Senate Legislative Counsel
Draft Copy of KEL24308 WWM

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Title: To amend titles XVIII and XIX of the Social Security Act to prevent and mitigate genericprescription drug shortages.

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Be it enacted by the Senate and House of Representatives of the United States of America inCongress assembled,

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SECTION 1. SHORT TITLE.

8This Act may be cited as the “Drug Shortage Prevention and Mitigation Act”.

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SEC. 2. MEDICARE DRUG SHORTAGE PREVENTION
AND MITIGATION PROGRAM.

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12Part E of title XVIII of the Social Security Act (42 U.S.C. 1395x et seq.) is amended byadding at the end the following new section:

914“SEC. 1899C. MEDICARE DRUG SHORTAGE
PREVENTION AND MITIGATION PROGRAM.

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“(a) Establishment.—Not later than [January 1, 2027], the Secretary shall establish a Drug
Shortage Prevention and Mitigation Program (in this section referred to as the ‘program’). Under
the program, the Secretary shall—

1819“(1) enter into agreements, as described in subsection (b), for purposes of carrying out
relevant activities under this section;

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“(2) determine amounts for the prevention and mitigation incentive payments describedin subsection (c) and make such payments to payment-eligible providers (as defined insubsection (b)(3)(A)), in accordance with the methodologies established under subsection
(c);

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“(3) issue technical guidance and provide outreach, education, and technical assistance torelevant providers of services and suppliers, as determined appropriate by the Secretary, tofacilitate participation in the program and compliance with program requirements, including
with respect to the standards and measures described in subsection (d); and2829“(4) carry out compliance monitoring, oversight, and enforcement activities, inaccordance with subsection (e).

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“(b) Program Participation and Design.—“(1) APPLICATION PROCESS FOR PROGRAM PARTICIPANTS.—

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“(A) IN GENERAL.—The Secretary shall establish an application process, pursuant to
subparagraph (B), for purposes of determining entities or consortia of entities, asapplicable, that are qualified to serve as program participants with respect to a given
program year.

3637“(B) APPLICATION PROCESS REQUIREMENTS.—Prior to a program year (in a form andmanner, and at a time, specified by the Secretary), the Secretary shall solicit and1
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1review applications from potential program participants.

2“(C) APPLICATION CONTENTS.—

3“(i) INITIAL APPLICATION.—

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“(I) IN GENERAL.—With respect to a given program year, an applicant that
did not serve as a program participant during the previous program year shallsubmit an initial application, using a standardized template developed andpublished by the Secretary.

89“(II) REQUIREMENTS.—Such application shall include, as determined
appropriate by the Secretary—1011“(aa) a description of each applicable generic for which suchapplicant intends to participate in such program;

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“(bb) a description of any advanced standards described undersubsection (d)(4) or buffer inventory standards described undersubsection (d)(5) that such applicant can meet for each such generic;1516“(cc) a description supported by documentation and evidence of how
such applicant is capable of completing program functions; and1718“(dd) any other information determined appropriate by the Secretaryfor purposes of carrying out the program.

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“(ii) ABRIDGED APPLICATION FOR SUBSEQUENT YEARS.—With respect to a given
program year, for an applicant serving as a program participant for the year prior
to such program year, such applicant may submit an abridged application,
pursuant to a standardized template developed and published by the Secretary,which shall include changes or additions to the information submitted by suchapplicant in such applicant’s initial application or previous abridged applications,in addition to any other information and documentation determined necessary andappropriate by the Secretary with respect to such subsequent program year.

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“(iii) ATTESTATION.—The applications described in clauses (i) and (ii) shall
include an attestation from such applicant to the Secretary that any information
submitted in such application is true, complete, and factual to the best of theknowledge of such applicant.

31“(2) PROGRAM PARTICIPANTS.—

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“(A) PROGRAM PARTICIPANT DEFINED.—For purposes of this section, the term‘program participant’ means, with respect to a given program year, an entity, or
consortium of entities, that—3536“(i) submits an application under paragraph (1)(C), with respect to a given
program year;3738“(ii) enters into a Program Participation Agreement under subparagraph (C) andis listed by the Secretary under subparagraph (D); and39
40“(iii) complies with all requirements of such Program Participation Agreement
and any other requirements determined necessary and appropriate by the2
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1Secretary to carry out the program under this section.

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“(B) DETERMINATION AND NOTIFICATION.—Based on the applications submitted
under paragraph (1), the Secretary shall determine whether each applicant for a given
program year meets the requirements to be a program participant for such year. The
Secretary shall notify each such applicant of such determination and offer a Program
Participation Agreement, as described in subparagraph (C), for such program year.

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“(C) PROGRAM PARTICIPATION AGREEMENT.—From the time of an offer made undersubparagraph (B) with respect to a given program year, an applicant shall have [15days] to enter into a Program Participation Agreement, under which such applicant
shall agree to the following terms and conditions (in a form and manner, and at a time,
specified by the Secretary):

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“(i) Each program participant shall provide to the Secretary, by not later than
[October 1, 2026, in the case of a participant with respect to the first programyear] and by October 1 of each subsequent year, a list of each payment-eligible
provider that has entered into a Program Provider Agreement with suchparticipant for the next program year and a list of each applicable generic subject
to such agreement for such program year.

1819“(ii) For each Program Provider Agreement with a payment-eligible provider
specified under clause (i), such program participant shall—

2021“(I) provide timely notification to the Secretary of any updates to theinformation provided pursuant to clause (i); and

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“(II) provide timely notification to the Secretary of any violation of theterms of such agreement by such provider, including a description of any
corrective actions undertaken by such participant or provider to remedy orotherwise address such violation.

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“(iii) Such program participant shall comply with periodic audits and otheroversight and enforcement activities and requirements, as described in subsection(e).
“(iv) Such program participant shall provide the Secretary with—

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“(I) a list of manufacturers with which such participant has entered into a
Manufacturer Reliability Agreement (as described in paragraph (4)(C));32
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each such manufacturer; and

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“(III) timely notification of manufacturer violations of terms or conditionsof any such Manufacturer Reliability Agreement, as well as a summary ofcorrective actions undertaken by any such manufacturer and by suchparticipant to remedy any such violations.

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“(v) Such program participant shall attest that any information submitted to apayment-eligible provider, a manufacturer, or the Secretary related to the programis, to the best of its knowledge, true, complete, and factual.

41“(vi) Such program participant shall comply with all relevant reporting and3
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other programmatic requirements under this section and provide any additional
information that the Secretary determines is necessary to calculate and makeprevention and mitigation incentive payments to providers, pursuant to subsection
(c).

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“(vii) Such program participant shall comply with the processes for agreement
modifications, suspensions, and terminations described under paragraph (5)(C).

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9“(viii) Such program participant shall attest that any information submitted
pursuant to [the Program Participant Agreement/this section] is true, complete,and factual to the best of the knowledge of such participant.

1011“(ix) Any other terms and conditions determined appropriate by the Secretaryfor purposes of carrying out the program under this section.

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“(D) PROGRAM PARTICIPANT LIST.—Not later than [January 1, 2026], and by January
1 of each subsequent year, the Secretary shall publish, maintain, and update, asapplicable, on a publicly available internet website of the Centers for Medicare &Medicaid Services, a list of each program participant that has entered a Program
Participation Agreement with respect to at least 1 applicable generic for a program
year. Such list shall be integrated and accessible with respect to other program
information published by the Secretary pursuant to subsection (e) and shall include, foreach such participant—2021“(i) the name, relevant contact information, and date of initial entrance into a
Program Participation Agreement for such participant;2223“(ii) a list of all applicable generics, identified by the generic or non-proprietary
name, covered by the agreement specified under clause (i);

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“(iii) for each such generic, a list of all advanced and buffer inventory
standards, as described under subsection (d), that such agreement is expected tomeet for such program year; and2728“(iv) any other information determined appropriate by the Secretary for
purposes of carrying out the program under this section.

29“(3) PAYMENT-ELIGIBLE PROVIDERS.—

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“(A) PAYMENT-ELIGIBLE PROVIDER DEFINED.—For purposes of this section, the term
‘payment-eligible provider’ means, with respect to a given program year, a provider ofservices (as defined in section 1861(u)) or supplier (as defined in section 1861(d))
that—

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“(i) furnishes items and services inclusive of applicable generics tobeneficiaries under this title as part of the ordinary course of items and services
furnished by such provider of services or supplier;

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“(ii) enters into, and has in effect, at least 1 Program Provider Agreement witha program participant under this section (or, in the case of a provider of services
or supplier electing to participate directly in the program pursuant to
subparagraph (C), has in effect a Direct Program Participation Agreement with
the Secretary); and4
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Draft Copy of KEL24308 WWM“(iii) complies with—123“(I) all requirements of such Program Provider Agreement (or Direct
Program Participation Agreement, as applicable);456“(II) the reporting requirements described in subparagraph (F),certification requirements described in subparagraph (G), and attestation
requirements described in subparagraph (H); and

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8“(III) any other requirements determined necessary and appropriate by the
Secretary for purposes of carrying out the program under this section.

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“(B) PROGRAM PROVIDER AGREEMENTS.—With respect to a given program year, inorder to be eligible to receive any payments specified under subsection (c), a paymenteligible provider shall, unless electing to participate directly in the program pursuant to
subparagraph (C), enter into at least 1 Program Provider Agreement with a program
participant for at least 1 applicable generic for such program year (at a time, and in aform and manner, specified by the Secretary). Such payment-eligible provider andprogram participant shall comply with all terms under such Program Provider
Agreement, which shall include the following:

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“(i) Such agreement shall specify a list of each applicable generic covered bysuch agreement for which such provider intends to meet all core standards and, asapplicable, any advanced or buffer inventory standards specified under subsection(d) for such program year.

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“(ii) Such program participant or provider shall comply with the processes foragreement modifications, suspensions, and terminations described underparagraph (5)(C).

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25“(iii) Such provider shall comply with any audits or other enforcement oroversight activities undertaken pursuant to subsection (e).

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“(iv) Such provider shall comply with reporting and recordkeeping
requirements as described in subparagraph (G) in addition to reporting any otherinformation required by the Secretary for purposes of determining eligibility or
amounts for any payments under subsection (c) and for monitoring compliance.

3031“(v) Such program participant shall provide the following information andnotifications to such provider, to the extent applicable:

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“(I) A list of manufacturers with which such participant has entered into a
Manufacturer Reliability Agreement (as described in paragraph (4)(C)) withrespect to an applicable generic covered by any Program Provider
Agreement in effect between such participant and such provider.

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“(II) Timely notification of manufacturer violations of terms or conditionsof any such Manufacturer Reliability Agreement, as well as a summary ofcorrective actions undertaken by any such manufacturer and by suchparticipant to remedy any such violations.

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41“(III) The summary information described under paragraph (4)(C)(v) for
each manufacturer listed under subclause (I).
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3“(IV) Advance notice of any modification or termination of such Program
Participation Agreement for such participant with the Secretary for suchprogram year.

456“(V) Timely notification of any violations by such participant of such
Program Participation Agreement, as identified by the Secretary, and any
corrective actions undertaken by such participant to remedy such violations.

789“(VI) Timely notification of any advanced notice and the quarterly reports
related to on-time deliveries provided by primary and secondary suppliers
pursuant to subparagraphs (B)(v) and (C)(vii) of subsection (d)(3).
“(vi) Such agreement shall not—

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“(I) prohibit, or have the effect of prohibiting, such provider from entering
into contracts or agreements with other program participants with respect toapplicable generics not listed under clause (i); or

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“(II) require such provider to enter into an exclusive contract or agreementwith such program participant with respect to such provider’s participation in
the program.

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“(vii) Such provider and such program participant shall certify that all
information submitted between the parties to such agreement or to the Secretarypursuant to such agreement, is true, complete, and factual, to the best of theknowledge of such provider or program participant.

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22“(viii) Any other terms and conditions determined necessary and appropriate by
the Secretary for purposes of carrying out the program under this section.

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“(C) DIRECT PROGRAM PARTICIPATION AGREEMENTS.—“(i) IN GENERAL.—A payment-eligible provider may, as an alternative to or in
addition to entering into a Program Provider Agreement with a program
participant—

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“(I) apply to participate directly in the program through the application
process specified under paragraph (1), with modifications and adaptations, as
needed, to collect the information necessary for the Secretary to make adetermination with respect to whether such provider may participate directlyin the program; and

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“(II) subject to the determination under subclause (I), enter into a Direct
Program Participation Agreement with the Secretary for purposes ofparticipating in the program.

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“(ii) DIRECT PROGRAM PARTICIPATION AGREEMENT.—Such Direct Program
Participation Agreement shall include all relevant and applicable components andinformation specified under a Program Participation Agreement described inparagraph (2)(C) and under a Program Provider Agreement described insubparagraph (B) of this paragraph, modified and adapted as determined
necessary and appropriate by the Secretary to carry out the purposes of the
program.
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“(D) RULE OF CONSTRUCTION.—Nothing in this paragraph shall be construed as
requiring a payment-eligible provider to participate in the program through a single
Program Provider Agreement or Direct Program Participant Agreement with respect toall applicable generics for which such provider elects to participate in the program.

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“(E) INITIATION OF PROGRAM PROVIDER AGREEMENT.—A payment-eligible provider
shall enter into a Program Provider Agreement before October 1 in the year before therelevant program year. Where such agreement is terminated or suspended, suchpayment-eligible provider may enter into a new Program Provider Agreement for suchprogram year, subject to timely notification requirements as determined by the
Secretary.

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“(F) REPORTING AND RECORDKEEPING REQUIREMENTS.—Pursuant to the agreements
described in subparagraphs (B) and (C), payment-eligible providers shall submit, atleast annually, to the program participant with which such provider has entered into a
Program Provider Agreement (as applicable) and to the Secretary (in a form andmanner, and at a time, specified by the Secretary) data and information, with respect toeach applicable generic for which such provider has entered into such agreement, on—

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“(i) the total committed volume by such provider for such applicable genericfor the relevant program year pursuant to a contract or agreement with a primary
supplier under subsection (d)(3)(B) and a secondary supplier under subsection(d)(3)(C);

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“(ii) the total number of units of such applicable generic that such provider
purchased from any manufacturer or other entity during the relevant program
year;

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“(iii) the number of units of such applicable generic broken down by purchasesfrom primary suppliers, secondary suppliers, and other manufacturers and entities
during the relevant program year;

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administered during the relevant program year;]

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“(v) total buffer inventory for such applicable generic such provider agreed topurchase pursuant to a contract or agreement under subsection (d)(3)(B) for the
relevant program year expressed as a number of units, as applicable;

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“(vi) the amount under clause (v), expressed as a number of months’ supply
based on the annual inventory amount reported by such provider under clause (ii),
as applicable;

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“(viii) certifications by such provider, as applicable, with respect to any offcontract purchases of such applicable generic reported under clause (vii) that met
the terms of the exception specified under subsection (d)(3)(B)(ii)(I) during therelevant program year and the number of units of such applicable genericpurchased pursuant to such certification; and42“(ix) for the first year of program participation, reasonable estimates of total
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standard inventory of such applicable generic based on purchases by suchprovider from any manufacturer during previous calendar years, based on amethodology and documentation of past purchases, as determined by the
Secretary.

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“(G) PRICING STABILITY CERTIFICATIONS.—A payment-eligible provider shallsubmit an annual Pricing Stability Certification to the Secretary, in a time, form andmanner determined by the Secretary, certifying that such provider will not seek or
accept any additional rebates, discounts, or other price concessions from applicablemanufacturers beyond any rebates, discounts, or other price concessions agreed to incontracts under subparagraph (B)(iii) or (C)(v) of subsection (d)(3) on units ofapplicable generics for which such provider receives payments under subsection (c),including discounts under section 340B of the Public Health Service Act.

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“(H) ATTESTATIONS OF COMPLIANCE.—A payment-eligible provider shall submit
attestations to the Secretary, in a time, form and manner determined by the Secretary,that such provider is compliant with any standards under paragraphs (2) through (5) of
subsection (d) for which such provider intends to receive an incentive payment undersubsection (c) with respect to an applicable generic for the program year.

18“(4) APPLICABLE GENERIC MANUFACTURERS.—

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“(A) APPLICABLE GENERIC MANUFACTURER DEFINED.—For purposes of this section,
the term ‘applicable generic manufacturer’ means a manufacturer that, with respect toa given program year—2223“(i) manufactures at least 1 applicable generic, as defined in subparagraph (B),during such program year;

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“(ii) has in effect a Manufacturer Reliability Agreement, as described insubparagraph (C), with at least 1 program participant or payment-eligible provider
during such program year;

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“(iii) adheres to the terms of all such Manufacturer Reliability Agreements andmeets any other requirements determined necessary and appropriate by the
Secretary to carry out the program under this section; and

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“(iv) reports an average sales price for any applicable generic manufactured bysuch manufacturer in accordance with paragraphs (1) through (3) of section
1847A(c), subject to all oversight and enforcement provisions applicable to suchsection, by no later than [January 1, 2025] for generics approved and marketed by
the date of enactment of this section and at a time determined by the Secretary for
generics approved and marketed thereafter.

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“(B) APPLICABLE GENERIC DEFINED.—“(i) IN GENERAL.—For purposes of this section, the term ‘applicable generic’means a multiple source drug (as defined in section 1847A(c)(6)(C)(i)) that is
manufactured by an applicable generic manufacturer and is furnished under partA or part B of this title (or, in the case of a multiple source drug approved or
licensed by the Food and Drug Administration for at least one pediatricindication, is furnished under title XIX of this Act) and—8
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Draft Copy of KEL24308 WWM“(I) is not a private label drug unless—

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“(aa) the entity marketing or distributing such private label drug
discloses to program participants and payment-eligible providers theprice at which such entity purchased such drug from the manufacturer
or entity affiliated with such manufacturer;

678“(bb) the price charged by such entity to any payment-eligible
provider for such drug is no more than [10] percent higher than thepurchase price described in item (aa); and

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“(cc) the contract or agreement for such private label drug between
any program participant, affiliate, or provider and the manufacturer ofsuch drug complies with the core standards described in subparagraph(B) or (C) of subsection (d)(3), as applicable;

1314“(II) for program years beginning with [2027], is an injectable or infused
drug [that is not usually self-administered]; and[“(III) for program years beginning with [2030], is either—]15[“(aa) a drug described in subclause (II); or]16[“(bb) a drug determined by the Secretary, in consultation with theCommissioner of the Food and Drug Administration and relevant
stakeholders, as appropriate, to be at a heightened risk of supply
disruption or shortage (as defined under section 506C(h)(2) of theFederal Food, Drug, and Cosmetic Act.]

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[“(ii) FACTORS FOR CONSIDERATION.—In making a determination under clause(i)(III)(bb), the Secretary, in consultation with the Commissioner, shall consider
the following factors:]

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[“(I) The inclusion of such drug on the drug shortage list established under
section 506E(a) of the Federal Food, Drug, and Cosmetic Act multiple times
in recent years or for a substantial duration of time during such years.]

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[“(II) Manufacturer notifications related to such drug made pursuant tosection 506C(a) of the Federal Food, Drug, and Cosmetic Act in recent
months or years.]

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Secretary.]

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“(iii) AGGREGATION.—For purposes of this section, the Secretary shall treat allstrengths, dosage forms, package sizes, and package types of a multiple-source
drug with the same established (generic) name, in the aggregate, as a single
applicable generic.

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“(C) MANUFACTURER RELIABILITY AGREEMENTS.—Each applicable genericmanufacturer participating in the program under this section shall, with respect to any
volume of any applicable generic supplied by such manufacturer pursuant to suchprogram, enter into and comply with the terms of a Manufacturer Reliability
Agreement with each program participant (and, in the case of a payment-eligible
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provider participation through a Direct Program Participation Agreement, each suchprovider, as applicable). For purposes only of this subparagraph, ‘program participant’,as used in this subparagraph, refers to both program participants (as described inparagraph (2)) and payment-eligible providers electing to enter into Direct Program
Participation Agreements. The terms and conditions of any Manufacturer Reliability
Agreement shall include the following:

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“(i) Any manufacturer entering such agreement shall provide a description tosuch participant, upon entering into such agreement, of how and why suchmanufacturer meets or has the capacity and capabilities needed to enable
providers to meet, as applicable, relevant standards established under subsection(d) with respect to each applicable generic covered by such agreement, as
demonstrated through the provision (to any program participant subject to suchagreement) of supporting information, evidence, and documentation determined
necessary and appropriate by the Secretary.

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“(ii) Such manufacturer shall provide to such participant, as a condition forentering such agreement, the relevant supply chain, compliance, and quality
information specified under subparagraph (D) with respect to each applicablegeneric subject to such agreement.

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“(iii) Such manufacturer shall provide timely notification to such participant of
any updates or changes in the relevant supply chain, compliance, and quality
information described in clause (ii) with respect to each applicable genericcovered under such agreement, including in the case where the Secretary modifies
requirements for such information and such modifications require updates toremain in compliance.

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“(iv) Such manufacturer shall provide information and timely updates related toany drug product quality initiatives identified by the Secretary for such applicablegeneric in which such manufacturer has engaged or is currently engaged,
including any documentation, ratings, or other materials relevant to assessing thescope and nature of the engagement of such manufacturer in such initiative forsuch generic.

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“(v) With respect to such information and updates specified under clauses (ii),(iii) and (iv), such manufacturer shall provide summary information to theprogram participant that such program participant can share with payment-eligible
providers, in accordance with a standardized template developed by the Secretary,
in a form and manner, and at a time, specified by the Secretary and in accordancewith appropriate protections for proprietary information established by the
Secretary.

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“(vi) With respect to each applicable generic subject to such agreement, suchmanufacturer shall attest that such manufacturer shall comply with legal andregulatory requirements, to the extent applicable to such generics, related to
redundancy risk management plans, as described under section 506C(j) of theFederal Food, Drug, and Cosmetic Act, current Good Manufacturing Practices,and notification requirements under section 506C(a) of the Federal Food, Drug,and Cosmetic Act.
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“(vii) Such manufacturer shall provide timely notification to such program
participant under such agreement and to the Secretary of any violation by suchmanufacturer of any such agreement, or of an alleged violation of such agreement
by such participant or by a payment-eligible provider covered under suchagreement, along with supporting documentation.

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7“(viii) Such manufacturer shall comply with periodic audits and other oversightand enforcement activities and requirements, as described in subsection (e).

8910“(ix) Such program participant and manufacturer shall comply with theprocesses for agreement modifications, suspensions, and terminations describedunder paragraph (5)(C).

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“(x) With respect to any information transmitted or otherwise submitted
pursuant to this subparagraph, such manufacturer shall certify that all suchinformation is accurate, complete, and factual, to the best of the knowledge,
belief, and understanding of such manufacturer.

1516“(xi) Any other requirements determined necessary and appropriate by the
Secretary.

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“(D) INTERAGENCY COORDINATION.—The Secretary shall consult and coordinate
with the Administrator and the Commissioner to carry out the following activities andtake the following actions:

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“(i) DEVELOPING STANDARDS FOR SUPPLY CHAIN, COMPLIANCE, AND QUALITY
INFORMATION.—The Secretary shall consult with the Commissioner, as well aswith stakeholders, as applicable, in advance of any applications or submissions
under this section, to develop, establish, and publish explicit standards for the
supply chain, compliance, and quality information submitted by applicablegeneric manufacturers pursuant to subparagraph (C)(ii). Such standards shallensure, as determined appropriate by the Secretary, the information submitted
pursuant to this subparagraph (accounting for redactions or revisions related toproprietary[, confidential, or commercially sensitive information, or national
security interests)] includes the following:

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“(I) Information related to compliance, inspection findings (as reflected on
FDA Form 483 or a successor document), enforcement action and preenforcement (or non-enforcement) action history related to suchmanufacturer and such applicable generic, including with respect to drug
establishments owned or utilized by such manufacturer, as well as otherestablishments and facilities with which such manufacturer has contracted orentered into a comparable business arrangement related to the sourcing,supply, manufacture, preparation, propagation, compounding, or processingof such drug (including any ingredients or excipients for such applicablegeneric) under title 21 of the United States Code, or any corresponding
regulations.

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“(II)(aa) Geographic information, subject to item (bb), to the extent thatany disclosure of such information does not result in the disclosure of
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store finished dosage forms of applicable generics or actively engage in, areexpected to engage in, or previously engaged in any of the processes
described in subclause (I) with respect to such applicable generic, inclusiveof any active pharmaceutical ingredients, other generic drug components, or
containers for such generic, as applicable.

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“(bb) The geographic information required to be submitted by anapplicable generic manufacturer to a program participant under thissubclause shall be sufficiently detailed for such participant to differentiate
between sources, suppliers, and establishments, including for active
pharmaceutical ingredients, for the primary supplier of such generic for suchprovider, relative to any secondary supplier with which such participant may
elect to contract for such generic and for such participant to identify whether
an establishment is located in a region of interest (as defined in section
510(h)(7) of the Federal Food, Drug, and Cosmetic Act).

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“(III) A list of all entities with a contract, or other comparable
arrangement, in effect with such manufacturer with respect to storage offinished dosage forms or any of the processes described in subclause (I), as
applicable, in relation to such applicable generic.

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“(IV) To the extent applicable, any redundancy risk management plansubmitted by such manufacturer for such generic pursuant to section 506C(j)of the Federal Food, Drug, and Cosmetic Act within the most recent 5-year
period.

232425“(V) A list of notifications submitted by such manufacturer for suchgeneric pursuant to section 506C(a) of the Federal Food, Drug, and Cosmetic
Act.

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“(VI) A list of all instances and durations for which such generic has beenplaced on the drug shortage list established under section 506E(a) of theFederal Food, Drug, and Cosmetic Act over the course of the most recent 5year period, along with an explanation of the underlying cause of any suchlisting and any corrective actions undertaken by such manufacturer toaddress the relevant disruption or shortage risk.

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“(VII) Any other information the Secretary determines appropriate to help
program participants and providers assess manufacturer quality andreliability.

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“(ii) INFORMATION SHARING AND EXCHANGE.—The Secretary shall, as
determined appropriate, take actions to facilitate and expedite the exchange of
relevant information among the Department of Health and Human Services, theCenters for Medicare & Medicaid Services, and the Food and Drug
Administration, including by—“(I) providing for routine updates and notifications by the Secretary to theCommissioner with respect to relevant components of this program,including upon identification of any violations of any requirements under
this section;

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“(II) expanding upon or enhancing, to the extent appropriate andpracticable, information provided by the Secretary to the Administrator
pursuant to section 506E(d) of the Federal Food, Drug, and Cosmetic Act
with respect to drugs currently in shortage;

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“(III) providing for the prompt and routine provision of relevant
information by the Secretary to the Administrator, including with respect tonotifications made pursuant to subsection (a) of section 506C of the Federal
Food, Drug, and Cosmetic Act, along with plans submitted pursuant tosubsection (j) of such section, and compliance history for manufacturers andfirms with which such manufacturers contract under the Federal Food, Drug,and Cosmetic Act; and

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“(IV) consulting at least annually on potential regulatory or subregulatory
modifications to such program, and holding periodic, joint public meetingson prevention and mitigation of drug shortages.

15“(5) CLARIFICATIONS, STANDARDS, AND PROCESSES FOR AGREEMENTS.—

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“(A) CLARIFICATION ON NATURE OF AGREEMENTS.—The agreements described inparagraphs (2)(C), (3)(B), (3)(C)(ii), and (4)(C) shall have the force of a binding
contract.

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“(B) DURATION OF AGREEMENTS.—The Secretary shall establish a process to allow
the parties to agreements described in paragraphs (2)(C), (3)(B), (3)(C)(ii), and (4)(C)to enter into such agreements for a term of multiple program years. Under suchprocess, the Secretary shall specify how such agreements will be updated based on thecontents of abridged applications under paragraph (1)(C)(ii) and modifications,suspensions, and terminations under subparagraph (C), as applicable.

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“(C) MODIFICATIONS, SUSPENSIONS, AND TERMINATIONS.—The Secretary shallestablish processes with respect to modifications, suspensions, and terminations of theagreements described in paragraphs (2)(C), (3)(B), (3)(C)(ii), and (4)(C). Suchprocesses shall include the following:

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“(i) Processes the parties to such agreements shall follow in order to makematerial modifications to such agreements, including requirements to provide
advance notice of intent to make such material modifications to other parties tothe agreement and to the Secretary in a form and manner, and at a time, specified
by the Secretary.

3435“(ii) Processes the parties to such agreements shall follow in order tovoluntarily terminate an agreement, including—

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“(I) requirements to provide advance notice of intent to voluntarily
terminate such agreement to other parties to the agreement and to theSecretary in a form and manner, and at a time, specified by the Secretary;
and

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“(II) as determined necessary by the Secretary, requirements for the party
electing to terminate such agreement to develop a transition plan outlining
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the agreement.

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including—

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“(I) requirements for the Secretary to provide a notice of noncomplianceto the party in violation of such agreement identifying any such violation andspecifying a timeframe for remedying such violation and providing
notification to the Secretary and other parties to the agreement about theactions taken to remedy such violation;

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“(II) in the case where such party fails to remedy a violation and provide
notification within the timeframe specified under subclause (I), requirementsthat such party submit to the Secretary and other parties to the agreement, asapplicable, a corrective action plan;

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“(III) in the case where such party fails to submit a corrective action planas specified under subclause (II), or where the Secretary determines suchparty has failed to take adequate steps under such a plan, the Secretary may
terminate or suspend all or part of such agreement in a form and manner, andat a time, specified by the Secretary;

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“(IV) in the case where the Secretary determines such party has engaged
in flagrant or repeated violations of such agreement, the Secretary may
terminate or suspend all or part of such agreement in a form and manner, andat a time, specified by the Secretary, without first providing a timeframe for
remedying such violation, as described in subclause (I), or requiring acorrective action plan, as described in subclause (II); and

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“(V) in the case of flagrant or repeated violations as described undersubclause (IV), the Secretary may also require such party to submit andcomply with a remediation plan in order for such party to resume program
participation.

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“(iv) Processes to hold payment-eligible providers harmless for a period of notlonger than [6 months] with respect to prevention and mitigation incentive
payments received under subsection (c) where a modification, termination, or
suspension described under this subparagraph—3334“(I) is likely to reduce the amount of payment such provider receives
under subsection (c); and“(II) was not caused by the actions of such provider.

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“(D) SIGNIFICANT HARDSHIP.—With respect to the terms of agreements establishedunder paragraphs (2)(C), (3)(B), (3)(C)(ii), and (4)(C), the Secretary may grant
temporary waivers or modifications of such terms in the event of significant hardshipinterfering with the ability of a relevant entity to comply with the requirements under
this section, including a natural disaster, public health emergency, bankruptcy, or otherunique or unexpected catastrophe or other similar situation.
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“(A) provide education and outreach to prospective payment-eligible providers,program participants, and applicable generic manufacturers, as applicable, to raiseawareness, understanding, and clarity with respect to the program established under
this section;

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“(B) provide technical assistance to providers of services and suppliers, potential
program participants, and manufacturers, as applicable, with respect to entering into
agreements specified under this subsection and complying with all terms of suchagreements, including with respect to the standards specified under subsection (d); and

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“(C) publish and update, on an ongoing basis, as appropriate, materials using
existing educational channels to provide a comprehensive understanding of eachcomponent of the program.

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“(c) Prevention and Mitigation Incentive Payments.—“(1) IN GENERAL.—Beginning with the first program year of the program establishedunder this section, the Secretary shall—

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“(A) calculate and make, on a quarterly basis, lump-sum prevention and mitigation
incentive payments related to core standards and advanced standards measures, asapplicable, to payment-eligible providers, in accordance with paragraph (2);1920“(B) as applicable, calculate and make additional annual lump-sum payments related
to buffer inventory standards, in accordance with paragraph (3); and2122“(C) as applicable, calculate and make bonus payments related to outcomesmeasures, in accordance with paragraph (4).

2324“(2) PAYMENTS RELATED TO CORE STANDARDS AND ADVANCED STANDARDS.—“(A) CALCULATION OF PAYMENTS FOR A PROGRAM QUARTER.—

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“(i) IN GENERAL.—With respect to each quarter of a program year during whicha payment-eligible provider meets each core standard specified in subsection(d)(3) with respect to an applicable generic under the program, the Secretary shallcalculate a prevention and mitigation incentive payment for such provider forsuch quarter in an amount equal to—3031“(I) the total committed volume for the quarter for such applicable genericfor such provider, multiplied by

3233“(II) the payment factor applicable to such generic for such provider, as
specified under clause (ii).

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“(ii) PAYMENT FACTOR.—For purposes of this subparagraph, with respect to apayment-eligible provider and applicable generic for a quarter as described inclause (i), the payment factor shall be an amount equal to—3738“(I) the applicable incentive percentage for such generic, as described inclause (iii)(I), multiplied by

3940“(II) the applicable pricing input for such generic for such program year,
as described in clause (iii)(II).
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“(I) APPLICABLE INCENTIVE PERCENTAGE.—With respect to an applicablegeneric subject to the program for a payment-eligible provider, for purposesof calculating the payment factor under clause (ii) for a program quarter, theapplicable percentage shall be a percentage equal to the sum of—

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“(aa) where such provider has met all core standards under subsection(d)(3) with respect to such generic, the base applicable incentive
percentage that corresponds with such generic under the methodology
described in subparagraph (B)(ii); and

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“(bb) where such provider has met at least one advanced standard
under subsection (d)(4) with respect to such generic an additional [two]percentage points for each such advanced standard met by such provider
with respect to such generic.

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“(II) APPLICABLE PRICING INPUT.—With respect to an applicable generic,for purposes of calculating the payment factor under clause (ii), theapplicable pricing input shall be—

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“(aa) for the first quarter of program year [2027], the average of thequarterly average sales prices for such generic described in section
1847A(c) for the most recent 4 quarters for which such data is available(or, if such data is available for such generic for fewer than 4 fullquarters, the average of the quarterly average sales prices for suchgeneric for any quarters for which such data is available), subject to theaggregation rule specified under subclause (III) and the special rule
specified under subclause (IV), as applicable;

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“(bb) for the second program quarter, the amount specified underitem (aa), increased (or reduced, if applicable) based on the percentage
by which the Producer Price Index for Pharmaceuticals (or successor
index), as computed by the Bureau of Labor Statistics, increased (ordecreased, if applicable) over the period between the end of the last of
the four quarters described under item (aa) and the most recent date forwhich data for such index is available; and

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“(cc) for each subsequent program quarter, the amount determined
for the previous quarter, increased (or reduced, if applicable) based on
the percentage change in the index specified under item (bb) between
the date used to adjust the amount for such previous quarter based onsuch index and the most recent date for which data for such index isavailable.

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“(III) AGGREGATION RULE FOR CALCULATIONS FOR APPLICABLE GENERICS
WITH MULTIPLE AVERAGE SALES PRICES.—For purposes of the calculations
specified under subclause (II)(aa), with respect to an applicable generic thathas multiple average sales prices for a given quarter, the Secretary shallcalculate the volume-weighted average of all such average sales prices forsuch generic for each such quarter.
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“(IV) SPECIAL RULE FOR CERTAIN APPLICABLE GENERICS WITH
INSUFFICIENT AVERAGE SALES PRICE DATA.—With respect to an applicablegeneric for which insufficient average sales price data is available for the
Secretary to make the calculations under subclause (II), the Secretary shallestablish an alternative methodology (or multiple alternative methodologies
to account for different circumstances) for determining the applicable pricing
input for such generic for each program quarter during which such generic is
an applicable generic.

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“(B) METHODOLOGY FOR ASSIGNING BASE APPLICABLE INCENTIVE PERCENTAGES TOAPPLICABLE GENERICS FOR MEETING CORE STANDARDS.—With respect to an applicablegeneric for a program quarter, the Secretary shall, based on the applicable pricing input
for such generic for such quarter, assign such generic to a base applicable incentive
percentage for such quarter, for purposes of calculating the percentage amount undersubparagraph (A)(iii)(I)(aa) (notwithstanding any additional percentage points formeeting any advanced standard), in accordance with the following methodology:

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“(i) The Secretary shall establish a series of cost bands aggregating assignmentof applicable generics with applicable pricing inputs within the same range ofcosts, such that each band corresponds with a different base applicable incentive
percentage, with higher percentages for cost bands with lower pricing inputs,
subject to clause (iii).

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“(ii) No base applicable incentive percentage assigned to an applicable genericshall be lower than [5 percent] or higher than [25 percent], except that a uniquebase applicable incentive percentage under clause (iii) may exceed or be lower
than these thresholds.

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“(iii) The Secretary may assign an applicable generic to a unique baseapplicable incentive percentage that is higher or lower than the base applicable
incentive percentage under the cost band to which such generic would otherwise
be assigned under clause (i) under the following circumstances:2930“(I) When such generic is subject to persistent shortages or threat ofshortage over a period of multiple years, as determined by the Secretary.

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“(II) When such generic is commonly used by providers of services or
suppliers to treat the same disease or condition for similarly situated patientsas another applicable generic that references a different listed drug under anapplication approved under section 505(j) of the Federal Food, Drug, andCosmetic Act, as determined by the Secretary, and such generics would
otherwise be subject to different cost bands under clause (i).

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“(III) When the Secretary determines that a base applicable incentive
percentage of [5] percent provides an excessive incentive for providers toachieve the standards described under subsection (d).

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“(IV) Any other circumstances the Secretary determines appropriate toprevent and mitigate shortages or prevent abuse of payment incentives under
this subsection.
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unique base applicable incentive percentages for applicable generics, as
determined appropriate by the Secretary, including with respect to any applicablepricing input bands specified under clause (ii), along with the pricing input band
to which any applicable generic is assigned.

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“(v) Beginning with respect to the first calendar quarter of [2026], the Secretaryshall publish (and update, at least once each calendar quarter), on a publicly
available internet website of the Centers for Medicare & Medicaid Services, theapplicable pricing input and base applicable incentive percentage or unique baseapplicable incentive percentage for each applicable generic, as updated at least
once every calendar quarter.

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“(3) PAYMENTS RELATED TO BUFFER INVENTORY STANDARDS.—“(A) CALCULATION OF PAYMENTS FOR A PROGRAM YEAR.—Beginning with program
year [2029], with respect to each program year during which a payment-eligible
provider meets a buffer inventory standard specified in subsection (d)(5) with respect
to an applicable generic under the program, the Secretary shall calculate and provide
an additional lump-sum payment for such provider for such program year in an amountequal to—1819“(i) the total buffer inventory for such generic, up to a 6-month supply,
multiplied by

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“(ii)(I) [150 percent of] the average applicable incentive percentage or the
average unique applicable incentive percentage for such program year as
described in paragraph (2)(A)(iii)(I), as applicable, multiplied by

2324“(II) the average applicable pricing input for such generic for such program
year described in paragraph (2)(A)(iii)(II).

25“(4) PAYMENTS RELATED TO OUTCOME MEASURES.—

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“(A) IN GENERAL.—Beginning with program year [2029], for purposes ofcalculating and making payments to payment-eligible providers based on performanceon outcome measures relative to their peer groups under the outcomes measures
specified under subsection (d)(6), the Secretary shall allocate the funding available foreach such year under subparagraph (B) in accordance with a methodology developedby the Secretary that rewards at least the [top 30 percent] of highest ranked providers
across all the outcome measures listed in subsection (d)(6)(B) in aggregate.

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“(B) OUTCOME MEASURE FUNDING.—The funding available, with respect to eachprogram year, for purposes of providing payments for the purposes specified undersubparagraph (A), shall be—36“(i) [$__; and]37“(ii) [$__].

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“(5) AUTHORITY TO RECONCILE AND ADJUST PAYMENTS.—Based on the data reported
under subsection (b)(3)(F) and using a methodology established by the Secretary, theSecretary shall reconcile or adjust payments under this subsection for a payment-eligible
provider to account for cases where—18
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3“(A) off-contract purchases or other factors reduce volume purchased from primaryor secondary suppliers below the total committed volume of an applicable generic forsuch provider during the relevant program year;456“(B) off-contract purchases or other factors reduce volume purchased from primaryor secondary suppliers below total buffer inventory of an applicable generic for suchprovider during the relevant program year; and78“(C) an advanced standard is met by either the primary supplier or secondary
supplier of an applicable generic for such provider, but not both.

910“(d) Program Standards and Measures for Determining Incentive Payment Eligibility andAmounts.—

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“(1) IN GENERAL.—Any payment-eligible provider shall, with respect to any applicablegeneric subject to a Program Provider Agreement to which such provider is a party for the
relevant program year, comply with and meet the standards and measures established under
this subsection in order for such provider to be eligible for payments corresponding to suchstandards and measures, as specified under subsection (c).

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“(2) MINIMUM COMMITTED VOLUME.—In order to become eligible for any payment undersubsection (c), with respect to any applicable generic, a payment-eligible provider shallcommit and subject at least the minimum committed volume of such generic for a given
program year to the core standards described in paragraph (3).

20“(3) CORE STANDARDS.—

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“(A) IN GENERAL.—A payment-eligible provider shall enter into contracts oragreements that enable such provider to meet the core standards specified under thisparagraph with respect to the total committed volume of an applicable generic subject
to a Program Provider Agreement or Direct Program Participation Agreement of suchprovider for the relevant program year in order to be eligible for and receive any
payment under subsection (c) for such program year related to such volume.

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“(B) CORE STANDARDS FOR CONTRACTS OR AGREEMENTS WITH PRIMARYSUPPLIERS.—The core standards specified under this paragraph shall require that suchprovider purchase a majority of total committed volume of an applicable generic for a
program year from a primary supplier that has in effect a relevant Manufacturer
Reliability Agreement for such generic (either with such provider or with suchprogram participant, as applicable), under contracts or agreements that meet thefollowing terms and conditions:“(i) Such contract or agreement shall be for a duration of—

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“(I) in the case of a contract or agreement entered into prior to or during
program year [2027 or 2028], at least 2 years; and3738“(II) in the case of a contract or agreement entered into during program
year [2029] or a subsequent program year, at least 3 years.

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“(ii) Such contract or agreement shall prohibit off-contract purchases by suchprovider that reduce the total committed volume of the applicable generic, except
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“(I) Such contract or agreement shall permit the payment-eligible provider
to make off-contract purchases of an applicable generic that would reduce
the total committed volume of such applicable generic for the program year
only in the case where such provider cannot continue to furnish such genericin sufficient quantities without taking such actions. If utilizing the exception
under the preceding sentence, the payment-eligible provider shall maintain,
as part of the reporting and recordkeeping requirements described undersubsection (b)(3)(F), a certification to the Secretary that both the primary
supplier for such generic under this subparagraph and, if applicable, thesecondary supplier for such generic under subparagraph (C), were unable toprovide sufficient supply of such generic to meet the needs of such provider.

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“(II) Such contract or agreement shall permit the payment-eligible
provider to make purchases of a separate drug or biological product in lieu ofan applicable generic covered under such contract or agreement if suchseparate drug or product offers a meaningful clinical advantage or otherbenefit, subject to terms specified under such contract or agreement.

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“(iii) The price agreed to in such contract or agreement may not be reduced
through rebates, discounts, price concessions, fees, or other forms of remuneration
paid by such supplier for the duration of the contract, except for—

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“(I) bona fide service fees charged by the program participant to the
supplier for services performed for the supplier by the program participant;
and

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“(II) reasonable fees charged by the program participant to the supplier for
failure to meet on-time delivery standards described in clause (v) when such
failure is the fault of the supplier.

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“(iv) Such contract or agreement shall permit upward price adjustments by the
supplier, subject to standards and limitations determined appropriate by the
Secretary, for such applicable generic in the event of a natural disaster or othersevere supply chain disruption that significantly affects the supply of suchapplicable generic or the supply of generic drug components of such applicablegeneric and is not caused by such supplier failing an inspection conductedpursuant to section 510 or 704 of the Federal Food, Drug, and Cosmetic Act, andenforcement actions related to such provisions under such Act;.

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“(v) Such contract or agreement shall include uniform standards developed by
the Secretary related to on-time deliveries for purchase orders of applicablegenerics from such supplier. Such supplier shall provide advance notice toprogram participants and providers with which such supplier has entered into a
Manufacturer Reliability Agreement of inability or anticipated inability to meetsuch on-time delivery standards and quarterly reports on the percentage ofdeliveries that met such standards.

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“(vi) Such contract or agreement shall include an attestation by each party tosuch contract or agreement that all information used to establish the terms andconditions of such contract or agreement, and all information shared or submitted
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pursuant to such contract or agreement, is, to the best of the knowledge, belief,
and understanding of the relevant party, true, factual, and complete.

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“(C) CORE STANDARDS FOR CONTRACTS WITH SECONDARY SUPPLIERS.—Unless there[is/are only 1/2 or fewer] manufacturer[s] that produce[s] and market[s] an applicablegeneric, the core standards specified under this paragraph shall require, subject to
exceptions for good cause, as determined appropriate by the Secretary (such as for
substantial price differences between applicable generic manufacturers for the same
product, natural disasters affecting 1 or more applicable manufacturers, or economic
hardship on the part of such provider), that such provider enter into and have in effect acontract or agreement with a secondary supplier of an applicable generic that has ineffect a relevant Manufacturer Reliability Agreement for such generic (either with suchprovider or with such program participant, as applicable) with respect to a program
year that is separate and distinct from the contract or agreement described insubparagraph (B) and meets the following terms and conditions:

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“(i) Such contract or agreement shall require that the supplier has, and certifies
to having, sources and suppliers for active pharmaceutical ingredients [and othergeneric drug components of such generic] that are different from the sources andsuppliers of the primary supplier described in subparagraph (B), except in the casewhere only 1 facility or drug establishment provides a given function orcomponent for such generic, such that redundancy for such source, function, or
supplier would be practically unfeasible.

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“(ii) Such contract or agreement shall require that the supplier submit acontingency plan to such provider (or to such participant, acting on behalf of suchprovider, as applicable) that describes the capacity and capabilities of suchsupplier and how such supplier intends to meet the purchasing needs of suchprovider with respect to the applicable volume of such generic, in the event wherea supply chain disruption or other exigent circumstances preclude the primary
supplier described in subparagraph (B) from meeting such needs.

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“(iii) Such contract or agreement shall require that the payment-eligible
provider (or such participant acting on behalf of such provider) purchase aminimum of [10] percent of total committed volume of the applicable genericfrom such secondary supplier.

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“(iv) Such contract or agreement shall require that the payment-eligible
provider (or such participant acting on behalf of such provider) attempt topurchase any remaining total committed volume or buffer inventory, as
applicable, of the applicable generic through the contract or agreement with thesecondary supplier under this subparagraph in the event that such provider isunable to procure sufficient volume from the primary supplier pursuant to thecontract or agreement described under subparagraph (B) before such provider
makes an off-contract purchase.

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“(v) Such contract or agreement shall include, with respect to secondary
suppliers, the provisions described in subparagraphs (B)(iii), (B)(iv), (B)(v), and(B)(vi).
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“(4) ADVANCED STANDARDS.—Beginning in program year [2029], a payment-eligible
provider may, in order to become eligible for and receive certain payments under subsection(c), meet 1 or more of the following advanced standards with respect to the total committed
volume of an applicable generic during a program year.

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“(A) ADVANCED MANUFACTURING STANDARD.—A payment-eligible provider meetsthe advanced manufacturing standard specified in this subparagraph, with respect to an
applicable generic, if the primary supplier or secondary supplier of such generic forsuch provider uses, for a substantial portion of the manufacture of such generic, amethod of manufacturing, or a combination of manufacturing methods, that has been
designated as an advanced manufacturing technology, pursuant to section 560L of theFederal Food, Drug, and Cosmetic Act, or that otherwise meets the criteria specified
under subsection (b) of such section, as determined appropriate by the Secretary, in
consultation with the Commissioner. For purposes of this subparagraph, the term‘substantial portion’ means, with respect to an applicable generic manufacturer, thatthe manufacturer uses such technology for the production of such generic, or of certain
components of such generic, in a manner that—1718“(i) is not de minimis, as determined by the Secretary, in consultation with theCommissioner; and

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“(ii) demonstrably, and by a more than de minimis amount, increases thecapacity of such supplier to produce such generic or reduces the time otherwise
needed to manufacture such generic, and increases the reliability andpredictability of the supply of such generic.

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“(B) DOMESTIC MANUFACTURING STANDARD.—A payment-eligible provider meetsthe domestic manufacturing standard if an applicable generic purchased from a
primary or secondary supplier meets the following requirements:

2627“(i) The finished-dosage form for such generic is produced at a drug
establishment located in the United States.

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“(ii) No generic drug component of such generic is sourced or produced at aforeign establishment located in a region of interest (as defined in section
510(h)(7) of the Federal Food, Drug, and Cosmetic Act), except in the case wheresuch location is necessary, as determined by the Secretary, to access certain raw
materials or other ingredients or generic drug components included in suchgeneric.

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“(iii) Active pharmaceutical ingredients for such generic meet minimum
domestic sourcing standards from countries that are members the Organization for
Economic Cooperation and Development established and promulgated by the
Secretary, in consultation with other Federal agencies and with relevant
stakeholders.

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“(5) BUFFER INVENTORY STANDARDS.—Beginning in program year [2029], a paymenteligible provider may, in order to become eligible for and receive certain payments undersubsection (c), meet 1 of the following buffer inventory standards with respect to an
applicable generic during a program year.
“(A) ENHANCED BUFFER INVENTORY STANDARD.—
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“(i) IN GENERAL.—A payment-eligible provider described in clause (iii) meetsthe enhanced buffer inventory standard specified in this subparagraph, withrespect to an applicable generic, if a contract or agreement with a primary supplier
under paragraph (3)(B) includes a requirement that such provider purchase anenhanced buffer supply (as specified in clause (ii)) of the applicable generic andstore such supply either through direct storage and maintenance by such provider
or, alternatively, through procurement and storage by a third-party entity acting
on behalf of such provider, with such buffer supply contractually committed tosuch provider, in accordance with subparagraph (D).

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“(ii) ENHANCED BUFFER SUPPLY.—For purposes of this subparagraph, the term‘enhanced buffer supply’ means, with respect to a payment-eligible provider andan applicable generic, a 6-month minimum supply calculated based on the total
standard inventory of such applicable generic for such provider, subject to any
adjustment made pursuant to subparagraph (E).

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“(iii) ELIGIBLE PROVIDERS.—Not later than [January 1, 2028], the Secretaryshall determine which payment-eligible providers are eligible for prevention andmitigation payment incentives under subsection (c) for the enhanced buffer
inventory standard described in this subparagraph. Eligible providers under thisclause shall—

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“(I) be included in peer groups as established by the Secretary underparagraph (6)(C)(iii) that represent providers with large size and scale
relative to other payment-eligible providers and serve a relatively large
number of beneficiaries; and

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“(II) not be eligible for prevention and mitigation payments describedunder subsection (c) related to the customary buffer inventory standard
described under subparagraph (B).

27“(B) CUSTOMARY BUFFER INVENTORY STANDARD.—

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“(i) IN GENERAL.—A payment-eligible provider described in clause (iii) meetsthe buffer inventory standard specified in this subparagraph, with respect to an
applicable generic, if the contract or agreement with a primary supplier underparagraph (3)(B) includes a requirement that the provider subject to such contract
or agreement purchase a customary buffer supply (as specified in clause (ii)) of
the applicable generic and store such supply either through direct storage andmaintenance by such provider or, alternatively, through procurement and storage
by a third-party entity acting on behalf of such provider, with such buffer supply
contractually committed to such provider, subject to subparagraph (D).

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“(ii) CUSTOMARY BUFFER SUPPLY.—For purposes of this subparagraph, theterm ‘customary buffer supply’ means, with respect to a payment-eligible
provider and an applicable generic, a 3-month minimum supply based on suchprovider’s historical inventory of such applicable generic, subject to any
adjustment made pursuant to subparagraph (E).

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providers under subparagraph (A)(iii) shall be eligible for prevention and23
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mitigation incentive payments under subsection (c) related to the customary
buffer inventory standard described in this subparagraph.

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“(C) ANTI-HOARDING MEASURES.—With respect to buffer inventory purchased or
procured under this paragraph, the Secretary shall establish an anti-hoarding standard,
which shall be a limitation on the maximum supply of an applicable generic that aprovider may secure and hold under the standard established in this subparagraph.
Payment-eligible providers that violate such standard with respect to total buffer
supply shall not be eligible for payments under subsection (c)(3).

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“(D) THIRD-PARTY STORAGE.—In the case where a payment-eligible provider meetsa buffer inventory standard under this paragraph by contracting with a third-party
entity to store and hold the buffer supply of an applicable generic on behalf of suchprovider—

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“(i) such third-party entity must provide a description, including supporting
documentation and evidence as determined by the Secretary, that such entity
would have the capacity necessary to provide such supply to such provider on atimely basis, subject to standards determined appropriate by the Secretary; and1718“(ii) in no case shall a third-party entity specified under this clause hold or store
such buffer supply in a location outside of the United States.

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“(E) ADJUSTMENTS TO BUFFER SUPPLY THRESHOLD.—The Secretary may, as
determined necessary and appropriate by the Secretary to prevent and mitigate drug
shortages, make adjustments to the 6-month supply threshold under subparagraph(A)(ii) and the 3-month supply threshold under subparagraph (B)(ii) to—

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“(i) adjust such thresholds upward or downward for certain peer groups as
described in paragraph (6)(C)(iii) or types of payment-eligible providers, such as
for physician practices not owned by a hospital, for providers that furnish items
and services under this title in rural areas, or for other entities for which such
thresholds would impose substantial administrative or cost burdens;

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“(ii) adjust such thresholds downward [or temporarily suspend payments undersubsection (c)] with respect to a specific applicable generic (or a specific type of
applicable generic) in the case where such threshold [or incentive] poses areasonable risk of increasing demand for such generic in a manner that causes orworsens supply chain disruptions or shortages, as determined by the Secretary, in
consultation with the Commissioner and with relevant stakeholders; or

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“(iii) adjust such threshold downward where the typical expiration date for the
relevant applicable generic may limit how much volume of such generic a
provider should reasonably hold in inventory, as determined by the Secretary.

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“(6) OUTCOME MEASURES.—“(A) IN GENERAL.—Beginning in program year [2029], a payment-eligible provider
may be subject to payment adjustments under subsection (c) on the basis of the relative
performance of such provider on the outcome measures specified under subparagraph(B).
“(B) ESTABLISHMENT OF OUTCOME MEASURES.—The Secretary shall establish
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outcome measures for purposes of measuring the aggregate performance of paymenteligible providers relative to their peer group at preventing and mitigating shortages ofapplicable generics during a program year. The Secretary [may/shall] develop outcome
measures that evaluate the following:

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“(i) The extent to which such provider, or a third-party entity acting on behalfof such provider, physically maintained sufficient inventory of applicable generics
for which a notification of a discontinuance or interruption was submitted to theSecretary pursuant to section 506C of the Federal Food, Drug, and Cosmetic Act
during the program year.

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“(ii) The portion of total inventory such provider purchased from manufacturersthat are primary or secondary suppliers of such provider met on-time delivery
standards, did not experience preventable shortages during the program year,
complied with the attestations described under subsection (b)(4)(C)(vi), [or met
other related reliability standards related established by the Secretary throughrulemaking].

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“(iii) Any other outcome measure that evaluates the extent to which a provider
prevented or mitigated shortages during the program year based on the purchasing
or inventory management practices of such provider.

19“(C) PARTICIPATION AND PARAMETERS FOR EVALUATION.—

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“(i) IN GENERAL.—The Secretary shall conduct evaluations of the performanceof a payment-eligible provider under the program based on the outcome measuresdescribed in subparagraph (B) pursuant to this paragraph on an annual basis, withrespect to each program year beginning with program year [2029], based on
information and data reported by program participants and payment-eligible
providers, as applicable, in accordance with requirements determined necessary
and appropriate by the Secretary for purposes of carrying out this paragraph.

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“(ii) THRESHOLD FOR PARTICIPATION.—In order to be eligible for payments
under subsection (c) related to the outcome measures specified in subparagraph(B), a payment-eligible provider shall, either directly or through a program
participant acting on behalf of such provider, comply with all data submission andreporting requirements established by the Secretary for purposes of carrying out
this paragraph for all outcomes measures under subparagraph (B) and meet anyother requirements established by the Secretary.

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“(iii) PEER GROUPS.—For purposes of conducting assessments and evaluationsof the performance of payment-eligible providers relative to the outcome
measures specified in subparagraph (B), the Secretary shall, not later than the
beginning of program year [2027], establish and publish peer groups todifferentiate among different types and features of payment-eligible providers. In
establishing such peer groups, the Secretary shall consult with stakeholders andshall consider any factors determined appropriate by the Secretary, including
geographic location and features of such location, category or type of provider ofservices or supplier, size and scale, affiliation with a large health system or otherlarge health care entity, number of beneficiaries served, and types of items or25
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1services furnished under this title.

234“(iv) EVALUATION.—In evaluating the performance of payment-eligible
providers based on the outcome measures described in subparagraph (B), theSecretary shall—

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“(I) with respect to each peer group established under clause (iii), rank thequantitative performance of all payment-eligible providers that meet thecriteria specified under clause (ii) and fit within the scope of such group,
evaluating relative performance on such measures on the basis of either all
applicable generics relevant to each outcomes measure or, to the extent
appropriate and feasible, a selective subset of applicable generics;

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“(II) in a form and manner, and at a time, specified by the Secretary,
notify each payment-eligible provider described in subclause (I) of theirranking for each outcome measure under such subclause; and

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“(III) publish, on a publicly accessible internet website of the Centers for
Medicare & Medicaid Services, a summary of the results of such
evaluations, disaggregated by peer group.

1718“(e) Program Oversight, Enforcement, and Accountability.—“(1) AUDITS.—

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“(A) AGREEMENTS.—The Secretary shall conduct periodic audits of Program
Participation Agreements, Direct Program Participation Agreements, Program Provider
Agreements, and Manufacturer Reliability Agreements under this section, of theinformation submitted and records maintained in relation to such agreements, and of
any other information required to be reported or maintained under this section, in order
to assess the accuracy of all such information, as well as to monitor and ensurecompliance with the requirements of this section.

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27“(B) USE OF VENDOR.—The Secretary may contract with a vendor to carry out anyof the audits under this paragraph.

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“(2) ENFORCEMENT ACTIONS.—“(A) INTERMEDIATE SANCTIONS.—With respect to violations of a Program Provider
Agreement or Direct Program Participation Agreement by a payment-eligible provider,
the Secretary may impose, as determined appropriate, intermediate sanctions inaccordance with this title, and may require the timely submission of a corrective action
plan, as determined appropriate by the Secretary.
“(B) CIVIL MONETARY PENALTIES.—

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“(i) IN GENERAL.—The Secretary may impose a civil monetary penalty on a
payment-eligible provider in the case where the Secretary determines thatintermediate sanctions under subparagraph (A) do not result in the required
remediation actions on the part of such provider, or in the case where such aprovider commits, once or on a repeat or flagrant basis, 1 or more of the following
actions:41“(I) Willful, deliberate, or repeated failure by such provider to comply
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with the standards for modifying, suspending, or terminating agreements
under subsection (b)(5)(C).

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and material information or other documents (such as information conflictingwith other such documents).

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7“(III) Refusal to comply with any audit conducted by the Secretary underparagraph (1).

8910“(IV) A relatively high rate of failure, as determined by the Secretary, forsuch payment-eligible provider to meet the core standards under subsection(d) after entering into one or more such agreements.

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“(ii) APPLICATION.—The provisions of section 1128A (other than subsections(a) and (b)) shall apply to a civil monetary penalty under this subparagraph in thesame manner as such provisions apply to a penalty or proceeding under section
1128A(a).

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“(3) PUBLIC REPORTING RELATED TO THE PROGRAM.—The Secretary shall publish, update,and maintain on an ongoing basis on a publicly available internet website of the Centers for
Medicare & Medicaid Services, along with consumer-friendly accompanying explanations
and descriptions, to the extent feasible and practicable, the following information withrespect to the program established under this section, coordinated and integrated with theinformation on program participants published under subsection (b)(2)(D):

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“(A) FOR PROGRAM PARTICIPANTS.—With respect to each program participant with a
Program Participation Agreement currently or previously in effect with the Secretary
under subsection (b)(2)(C) (or, as applicable, subject to such adaptations andmodifications as the Secretary determines necessary and appropriate, a paymenteligible provider with a Direct Program Participation Agreement currently or
previously in effect, hereafter in this subparagraph included in the terms ‘program
participant’ and ‘Program Participation Agreement’, respectively), for each suchagreement, both in the aggregate and by each applicable generic covered under suchagreement the following:

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“(i) Summary information related to terminations, suspensions, andmodifications of agreements under subsection (b) to which such program
participant is a party, including a complete listing of all mandatory terminations
and suspensions.

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“(ii) Data and information, as determined appropriate by the Secretary, on theextent to which payment-eligible providers that have entered into contracts oragreements under subsection (b) with such program participant that met, withrespect to each payment quarter specified under subsection (c)—3839“(I) all core standards in effect for such program year, as specified undersubsection (d)(3);40
41“(II) each advanced standard in effect for such program year, as specified
under subsection (d)(4); and42[“(III) buffer inventory standards in effect for such program year, as
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1specified under subsection (d)(5).]2
3“(iii) The findings of any audits of such program participant pursuant toparagraph (1) of this subsection.

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“(B) FOR PAYMENT-ELIGIBLE PROVIDERS.—With respect to each payment-eligible
provider that has or previously had a Program Provider Agreement in effect undersubsection (b)(2)(C) (or, if applicable, a Direct Program Participation Agreement undersubsection (b)(3)(C)), the following information, both in the aggregate anddisaggregated by such agreements and applicable generics:

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“(i) Summary information related to terminations, suspensions, andmodifications of agreements under subsection (b) to which such provider is aparty, including a complete listing of all mandatory terminations and suspensions.

12“(ii) The findings of any audits of such provider pursuant to paragraph (1).

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14“(iii) Any enforcement actions undertaken with respect to such provider underparagraph (2).

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16“(iv) Any non- or pre-enforcement actions undertaken with respect to suchprovider, such as through warning letters or other forms of notification.

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18“(C) FOR APPLICABLE GENERIC MANUFACTURERS.—With respect to applicablegeneric manufacturers, the following information:“(i) A list of all applicable generic manufacturers for each applicable generic.

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“(ii) High-level information, with no risk of disclosure of proprietary
information [or trade secrets], based on the information provided pursuant tosubsection (b)(4)(C)(ii).

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“(iii) Summary information related to terminations, suspensions, andmodifications of agreements under subsection (b) to which such manufacturer is aparty, including a complete listing of all mandatory terminations and suspensions.

2627“(iv) The findings of any audits of such manufacturer pursuant to paragraph
(1).

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“(4) NON-DUPLICATION AND STREAMLINING IMPLEMENTATION.—The Secretary shallestablish procedures to streamline any information submission requirements under thissubsection in order to prevent duplication of requirements with other reporting requirements
under this title.

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“(5) SIGNIFICANT HARDSHIP.—The Secretary may waive or reduce penalties for violationsof the requirements under this section, as determined appropriate by the Secretary, in theevent of significant hardship interfering with the ability of an entity to comply with therequirements under this section, including in the case of a natural disaster, public healthemergency, bankruptcy, or other unique or unexpected catastrophe or other similar
situation.

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“(6) REPORTING OF ALLEGED VIOLATIONS.—The Secretary shall make available andmaintain a mechanism for providers, program participants, manufacturers, and otherstakeholders subject to or with knowledge of an agreement under this section to report on a28
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confidential basis alleged violations of the requirements under this section.
“(f) Definitions.—In this section:

345“(1) ACTIVE PHARMACEUTICAL INGREDIENT.—The term ‘active pharmaceuticalingredient’ has the meaning given to such term in section 744A(2) of the Federal Food,
Drug, and Cosmetic Act.

67“(2) ADMINISTRATOR.—The term ‘Administrator’ means the Administrator of the Centers
for Medicare & Medicaid Services.

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“(3) AFFILIATE.—The term ‘affiliate’ means any entity that is owned by, controlled by, or
related under a common ownership structure with a program participant, or that acts as acontractor or agent to such program participant, insofar as such contractor or agent markets
or distributes a private label drug.

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“(4) BONA FIDE SERVICE FEE.—The term ‘bona fide service fee’ means a fee that isreflective of the fair market value (as specified by the Secretary) for a bona fide, itemized
service actually performed on behalf of an entity, that the entity would otherwise perform(or contract for) in the absence of the service arrangement and that is not passed on in whole
or in part to a client or customer, whether or not the entity takes title to the drug.

1718“(5) COMMISSIONER.—The term ‘Commissioner’ means the Commissioner of the Foodand Drug Administration.

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“(6) CORRECTIVE ACTION PLAN.—The term ‘corrective action plan’ means a document
submitted using a standardized template developed and published by the Secretary that iscompleted and signed by an entity subject to an agreement under subsection (b) thatspecifies the actions such entity has taken and plans to take to remedy program violations.

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“(7) DRUG PRODUCT QUALITY INITIATIVES.—The term ‘drug product quality initiatives’means public or private sector programs that evaluate, test, or otherwise assess
manufacturer quality management practices, prescription drug supply chain reliability, or
drug product quality.

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“(8) GENERIC DRUG COMPONENT.—The term ‘generic drug component’ means active
pharmaceutical ingredients, excipients, or other substances that are ingredients of genericdrugs.

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section 1860D–14C(g)(5).

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“(10) MATERIAL MODIFICATION.—The term ‘material modification’ means a change to anagreement described under subsection (b) that is likely to reduce payments made undersubsection (c) to a payment-eligible provider.

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“(11) MINIMUM COMMITTED VOLUME.—“(A) IN GENERAL.—The term ‘minimum committed volume’ means, with respect toa payment-eligible provider and an applicable generic, the applicable minimum
percentage (as defined in subparagraph (B)) of the total standard inventory for suchprovider for such generic for a given program year.
“(B) APPLICABLE MINIMUM PERCENTAGE.—
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123“(i) IN GENERAL.—Subject to clause (ii), the term ‘applicable minimum
percentage’ means, with respect to a payment-eligible provider and an applicablegeneric—

4“(I) for program years [2027 and 2028], [40 percent];5“(II) for program years [2029 through 2031], [60 percent]; and6
7“(III) for program year [2032 and each subsequent program year], [75percent].

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“(ii) CONTROLLED SUBSTANCES.—The Secretary may set a lower minimum
committed volume than the amounts specified under clause (i) for applicablegenerics that are controlled substances if the Secretary determines that a lower
minimum committed volume would help prevent diversion of such generic or
facilitate compliance with Federal law.

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“(C) CLARIFICATION ON VOLUME CALCULATIONS.—The Secretary, in consultation
with relevant stakeholders, shall specify appropriate methodologies and volume
metrics for calculating the volume and inventory of an applicable generic for purposesof this section, including with respect to appropriate metrics for determining the scopeof a single unit of an applicable generic.

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“(12) OFF-CONTRACT PURCHASE.—The term ‘off-contract purchase’ means a purchase of
an applicable generic by a payment-eligible provider that is subject to a Program Provider
Agreement or Direct Program Participation Agreement of such provider from amanufacturer other than the primary supplier or a secondary supplier of such provider forsuch applicable generic pursuant to the contracts or agreements described under subsection(d)(3).

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“(13) PRIMARY SUPPLIER.—The term ‘primary supplier’ means an applicable genericmanufacturer that has entered into a contract or agreement for an applicable genericpursuant to subsection (d)(3)(B) with a payment-eligible provider from which suchpayment-eligible provider agrees to purchase the majority of total committed volume ofsuch applicable generic for a program year.

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“(14) PRIVATE LABEL DRUG.—The term ‘private label drug’ means a drug that ismarketed or distributed under a distinct trade name by an entity that does not participate in
the manufacture or processing of such drug.

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“(15) REMEDIATION PLAN.—The term ‘remediation plan’ means a document submittedusing a standardized template developed and published by the Secretary that is completed
and signed by a potential program participant seeking the Secretary’s approval to become aprogram participant that specifies the actions such potential program participant has taken
and plans to take to address past Program Participation Agreement violations.

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“(16) SECONDARY SUPPLIER.—The term ‘secondary supplier’ means an applicablegeneric manufacturer that has entered into a contract or agreement pursuant to subsection(d)(3)(C) with a payment-eligible provider that is distinct from the manufacturer that is theprimary supplier for such provider from which such payment-eligible provider agrees topurchase any remaining total committed volume not committed to the primary supplier ofsuch applicable generic for a program year.
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“(17) TOTAL BUFFER INVENTORY.—The term ‘total buffer inventory’ means the estimatednumber of units of an applicable generic held in buffer inventory by a provider over a yearlong period calculated based on a methodology developed by the Secretary using datasubmitted by such provider under subsection (b)(3)(F).

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“(18) TOTAL COMMITTED VOLUME.—The term ‘total committed volume’ means, withrespect to a payment eligible provider and an applicable generic, the percentage of the totalpurchasing volume (calculated in terms of units of such generic) of the provider for suchgeneric for a given program year that such provider agrees to purchase from a primary
supplier or a secondary supplier pursuant to a contract or agreement under subsection (d)(3),excluding any volume of such applicable generic dedicated to buffer inventory.

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“(19) TOTAL STANDARD INVENTORY.—The term ‘total standard inventory’ means theestimated number of units of an applicable generic, excluding any units included in total
buffer inventory, that a payment-eligible provider administers over a year-long period
calculated based on a methodology developed by the Secretary using data submitted bysuch provider under subsection (b)(3)(F).

1617“(g) Program Reports, Studies, and Evaluations.—“(1) INITIAL STUDY AND REPORT.—

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“(A) STUDY.—The Comptroller General of the United States (in this subsectionreferred to as the ‘Comptroller General’) shall conduct a study on the effects of theimplementation of the program. Such study shall include an analysis of the following:

2122“(i) Trends, changes, and the frequency with which applicable generics subject
to the program—

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“(I) appeared on the drug shortage list established under section 506E(a)of the Federal Food, Drug, and Cosmetic Act, drug shortage lists maintainedby the American Society of Health-System Pharmacists, or drug shortage
lists maintained by other organizations, as determined appropriate by theComptroller General; or2829“(II) were subject to notifications under section 506C(a) of the Federal
Food, Drug, and Cosmetic Act.

3031“(ii) Trends and changes in the amounts paid to manufacturers for applicablegenerics before and after implementation of the program.

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“(iii) Hospital and provider participation in the program and findings fromstakeholder surveys or interviews on the greatest incentives and barriers toprogram participation.

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“(iv) Participation in the program by manufacturers, wholesalers, grouppurchasing organizations, and other entities and findings from stakeholder surveys
or interviews on the greatest incentives and barriers to program participation.

3839“(v) How the program could be improved to address loopholes, further preventand mitigate prescription drug shortages, or improve program efficiency.
“(vi) Other items determined appropriate by the Comptroller General.

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12“(B) REPORT.—Not later than [January 1, 2031], the Comptroller General shall
publish a report on the study conducted under subparagraph (A).

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appropriate, conduct subsequent studies and produce subsequent reports with respect to theongoing implementation and effects of the program.

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“(h) Implementation.—In addition to amounts otherwise available, there is appropriated to theCenters for Medicare & Medicaid Services Program Management Account, out of any money in
the Treasury not otherwise appropriated, $[XXX] for fiscal year [2025], to remain available until
expended, for purposes of carrying out this section.”.

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SEC. 3. REBATES FOR GENERIC COVEREDOUTPATIENT DRUGS UNDER MEDICAID.

1213(a) Limitation on Covered Outpatient Drugs; Determination of Amount of Rebate.—Section
1927(c)(3) of the Social Security Act (42 U.S.C. 1396r–8(c)(3)) is amended—

14(1) in subparagraph (B)—15(A) in clause (ii), by striking “and” after the semicolon;

16(B) in clause (iii)—

17(i) by inserting “and before ________,” after “2009,”; and18(ii) by striking the period at the end and inserting “; and”; and19(C) by adding at the end the following:“(iv) after [_______], is [___] percent.”; and2021(2) in subparagraph (C)—22

(A) in clause (i)—

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(i) by striking “covered outpatient drug other than a single source drug or an
innovator multiple source drug of a manufacturer” and inserting “covered
outpatient drug described in clause (v)”; and26(ii) by striking “clause (ii)” and inserting “clauses (ii) and (vii)”; and

2728(B) in clause (iii), in the matter preceding subclause (I), by inserting “described inclause (v)” after “covered outpatient drug”; and29(C) by adding at the end the following new clauses:

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“(v) APPLICATION TO CERTAIN COVERED OUTPATIENT DRUGS.—The additional
rebate described in this subparagraph shall only apply to a covered outpatient drug
that—

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“(I) is not a single source drug or innovator multiple source drug;“(II) is a drug approved under an abbreviated new drug application under
section 505(j) of the Federal Food, Drug, and Cosmetic Act, in the casewhere—

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“(aa) the reference listed drug approved under section 505(c) of theFederal Food, Drug, and Cosmetic Act, including any ‘authorized
generic drug’ (as that term is defined in section 505(t)(3) of the Federal
Food, Drug, and Cosmetic Act), is not being marketed, as identified in
the Food and Drug Administration’s National Drug Code Directory;

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“(bb) there is no other drug approved under section 505(j) of theFederal Food, Drug, and Cosmetic Act that is rated as therapeuticallyequivalent (under the Food and Drug Administration’s most recent
publication of ‘Approved Drug Products with Therapeutic Equivalence
Evaluations’) and that is being marketed, as identified in the Food andDrug Administration’s National Drug Code Directory;

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“(cc) the manufacturer is not a ‘first applicant’ during the ‘180-day
exclusivity period’, as those terms are defined in section
505(j)(5)(B)(iv) of the Federal Food, Drug, and Cosmetic Act; and

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“(dd) the manufacturer is not a ‘first approved applicant’ for acompetitive generic therapy, as that term is defined in section
505(j)(5)(B)(v) of the Federal Food, Drug, and Cosmetic Act; and

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“(III) with respect to the rebate period involved, has an average annual
total cost under this title per individual who uses such drug (as determinedby the Secretary using the most recent data available or, if data is notavailable, as estimated by the Secretary) that is equal to or greater than theamount specified for the rebate period in clause (vi).
“(vi) AMOUNT SPECIFIED.—

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“(I) IN GENERAL.—For purposes of clause (v)(III), the amount specified inthis clause for a rebate period shall, subject to subclause (II), be equal to—26“(aa) for rebate periods beginning in calendar year [2027], $100; and

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“(bb) for rebate periods beginning in a subsequent calendar year,$100, increased by the percentage by which the consumer price index
for all urban consumers (United States city average) for January of suchcalendar year exceeds such index for January of [2027].

3132“(II) ROUNDING.—Any amount determined under subclause (I) that is nota multiple of $10 shall be rounded to the nearest multiple of $10.

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“(vii) REDUCTION OR WAIVER FOR GENERIC DRUG SHORTAGES AND SEVERESUPPLY CHAIN DISRUPTIONS.—The Secretary shall reduce or waive the amount of

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“(I) in the case of such a drug that is described as currently in shortage on
the shortage list in effect under section 506E of the Federal Food, Drug, andCosmetic Act at any point during the calendar quarter;

41“(II) in the case of such a drug when the Secretary determines there is aany rebate increase applicable under clause (i) for a rebate period with respect toeach dosage form and strength of a covered outpatient drug described in clause(v) and a calendar quarter—

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severe supply chain disruption during the calendar quarter, such as thatcaused by a natural disaster or other unique or unexpected event; and3
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5“(III) in the case of such a drug if the Secretary determines that without
such reduction or waiver, the drug is likely to be described as in shortage onsuch shortage list during a subsequent calendar quarter.”.

67(b) Effective Date.—The amendments made by this section shall take effect on [January 1,2027], and shall apply to rebate periods beginning on or after such date.

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