarket review of a combination product may be presented to the Office for resolution, unless the dispute is clearly premature. (ii) During the review process, any dispute regarding the substance of the premarket review may be presented to the Commissioner of Food and Drugs after first being considered by the agency center with primary jurisdiction of the premarket review, under the scientific dispute resolution procedures for such center. The Commissioner of Food and Drugs shall consult with the Director of the Office in resolving the substantive dispute. (F) The Secretary, acting through the Office, shall review each agreement, guidance, or practice of the Secretary that is specific to the assignment of combination products to agency centers and shall determine whether the agreement, guidance, or practice is consistent with the requirements of this subsection. In carrying out such review, the Secretary shall consult with stakeholders and the directors of the agency centers. After such consultation, the Secretary shall determine whether to continue in effect, modify, revise, or eliminate such agreement, guidance, or practice, and shall publish in the Federal Register a notice of the availability of such modified or revised agreement, guidance or practice. Nothing in this paragraph shall be construed as preventing the Secretary from following each agreement, guidance, or practice until continued, modified, revised, or eliminated. (G) Not later than one year after the date of the enactment of this paragraph (except with respect to clause (iv), beginning not later than one year after the date of the enactment of the 21st Century Cures Act) and annually thereafter, the Secretary shall report to the appropriate committees of Congress on the activities and impact of the Office. The report shall include provisions-- (i) describing the numbers and types of combination products under review and the timeliness in days of such assignments, reviews, and dispute resolutions; (ii) identifying the number of premarket reviews of such products that involved a consulting agency center; (iii) describing improvements in the consistency of postmarket regulation of combination products; and (iv) identifying the percentage of combination products for which a dispute resolution, with respect to premarket review, was requested by the combination product's sponsor. (H) Nothing in this paragraph shall be construed to limit the regulatory authority of any agency center. (9) As used in this subsection: (A) The term ``agency center'' means a center or alternative organizational component of the Food and Drug Administration. (B) The term ``biological product'' has the meaning given the term in section 351(i) of the Public Health Service Act (42 U.S.C. 262(i)). (C) The term ``market clearance'' includes-- (i) approval of an application under section 505, 507, 515, or 520(g); (ii) a finding of substantial equivalence under this subchapter; (iii) approval of a biologics license application under subsection (a) of section 351 of the Public Health Service Act (42 U.S.C. 262); and (iv) de novo classification under section 513(a)(1). (D) The terms ``premarket review'' and ``reviews'' include all activities of the Food and Drug Administration conducted prior to approval or clearance of an application, notification, or request for classification submitted under section 505, 510(k), 513(f)(2), 515, or 520 of this Act or under section 351 of the Public Health Service Act, including with respect to investigational use of the product. * * * * * * * [all]