II 

112TH CONGRESS 

1ST SESSION S. 1699 

To reduce the costs of prescription drugs under the Medicare program, 

and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

OCTOBER 12, 2011 

Mr. KOHL introduced the following bill; which was read twice and referred to 

the Committee on Finance 

A BILL 

To reduce the costs of prescription drugs under the Medicare 

program, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Prescription Drug Cost Reduction Act’’. 

6 (b) TABLE OF CONTENTS.—The table of contents for 

7 this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Medicare part B drug rebate program. 

Sec. 3. Negotiation of drug prices under Medicare part B. 

Sec. 4. Payment for least costly alternative for Medicare part B drugs. 

Sec. 5. Study and report on physician reimbursement for drugs and biologicals 

under Medicare part B. 

Sec. 6. Requirements of pharmacy benefit managers. 


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Sec. 7. Certification for off-label prescribing of certain drugs prescribed in a 

nursing home setting. 

Sec. 8. Expansion of 340B program covered entities to include PACE programs. 

1 SEC. 2. MEDICARE PART B DRUG REBATE PROGRAM. 

2 Section 1842 of the Social Security Act (42 U.S.C. 

3 1395u) is amended by adding at the end the following new 

4 subsection: 

5 ‘‘(v)(1) Not later than 2 years after the date of enact6 ment of this subsection, the Secretary shall establish a 

7 program under which a manufacturer shall provide a re8 bate to the Secretary for drugs or biologicals of the manu9 facturer that are furnished under this part. 

10 ‘‘(2) The program established under paragraph (1)— 

11 ‘‘(A) shall be similar to rebate agreements 

12 under section 1927 (including the application of an 

13 additional rebate for certain drugs whose costs ex14 ceed an annual inflation target as described in sub15 section (c)(2) of such section); and 

16 ‘‘(B) may use the average manufacturer price 

17 (as determined under section 1927(k)(1)) or the av18 erage sales price (as defined in section 1847A(c)) as 

19 the basis for calculating the amount of the rebate 

20 under the program. 

21 ‘‘(3) The Secretary shall promulgate regulations to 

22 carry out this subsection.’’. 


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1 SEC. 3. NEGOTIATION OF DRUG PRICES UNDER MEDICARE 

2 PART B. 

3 (a) IN GENERAL.—Section 1842 of the Social Secu4 rity Act (42 U.S.C. 1395u), as amended by section 2, is 

5 amended by adding at the end the following new sub6 section: 

7 ‘‘(w) NEGOTIATION OF PRICES FOR DRUGS AND

8 BIOLOGICALS.— 

9 ‘‘(1) IN GENERAL.—Notwithstanding any other 

10 provision of law, the Secretary shall negotiate a con11 tract with a manufacturer to establish the amount of 

12 payment under this part for any drug or biological 

13 for which the program under this part is the major14 ity purchaser (as determined under paragraph (2)). 

15 The Secretary shall negotiate such contracts with 

16 the goal of ensuring appropriate and adequate ac17 cess to necessary drugs and biologicals for individ18 uals enrolled under this part, while minimizing costs 

19 to such individuals and to the program under this 

20 part to the greatest extent possible. 

21 ‘‘(2) MAJORITY PURCHASER.—For purposes of 

22 paragraph (1), the Secretary shall, by regulation, es23 tablish a method to identify, based upon drug utili24 zation rates, any drug or biological for which greater 

25 than 50 percent of the units sold by the manufac26 turer of such drug or biological in the preceding calVerDate Mar 15 2010 00:10 Oct 14, 2011 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1699.IS S1699

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1 endar year were provided to individuals enrolled 

2 under this part. 

3 ‘‘(3) DEFINITIONS.—In this subsection: 

4 ‘‘(A) DRUGS AND BIOLOGICALS.—The 

5 term ‘drug’ and the term ‘biological’ have the 

6 same meaning as provided under section 

7 1861(t). 

8 ‘‘(B) MANUFACTURER.—The term ‘manu9 facturer’ has the same meaning as provided 

10 under section 1847A(c)(6)(A).’’. 

11 (b) EFFECTIVE DATE.—The amendments made by 

12 this section shall apply to drugs and biologicals that are 

13 furnished on or after July 1, 2012. 

14 SEC. 4. PAYMENT FOR LEAST COSTLY ALTERNATIVE FOR 

15 MEDICARE PART B DRUGS. 

16 Section 1847A(b) of the Social Security Act (42 

17 U.S.C. 1395w–3a(b)) is amended— 

18 (1) in paragraph (1), in the matter preceding 

19 subparagraph (A), by striking ‘‘paragraph (7)’’ and 

20 inserting ‘‘paragraphs (7) and (9)’’; and 

21 (2) by adding at the end the following new 

22 paragraph: 

23 ‘‘(9) TREATMENT OF FUNCTIONALLY EQUIVA24 LENT DRUGS AND BIOLOGICALS.—In the case of a 

25 drug or biological furnished on or after the date that 


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1 is 180 days after the date of enactment of this para2 graph, for which payment is determined under this 

3 section, if the drug or biological is functionally 

4 equivalent (as defined by the Secretary) to another 

5 drug or biological for which payment is determined 

6 under this section, the amount of payment for both 

7 such drugs or biologicals shall be equal to the pay8 ment amount otherwise determined under this sec9 tion (without regard to the application of this para10 graph) for the least costly of such drugs or 

11 biologicals.’’. 

12 SEC. 5. STUDY AND REPORT ON PHYSICIAN REIMBURSE13 MENT FOR DRUGS AND BIOLOGICALS UNDER 

14 MEDICARE PART B. 

15 (a) STUDY.—The Secretary of Health and Human 

16 Services (in this section referred to as the ‘‘Secretary’’) 

17 shall conduct a study on physician reimbursement for 

18 drugs and biologicals furnished under part B of title 

19 XVIII of the Social Security Act (42 U.S.C. 1395j et 

20 seq.). Such study shall include an evaluation and assess21 ment of the following: 

22 (1) The ability of physicians to afford and prof23 it from drugs and biologicals purchased at the cur24 rent reimbursement rate of average sales price plus 

25 6 percent under section 1847A of the Social Security 


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1 Act (42 U.S.C. 1395w–3a), including any profit 

2 margins with respect to such drugs and biologicals. 

3 (2) The rate at which physicians furnish the 

4 higher priced drug or biological under such part 

5 when there is a cheaper alternative drug or biologi6 cal. 

7 (3) The feasibility and merits of other reim8 bursement structures that are not based on the price 

9 of the drug or biological, such as a flat, universal fee 

10 issued for every drug or biological furnished under 

11 such part, or any other relevant reimbursement 

12 structures. 

13 (b) CONSULTATION.—In conducting the study under 

14 subsection (a), the Secretary shall consult with the Admin15 istrator of the Centers for Medicare & Medicaid Services 

16 and the Inspector General of the Department of Health 

17 and Human Services. 

18 (c) REPORT.— 

19 (1) IN GENERAL.—Not later than 1 year after 

20 the date of enactment of this Act, the Secretary 

21 shall submit to Congress a report containing the re22 sults of the study conducted under subsection (a), 

23 together with recommendations for changing physi24 cian reimbursement for drugs and biologicals under 

25 Medicare part B. 


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1 (2) CONSIDERATION OF RECOMMENDATIONS TO

2 REMOVE INCENTIVES TO PRESCRIBE HIGHER PRICED

3 DRUGS.—In making recommendations under para4 graph (1), the Secretary shall consider including rec5 ommendations that would— 

6 (A) move reimbursement for drugs and 

7 biologicals under Medicare part B away from 

8 being based on the price of the drug or biologi9 cal; and 

10 (B) reduce or eliminate incentives to fur11 nish higher priced drugs and biologicals under 

12 such part. 

13 SEC. 6. REQUIREMENTS OF PHARMACY BENEFIT MAN14 AGERS. 

15 (a) IN GENERAL.—A pharmacy benefit manager (re16 ferred to in this section as a ‘‘PBM’’) shall owe a fiduciary 

17 duty, in accordance with this section, to each covered enti18 ty. 

19 (b) COVERED ENTITY DEFINED.—In this section, the 

20 term ‘‘covered entity’’ means the head of each Federal 

21 agency with which the PBM contracts, including— 

22 (1) the Secretary of Health and Human Serv23 ices with respect to the programs under part C of 

24 title XVIII of the Social Security Act (42 U.S.C. 

25 1395w–21 et seq.) and part D of such title; 


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1 (2) the Secretary of Veterans Affairs with re2 spect to health coverage offered through the Depart3 ment of Veterans Affairs; 

4 (3) the Secretary of Defense with respect to the 

5 TRICARE program under chapter 55 of title 10, 

6 United States Code; and 

7 (4) the Director of the Office of Personnel 

8 Management with respect to the Federal employee 

9 health benefits program under chapter 89 of title 5, 

10 United States Code. 

11 (c) REQUIREMENTS.— 

12 (1) IN GENERAL.—The fiduciary duty described 

13 in subsection (a) shall include the duty to— 

14 (A) notify each covered entity, on a quar15 terly basis, if the PBM substitutes a drug that 

16 costs more than the drug prescribed to an indi17 vidual by a practitioner, and disclose the aggre18 gate costs of the drug prescribed and the drug 

19 provided by the PBM and any benefit or pay20 ment directly or indirectly received by the PBM 

21 as a result of the substitution for all individuals 

22 receiving such substitute drug during the appli23 cable quarter; 

24 (B) pass through any benefit, rebate, or 

25 payment the PBM receives for promoting a 


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1 drug that is more expensive than a drug pre2 scribed; 

3 (C) in the case that a PBM receives a pay4 ment or benefit for increasing volume of sales 

5 for a particular drug, class of drug, or brand of 

6 drug, disclose the payment or benefit with the 

7 covered entity; and 

8 (D) disclose to covered entities all financial 

9 terms and arrangements between the PBM and 

10 a pharmaceutical drug company, including for11 mulary management and drug-switch agree12 ments, educational support, claims processing 

13 and pharmacy network fees that are charged 

14 from retail pharmacies, data sales fees, and 

15 other direct or indirect remunerations, includ16 ing discounts, charge backs or rebates, cash dis17 counts, free goods contingent on a purchase 

18 agreement, up-front payments, coupons, goods 

19 in-kind, free or reduced-price services, grants, 

20 or other price concessions or similar benefits of21 fered to some or all purchasers from any 

22 source, including manufacturers, pharmacies, 

23 enrollees, or any other person that would serve 

24 to decrease the costs incurred under the plan. 


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1 (2) REPORTING OF DRUG SUBSTITUTIONS.— 

2 The Secretary of Health and Human Services shall 

3 establish categories that describe reasons, such as a 

4 concern about drug interactions or discretion of the 

5 PBM, for a PBM to substitute a drug that costs 

6 more than the drug prescribed to an individual by 

7 a practitioner, as described in paragraph (1)(A). In 

8 reporting drug substitutions under such paragraph, 

9 a PBM shall state the category under which each 

10 type of substitution falls. 

11 (3) DIRECT OR INDIRECT REMUNERATION.— 

12 For purposes of paragraph (1)(D), the term ‘‘direct 

13 or indirect remuneration’’ includes discounts, 

14 chargebacks or rebates, cash discounts, free goods 

15 contingent on a purchase agreement, up-front pay16 ments, coupons, goods in-kind, free or reduced-price 

17 services, grants, or other price concessions or similar 

18 benefits from manufacturers, pharmacies or similar 

19 entities obtained by an intermediary contracting or20 ganization with which the plan sponsor has con21 tracted, regardless of whether the intermediary con22 tracting organization retains all or a portion of the 

23 direct and indirect remuneration or passes the entire 

24 direct and indirect remuneration to the plan sponsor 

25 and regardless of the terms of the contract between 


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1 the plan sponsor and the intermediary contracting 

2 organization. 

3 (d) CONFIDENTIALITY.— 

4 (1) IN GENERAL.—A PBM may require covered 

5 entities to keep the information described in sub6 section (c)(4) confidential. 

7 (2) RESTRICTIONS ON THE USE OF INFORMA8 TION.— 

9 (A) IN GENERAL.—Officers, employees, 

10 and contractors of the Department of Health 

11 and Human Services may use the information 

12 disclosed or obtained in accordance with the 

13 provisions of this Act only for the purposes of, 

14 and to the extent necessary in, carrying out this 

15 Act, including determination of payments, pay16 ment-related oversight, and program integrity 

17 activities. 

18 (B) LIMITATIONS.— 

19 (i) AUTHORITY OF THE OIG.—The re20 striction described in subparagraph (A) 

21 does not limit the authority of the Inspec22 tor General of the United States to fulfill 

23 the responsibilities of the Inspector Gen24 eral in accordance with applicable Federal 

25 law. 


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1 (ii) AUTHORITY OF CMS.—The restric2 tion described in subparagraph (A) does 

3 not limit the authority of the Centers for 

4 Medicare & Medicaid Services to use data 

5 regarding drug claims in accordance with 

6 section 1848(m) of the Social Security Act 

7 (42 U.S.C. 1395w–4(m)). 

8 (e) AUDITS.—To ensure compliance with the require9 ments of this section, each covered entity shall conduct 

10 audits of the PBMs with which the covered entity con11 tracts. 

12 SEC. 7. CERTIFICATION FOR OFF-LABEL PRESCRIBING OF 

13 CERTAIN DRUGS PRESCRIBED IN A NURSING 

14 HOME SETTING. 

15 Title XVIII of the Social Security Act (42 U.S.C. 

16 1395 et seq.) is amended by adding at the end the fol17 lowing new section: 

18 ‘‘CERTIFICATION FOR OFF-LABEL PRESCRIBING OF CER19 TAIN DRUGS PRESCRIBED IN A NURSING HOME SET20 TING

21 ‘‘SEC. 1899B. (a) IN GENERAL.—The Secretary shall 

22 develop a form for use by physicians and practitioners (as 

23 defined in section 1842(b)(18)(C)) to certify that, in the 

24 case of an applicable drug prescribed for an off-label use 

25 under this title, such use is for a medically accepted indi26 cation. 


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1 ‘‘(b) DEFINITIONS.—In this section: 

2 ‘‘(1) APPLICABLE DRUG.—The term ‘applicable 

3 drug’ means an atypical antipsychotic prescribed for 

4 use in a nursing home setting (as defined by the 

5 Secretary). 

6 ‘‘(2) OFF-LABEL USE.—The term ‘off-label use’ 

7 means a use which has not been approved by the 

8 Food and Drug Administration. 

9 ‘‘(3) MEDICALLY ACCEPTED INDICATION.—The 

10 term ‘medically accepted indication’ means the appli11 cable drug is included in the compendia described in 

12 section 1861(t)(1) or is approved by a committee de13 scribed in such section (or, in the case of an applica14 ble drug that is a covered part D drug (as defined 

15 in section 1860D–2(e)), has the meaning given such 

16 term in paragraph (4) of such section 1860D–2(e)). 

17 ‘‘(c) REGULATIONS.—The Secretary shall establish 

18 by regulation requirements that, effective not later than 

19 1 year after the date of enactment of this section, physi20 cians and practitioners use the form developed under sub21 section (a) to make the certification under such subsection 

22 with respect to an applicable drug prescribed by the physi23 cian or practitioner for an off-label use under this title. 

24 In order to carry out these requirements in a timely man25 ner, the Secretary shall promulgate regulations that take 


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1 effect on an interim basis, after notice and pending oppor2 tunity for public comment.’’. 

3 SEC. 8. EXPANSION OF 340B PROGRAM COVERED ENTITIES 

4 TO INCLUDE PACE PROGRAMS. 

5 (a) EXPANSION.—Section 340B(a) of the Public 

6 Health Service Act (42 U.S.C. 256b(a)) is amended— 

7 (1) in paragraph (4), by adding at the end the 

8 following: 

9 ‘‘(P) An entity that is a PACE provider of10 fering a PACE program under section 1894 

11 and section 1934 of the Social Security Act.’’; 

12 and 

13 (2) in paragraph (5)(A), by adding at the end 

14 the following: 

15 ‘‘(iii) ADDITIONAL MECHANISM.—The 

16 Secretary shall establish a mechanism to 

17 ensure that a manufacturer does not pay a 

18 duplicate discount with respect to a drug 

19 that is subject to an agreement under this 

20 section if the PACE program receives any 

21 rebate (including any negotiated price con22 cessions) for the drug under part D of title 

23 XVIII of the Social Security Act. Such 

24 mechanism shall be similar to the mecha25 nism established under clause (ii).’’. 


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1 (b) REQUIREMENTS.— 

2 (1) MEDICARE.—Section 1894(e) of the Social 

3 Security Act (42 U.S.C. 1395eee(e)) is amended by 

4 adding at the end the following new paragraph: 

5 ‘‘(9) PARTICIPATION IN 340B PROGRAM.— 

6 ‘‘(A) IN GENERAL.—In the case of a 

7 PACE program that serves part D eligible indi8 viduals who are enrolled under such program, 

9 the PACE program agreement for such pro10 gram shall require the PACE provider offering 

11 the program to participate in the drug discount 

12 program under section 340B of the Public 

13 Health Service Act for purposes of purchasing 

14 covered part D drugs with respect to qualified 

15 prescription drug coverage provided to such in16 dividuals. 

17 ‘‘(B) ATTESTATION.—The Secretary may 

18 accept an attestation by a PACE provider, at 

19 the time of submitting a bid pursuant to section 

20 1860D–21(f), as sufficient evidence of partici21 pation in the drug discount program under sec22 tion 340B of the Public Health Service Act for 

23 purposes of subparagraph (A). 

24 ‘‘(C) ENSURING TIMELY ACCESS TO COV25 ERED OUTPATIENT DRUGS.—Nothing in this 


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1 paragraph shall prevent a PACE program from 

2 providing enrollees access to covered outpatient 

3 drugs (including covered part D drugs) through 

4 a retail community pharmacy (as defined in sec5 tion 1927(k)(10)) that is not a contract phar6 macy under the drug discount program under 

7 section 340B of the Public Health Service Act 

8 in the case where such access is necessary to 

9 ensure that such drugs are dispensed to enroll10 ees on a timely basis. 

11 ‘‘(D) DEFINITIONS.—In this paragraph: 

12 ‘‘(i) COVERED OUTPATIENT DRUG.— 

13 The term ‘covered outpatient drug’ has the 

14 meaning given such term for purposes of 

15 section 340B of the Public Health Service 

16 Act. 

17 ‘‘(ii) COVERED PART D DRUG.—The 

18 term ‘covered part D drug’ has the mean19 ing given such term in section 1860D–2(e). 

20 ‘‘(iii) PART D ELIGIBLE INDI21 VIDUAL.—The term ‘part D eligible indi22 vidual’ has the meaning given such term in 

23 section 1860D–1(a)(3)(A). 

24 ‘‘(iv) QUALIFIED PRESCRIPTION DRUG

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1 tion drug coverage’ has the meaning given 

2 such term in section 1860D–2(a).’’. 

3 (2) MEDICAID.—Section 1934(e) of the Social 

4 Security Act (42 U.S.C. 1396u–4(e)) is amended by 

5 adding at the end the following new paragraph: 

6 ‘‘(9) PARTICIPATION IN 340B PROGRAM.— 

7 ‘‘(A) IN GENERAL.—In the case of a 

8 PACE program that serves part D eligible indi9 viduals who are enrolled under such program, 

10 the PACE program agreement for such pro11 gram shall require the PACE provider offering 

12 the program to participate in the drug discount 

13 program under section 340B of the Public 

14 Health Service Act for purposes of purchasing 

15 covered part D drugs with respect to qualified 

16 prescription drug coverage provided to such in17 dividuals. 

18 ‘‘(B) ATTESTATION.—The Secretary may 

19 accept an attestation by a PACE provider, at 

20 the time of submitting a bid pursuant to section 

21 1860D–21(f), as sufficient evidence of partici22 pation in the drug discount program under sec23 tion 340B of the Public Health Service Act for 

24 purposes of subparagraph (A). 


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1 ‘‘(C) ENSURING TIMELY ACCESS TO COV2 ERED OUTPATIENT DRUGS.—Nothing in this 

3 paragraph shall prevent a PACE program from 

4 providing enrollees access to covered outpatient 

5 drugs (including covered part D drugs) through 

6 a retail community pharmacy (as defined in sec7 tion 1927(k)(10)) that is not a contract phar8 macy under the drug discount program under 

9 section 340B of the Public Health Service Act 

10 in the case where such access is necessary to 

11 ensure that such drugs are dispensed to enroll12 ees on a timely basis. 

13 ‘‘(D) DEFINITIONS.—In this paragraph: 

14 ‘‘(i) COVERED OUTPATIENT DRUG.— 

15 The term ‘covered outpatient drug’ has the 

16 meaning given such term for purposes of 

17 section 340B of the Public Health Service 

18 Act. 

19 ‘‘(ii) COVERED PART D DRUG.—The 

20 term ‘covered part D drug’ has the mean21 ing given such term in section 1860D–2(e). 

22 ‘‘(iii) PART D ELIGIBLE INDI23 VIDUAL.—The term ‘part D eligible indi24 vidual’ has the meaning given such term in 

25 section 1860D–1(a)(3)(A). 


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1 ‘‘(iv) QUALIFIED PRESCRIPTION DRUG

2 COVERAGE.—The term ‘qualified prescrip3 tion drug coverage’ has the meaning given 

4 such term in section 1860D–2(a).’’. 

5 (3) EFFECTIVE DATE.—The amendments made 

6 by this subsection shall apply to PACE program 

7 agreements entered into on or after the date that is 

8 2 years after the date of enactment of this section. 

9 (c) INCLUSION OF SAVINGS IN BIDS SUBMITTED BY

10 PACE PROGRAMS PROVIDING QUALIFIED PRESCRIPTION

11 DRUG COVERAGE.— 

12 (1) IN GENERAL.—Section 1860D–21(f) of the 

13 Social Security Act (42 U.S.C. 1395w–131(f)) is 

14 amended by adding at the end the following new 

15 paragraph: 

16 ‘‘(4) PARTICIPATION IN 340B PROGRAM.— 

17 ‘‘(A) INCLUSION OF SAVINGS IN BIDS SUB18 MITTED.— 

19 ‘‘(i) DETERMINATION OF SAVINGS.— 

20 An organization offering prescription drug 

21 coverage under this subsection shall deter22 mine the estimated annual savings to the 

23 organization as a result of participation in 

24 the drug discount program under section 

25 340B of the Public Health Service Act (as 


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1 described in sections 1894(e)(2)(C) and 

2 1934(e)(2)(C)). 

3 ‘‘(ii) INCLUSION IN BIDS SUB4 MITTED.—The bid of an organization of5 fering prescription drug coverage under 

6 this subsection shall reflect the estimated 

7 savings determined by the organization 

8 under clause (i) for the plan year involved, 

9 and shall take into account any additional 

10 costs to the organization as a result of the 

11 implementation and administration of such 

12 drug discount program during the plan 

13 year involved. Such bid shall include an at14 testation by the organization that such 

15 savings are reflected in the bid amount. 

16 ‘‘(iii) CONSIDERATION OF APPLICABLE

17 CEILING PRICES.—In making the deter18 mination under clause (i), the organization 

19 shall consider the applicable ceiling prices 

20 for covered outpatient drugs (using the ac21 cess provided under section 

22 340B(d)(1)(B)(iii) of the Public Health 

23 Service Act). 

24 ‘‘(B) RECEIPT OF PERCENTAGE OF SAV25 INGS.— 


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1 ‘‘(i) IN GENERAL.—Subject to clause 

2 (ii), an organization offering prescription 

3 drug coverage under this subsection shall 

4 be eligible to receive from the Secretary an 

5 amount equal to 10 percent of the esti6 mated annual savings to the Federal gov7 ernment (as determined by the Secretary 

8 under regulations promulgated under sub9 paragraph (C)) to the organization as a re10 sult of participation in the drug discount 

11 program under section 340B of the Public 

12 Health Service Act (as described in sec13 tions 1894(e)(2)(C) and 1934(e)(2)(C)). In 

14 making the determination under the pre15 ceding sentence, the Secretary shall con16 sider the determination of the organization 

17 under subparagraph (A)(i). 

18 ‘‘(ii) REQUIREMENTS.—An organiza19 tion shall only be eligible to receive the 

20 amount under clause (i) for the plan year 

21 involved if the organization— 

22 ‘‘(I) submits to the Secretary an 

23 application in such form and manner, 

24 and containing such information, as 

25 the Secretary may specify; and 


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1 ‘‘(II) has in effect a plan ap2 proved by the Secretary for the use of 

3 any amounts received under such 

4 clause to— 

5 ‘‘(aa) provide to enrollees 

6 enhanced formulary coverage, 

7 medication management, or dis8 ease management; 

9 ‘‘(bb) invest in the develop10 ment of the organization (includ11 ing through the use of a signifi12 cant proportion of the savings to 

13 invest in the development and 

14 use of qualified electronic health 

15 records (as defined in section 

16 3000(13) of the Public Health 

17 Service Act) or other health in18 formation technology); or 

19 ‘‘(cc) carry out other initia20 tives approved by the Secretary. 

21 ‘‘(C) REGULATIONS.—The Secretary shall 

22 promulgate regulations to carry out this para23 graph and sections 1894(e)(9) and 

24 1934(e)(9).’’. 


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1 (2) EFFECTIVE DATE.—The amendment made 

2 by this subsection shall apply to plan years begin3 ning on or after the date that is 2 years after the 

4 date of enactment of this Act. 

5 (d) NOT TREATED AS CHANGE IN LAW FOR PUR6 POSES OF DETERMINING MANUFACTURER COMPLI7 ANCE.—Section 1927(a)(5) of the Social Security Act (42 

8 U.S.C. 1396r–8(a)(5)) is amended— 

9 (1) in subparagraph (D)— 

10 (A) by striking ‘‘AMENDMENTS.—In deter11 mining’’ and inserting ‘‘AMENDMENTS.— 

12 ‘‘(i) IN GENERAL.—Subject to clause 

13 (ii), in determining’’; and 

14 (B) by adding at the end the following new 

15 clause: 

16 ‘‘(ii) EXCEPTION.—The Secretary 

17 shall take into account the amendments 

18 made by section 9 of the Prescription Drug 

19 Cost Reduction Act for purposes of deter20 mining whether an agreement under sub21 paragraph (A) meets the requirements of 

22 section 340B of the Public Health Service 

23 Act and an agreement under such subpara24 graph shall not be determined to meet such 

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1 quirements under such section with respect 

2 to covered outpatient drugs purchased by a 

3 covered entity described in subsection 

4 (a)(4)(P) of such section on or after the 

5 date that is 1 year after the date of enact6 ment of such Act.’’; and 

7 (2) in subparagraph (E)— 

8 (A) by striking ‘‘COMPLIANCE.—A manu9 facturer’’ and inserting ‘‘COMPLIANCE.— 

10 ‘‘(i) IN GENERAL.—Subject to clause 

11 (ii), a manufacturer’’; and 

12 (B) by adding at the end the following new 

13 clause: 

14 ‘‘(ii) EXCEPTION.—The amendments 

15 made by section 9 of the Prescription Drug 

16 Cost Reduction Act shall not be treated as 

17 a legislative change for purposes of apply18 ing clause (i) and a manufacturer shall not 

19 be deemed to be in compliance with the re20 quirements of this paragraph if the manu21 facturer has not entered into an agreement 

22 with the Secretary that meets the require23 ments under section 340B of the Public 

24 Health Service Act with respect to covered 

25 outpatient drugs purchased by a covered 


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25 

•S 1699 IS

1 entity described in subsection (a)(4)(P) of 

2 such section on or after the date that is 1 

3 year after the date of enactment of such 

4 Act.’’. 

Æ 


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