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[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 1239 Introduced in Senate (IS)]

111th CONGRESS
  1st Session
                                S. 1239

 To amend section 340B of the Public Health Service Act to revise and 
  expand the drug discount program under that section to improve the 
    provision of discounts on drug purchases for certain safety net 
                               providers.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                             June 11, 2009

 Mr. Bingaman (for himself, Mr. Thune, and Mrs. Gillibrand) introduced 
the following bill; which was read twice and referred to the Committee 
               on Health, Education, Labor, and Pensions

_______________________________________________________________________

                                 A BILL

 
 To amend section 340B of the Public Health Service Act to revise and 
  expand the drug discount program under that section to improve the 
    provision of discounts on drug purchases for certain safety net 
                               providers.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``340B Program Improvement and 
Integrity Act of 2009''.

SEC. 2. EXPANDED PARTICIPATION IN SECTION 340B PROGRAM.

    (a) Expansion of Covered Entities Receiving Discounted Prices.--
Section 340B(a)(4) of the Public Health Service Act (42 U.S.C. 
256b(a)(4)) is amended by adding at the end the following:
                    ``(M) A children's hospital excluded from the 
                Medicare prospective payment system pursuant to section 
                1886(d)(1)(B)(iii) of the Social Security Act which 
                would meet the requirements of subparagraph (L), 
                including the disproportionate share adjustment 
                percentage requirement under clause (ii) of such 
                subparagraph, if the hospital were a subsection (d) 
                hospital as defined by section 1886(d)(1)(B) of the 
                Social Security Act.
                    ``(N) An entity that is a critical access hospital 
                (as determined under section 1820(c)(2) of the Social 
                Security Act), and that meets the requirements of 
                subparagraph (L)(i).
                    ``(O) An entity that is a rural referral center, as 
                defined by section 1886(d)(5)(C)(i) of the Social 
                Security Act, or a sole community hospital, as defined 
                by section 1886(d)(5)(C)(iii) of such Act, and that 
                both meets the requirements of subparagraph (L)(i) and 
                has a disproportionate share adjustment percentage 
                equal to or greater than 8 percent.''.
    (b) Extension of Discounts to Inpatient Drugs.--Section 340B of the 
Public Health Service Act (42 U.S.C. 256b) is amended--
            (1) in subsection (a), by striking ``outpatient'' each 
        place that such appears in paragraphs (2), (5), (7), and (9); 
        and
            (2) in subsection (b)--
                    (A) by striking ``In this section'' and inserting 
                the following:
                    ``(A) In general.--In this section''; and
                    (B) by adding at the end the following:
                    ``(B) Covered drug.--In this section, the term 
                `covered drug'--
                            ``(i) means a covered outpatient drug (as 
                        defined in section 1927(k)(2) of the Social 
                        Security Act); and
                            ``(ii) includes, notwithstanding paragraph 
                        (3)(A) of such section 1927(k), a drug used in 
                        connection with an inpatient or outpatient 
                        service provided by a hospital described in 
                        subparagraph (L), (M), (N), or (O) of 
                        subsection (a)(4) that is enrolled to 
                        participate in the drug discount program under 
                        this section.
                    ``(C) Purchasing arrangements for inpatient 
                drugs.--The Secretary shall ensure that a hospital 
                described in subparagraph (L), (M), (N), or (O) of 
                subsection (a)(4) that is enrolled to participate in 
                the drug discount program under this section shall have 
                multiple options for purchasing covered drugs for 
                inpatients including by utilizing a group purchasing 
                organization or other group purchasing arrangement, 
                establishing and utilizing its own group purchasing 
                program, purchasing directly from a manufacturer, and 
                any other purchasing arrangements that the Secretary 
                may deem appropriate to ensure access to drug discount 
                pricing under this section for inpatient drugs taking 
                into account the particular needs of small and rural 
                hospitals.''.
    (c) Prohibition on Group Purchasing Arrangements.--Section 340B(a) 
of the Public Health Service Act (42 U.S.C. 256b(a)) is amended--
            (1) in paragraph (4)(L)--
                    (A) in clause (i), by adding ``and'' at the end;
                    (B) in clause (ii), by striking ``; and'' and 
                inserting a period; and
                    (C) by striking clause (iii); and
            (2) in paragraph (5)--
                    (A) by redesignating subparagraphs (C) and (D) as 
                subparagraphs (D) and (E); respectively; and
                    (B) by inserting after subparagraph (B), the 
                following:
                    ``(C) Prohibiting the use of group purchasing 
                arrangements.--
                            ``(i) In general.--A hospital described in 
                        subparagraphs (L), (M), (N), or (O) of 
                        paragraph (4) shall not obtain covered 
                        outpatient drugs through a group purchasing 
                        organization or other group purchasing 
                        arrangement, except as permitted or provided 
                        for pursuant to clauses (ii) or (iii).
                            ``(ii) Inpatient drugs.--Clause (i) shall 
                        not apply to drugs purchased for inpatient use.
                            ``(iii) Exceptions.--The Secretary shall 
                        establish reasonable exceptions to clause (i)--
                                    ``(I) with respect to a covered 
                                outpatient drug that is unavailable to 
                                be purchased through the program under 
                                this section due to a drug shortage 
                                problem, manufacturer noncompliance, or 
                                any other circumstance beyond the 
                                hospital's control;
                                    ``(II) to facilitate generic 
                                substitution when a generic covered 
                                outpatient drug is available at a lower 
                                price; or
                                    ``(III) to reduce in other ways the 
                                administrative burdens of managing both 
                                inventories of drugs subject to this 
                                section and inventories of drugs that 
                                are not subject to this section, so 
                                long as the exceptions do not create a 
                                duplicate discount problem in violation 
                                of subparagraph (A) or a diversion 
                                problem in violation of subparagraph 
                                (B).''.
    (d) Medicaid Credits on Inpatient Drugs.--Section 340B(a)(5) of the 
Public Health Service Act (42 U.S.C. 256b(a)(5)) is amended by adding 
at the end the following:
                    ``(E) Medicaid credits.--Not later than 90 days 
                after the date of filing of the hospital's most 
                recently filed Medicare cost report, the hospital shall 
                issue a credit as determined by the Secretary to the 
                State Medicaid program for inpatient covered drugs 
                provided to Medicaid recipients.''.
    (e) Integrity Improvements.--Subsection (c) of section 340B of the 
Public Health Service Act (42 U.S.C. 256b(c)) is amended to read as 
follows:
    ``(c) Improvements in Program Integrity.--
            ``(1) Manufacturer compliance.--
                    ``(A) In general.--From amounts appropriated under 
                paragraph (4), the Secretary shall provide for 
                improvements in compliance by manufacturers with the 
                requirements of this section in order to prevent 
                overcharges and other violations of the discounted 
                pricing requirements specified in this section.
                    ``(B) Improvements.--The improvements described in 
                subparagraph (A) shall include the following:
                            ``(i) The development of a system to enable 
                        the Secretary to verify the accuracy of ceiling 
                        prices calculated by manufacturers under 
                        subsection (a)(1) and charged to covered 
                        entities, which shall include the following:
                                    ``(I) Developing and publishing 
                                through an appropriate policy or 
                                regulatory issuance, precisely defined 
                                standards and methodology for the 
                                calculation of ceiling prices under 
                                such subsection.
                                    ``(II) Comparing regularly the 
                                ceiling prices calculated by the 
                                Secretary with the quarterly pricing 
                                data that is reported by manufacturers 
                                to the Secretary.
                                    ``(III) Performing spot checks of 
                                sales transactions by covered entities.
                                    ``(IV) Inquiring into the cause of 
                                any pricing discrepancies that may be 
                                identified and either taking, or 
                                requiring manufacturers to take, such 
                                corrective action as is appropriate in 
                                response to such price discrepancies.
                            ``(ii) The establishment of procedures for 
                        manufacturers to issue refunds to covered 
                        entities in the event that there is an 
                        overcharge by the manufacturers, including the 
                        following:
                                    ``(I) Providing the Secretary with 
                                an explanation of why and how the 
                                overcharge occurred, how the refunds 
                                will be calculated, and to whom the 
                                refunds will be issued.
                                    ``(II) Oversight by the Secretary 
                                to ensure that the refunds are issued 
                                accurately and within a reasonable 
                                period of time, both in routine 
                                instances of retroactive adjustment to 
                                relevant pricing data and exceptional 
                                circumstances such as erroneous or 
                                intentional overcharging for covered 
                                drugs.
                            ``(iii) The provision of access through the 
                        Internet website of the Department of Health 
                        and Human Services to the applicable ceiling 
                        prices for covered drugs as calculated and 
                        verified by the Secretary in accordance with 
                        this section, in a manner (such as through the 
                        use of password protection) that limits such 
                        access to covered entities and adequately 
                        assures security and protection of privileged 
                        pricing data from unauthorized re-disclosure.
                            ``(iv) The development of a mechanism by 
                        which--
                                    ``(I) rebates and other discounts 
                                provided by manufacturers to other 
                                purchasers subsequent to the sale of 
                                covered drugs to covered entities are 
                                reported to the Secretary; and
                                    ``(II) appropriate credits and 
                                refunds are issued to covered entities 
                                if such discounts or rebates have the 
                                effect of lowering the applicable 
                                ceiling price for the relevant quarter 
                                for the drugs involved.
                            ``(v) Selective auditing of manufacturers 
                        and wholesalers to ensure the integrity of the 
                        drug discount program under this section.
                            ``(vi) The imposition of sanctions in the 
                        form of civil monetary penalties, which--
                                    ``(I) shall be assessed according 
                                to standards established in regulations 
                                to be promulgated by the Secretary 
                                within 180 days of the date of 
                                enactment of the 340B Program 
                                Improvement and Integrity Act of 2009;
                                    ``(II) shall not exceed $5,000 for 
                                each instance of overcharging a covered 
                                entity that may have occurred; and
                                    ``(III) shall apply to any 
                                manufacturer with an agreement under 
                                this section that knowingly and 
                                intentionally charges a covered entity 
                                a price for purchase of a drug that 
                                exceeds the maximum applicable price 
                                under subsection (a)(1).
            ``(2) Covered entity compliance.--
                    ``(A) In general.--From amounts appropriated under 
                paragraph (4), the Secretary shall provide for 
                improvements in compliance by covered entities with the 
                requirements of this section in order to prevent 
                diversion and violations of the duplicate discount 
                provision and other requirements specified under 
                subsection (a)(5).
                    ``(B) Improvements.--The improvements described in 
                subparagraph (A) shall include the following:
                            ``(i) The development of procedures to 
                        enable and require covered entities to 
                        regularly update (at least annually) the 
                        information on the Internet website of the 
                        Department of Health and Human Services 
                        relating to this section.
                            ``(ii) The development of a system for the 
                        Secretary to verify the accuracy of information 
                        regarding covered entities that is listed on 
                        the website described in clause (i).
                            ``(iii) The development of more detailed 
                        guidance describing methodologies and options 
                        available to covered entities for billing 
                        covered drugs to State Medicaid agencies in a 
                        manner that avoids duplicate discounts pursuant 
                        to subsection (a)(5)(A).
                            ``(iv) The establishment of a single, 
                        universal, and standardized identification 
                        system by which each covered entity site can be 
                        identified by manufacturers, distributors, 
                        covered entities, and the Secretary for 
                        purposes of facilitating the ordering, 
                        purchasing, and delivery of covered drugs under 
                        this section, including the processing of 
                        chargebacks for such drugs.
                            ``(v) The imposition of sanctions, in 
                        appropriate cases as determined by the 
                        Secretary, additional to those to which covered 
                        entities are subject under subparagraph 
                        (a)(5)(E), through one or more of the following 
                        actions:
                                    ``(I) Where a covered entity 
                                knowingly and intentionally violates 
                                subparagraph (a)(5)(B), the covered 
                                entity shall be required to pay a 
                                monetary penalty to a manufacturer or 
                                manufacturers in the form of interest 
                                on sums for which the covered entity is 
                                found liable under paragraph (a)(5)(E), 
                                such interest to be compounded monthly 
                                and equal to the current short term 
                                interest rate as determined by the 
                                Federal Reserve for the time period for 
                                which the covered entity is liable.
                                    ``(II) Where the Secretary 
                                determines a violation of subparagraph 
                                (a)(5)(B) was systematic and egregious 
                                as well as knowing and intentional, 
                                removing the covered entity from the 
                                drug discount program under this 
                                section and disqualifying the entity 
                                from re-entry into such program for a 
                                reasonable period of time to be 
                                determined by the Secretary.
                                    ``(III) Referring matters to 
                                appropriate Federal authorities within 
                                the Food and Drug Administration, the 
                                Office of Inspector General of 
                                Department of Health and Human 
                                Services, or other Federal agencies for 
                                consideration of appropriate action 
                                under other Federal statutes, such as 
                                the Prescription Drug Marketing Act.
            ``(3) Administrative dispute resolution process.--
                    ``(A) In general.--Not later than 180 days after 
                the date of enactment of the 340B Program Improvement 
                and Integrity Act of 2009, the Secretary shall 
                promulgate regulations to establish and implement an 
                administrative process for the resolution of claims by 
                covered entities that they have been overcharged for 
                drugs purchased under this section, and claims by 
                manufacturers, after the conduct of audits as 
                authorized by subsection (a)(5)(D), of violations of 
                subsections (a)(5)(A) or (a)(5)(B), including 
                appropriate procedures for the provision of remedies 
                and enforcement of determinations made pursuant to such 
                process through mechanisms and sanctions described in 
                paragraphs (1)(B) and (2)(B).
                    ``(B) Deadline and procedures.--Regulations 
                promulgated by the Secretary under subparagraph (A) 
                shall--
                            ``(i) designate or establish a decision-
                        making official or decision-making body within 
                        the Department of Health and Human Services to 
                        be responsible for reviewing and finally 
                        resolving claims by covered entities that they 
                        have been charged prices for covered drugs in 
                        excess of the ceiling price described in 
                        subsection (a)(1), and claims by manufacturers 
                        that violations of subsection (a)(5)(A) or 
                        (a)(5)(B) have occurred;
                            ``(ii) establish such deadlines and 
                        procedures as may be necessary to ensure that 
                        claims shall be resolved fairly, efficiently, 
                        and expeditiously;
                            ``(iii) establish procedures by which a 
                        covered entity may discover and obtain such 
                        information and documents from manufacturers 
                        and third parties as may be relevant to 
                        demonstrate the merits of a claim that charges 
                        for a manufacturer's product have exceeded the 
                        applicable ceiling price under this section, 
                        and may submit such documents and information 
                        to the administrative official or body 
                        responsible for adjudicating such claim;
                            ``(iv) require that a manufacturer conduct 
                        an audit of a covered entity pursuant to 
                        subsection (a)(5)(D) as a prerequisite to 
                        initiating administrative dispute resolution 
                        proceedings against a covered entity;
                            ``(v) permit the official or body 
                        designated under clause (i), at the request of 
                        a manufacturer or manufacturers, to consolidate 
                        claims brought by more than one manufacturer 
                        against the same covered entity where, in the 
                        judgment of such official or body, 
                        consolidation is appropriate and consistent 
                        with the goals of fairness and economy of 
                        resources; and
                            ``(vi) include provisions and procedures to 
                        permit multiple covered entities to jointly 
                        assert claims of overcharges by the same 
                        manufacturer for the same drug or drugs in one 
                        administrative proceeding, and permit such 
                        claims to be asserted on behalf of covered 
                        entities by associations or organizations 
                        representing the interests of such covered 
                        entities and of which the covered entities are 
                        members.
                    ``(C) Finality of administrative resolution.--The 
                administrative resolution of a claim or claims under 
                the regulations promulgated under subparagraph (A) 
                shall be a final agency decision and shall be binding 
                upon the parties involved, unless invalidated by an 
                order of a court of competent jurisdiction.
            ``(4) Authorization of appropriations.--There are 
        authorized to be appropriated to carry out this subsection, 
        such sums as may be necessary for fiscal year 2010, and each 
        succeeding fiscal year.''.
    (f) Conforming Amendments.--
            (1) Social security act.--Section 1927 of the Social 
        Security Act (42 U.S.C. 1396r-8), is amended--
                    (A) in subsection (a)(5)--
                            (i) in subparagraph (A), by striking 
                        ``covered outpatient drugs'' and inserting 
                        ``covered drugs (as defined in section 
                        340B(b)(2) of the Public Health Service Act)'';
                            (ii) by striking subparagraph (D); and
                            (iii) by redesignating subparagraph (E) as 
                        subparagraph (D);
                    (B) in subsection (c)(1)(C)(i), by redesignating 
                subclauses (II) through (IV) as subclauses (III) 
                through (V), respectively and by inserting after 
                subclause (I) the following new subclause:
                                    ``(II) any prices charged for a 
                                covered drug (as defined in section 
                                340B(b)(2) of the Public Health Service 
                                Act);''; and
                    (C) in subsection (k)(1)--
                            (i) in subparagraph (A), by striking 
                        ``subparagraph (B)'' and inserting 
                        ``subparagraphs (B) and (D)''; and
                            (ii) by adding at the end the following new 
                        subparagraph:
                    ``(D) Calculation for covered drugs.--With respect 
                to a covered drug (as defined in section 340B(b)(2) of 
                the Public Health Service Act), the average 
                manufacturer price shall be determined in accordance 
                with subparagraph (A) except that, in the event a 
                covered drug is not distributed to the retail pharmacy 
                class of trade, it shall mean the average price paid to 
                the manufacturer for the drug in the United States by 
                wholesalers for drugs distributed to the acute care 
                class of trade, after deducting customary prompt pay 
                discounts. The Secretary shall establish a mechanism 
                for collecting the necessary data for the acute care 
                class of trade from manufacturers.''.
            (2) Public health service act.--Section 340B(a) of such Act 
        (42 U.S.C. 256b(a)) is amended--
                    (A) in subsection (a)(1), by adding at the end the 
                following: ``Each such agreement shall require that the 
                manufacturer furnish the Secretary with reports, on a 
                quarterly basis, of the price for each covered drug 
                subject to the agreement that, according to the 
                manufacturer, represents the maximum price that covered 
                entities may permissibly be required to pay for the 
                drug (referred to in this section as the `ceiling 
                price'), and shall require that the manufacturer offer 
                each covered entity covered drugs for purchase at or 
                below the applicable ceiling price if such drug is made 
                available to any other purchaser at any price.''; and
                    (B) in the first sentence of subsection (a)(5)(E), 
                as so redesignated by subsection (c)(2), by inserting 
                ``after an audit as described in subparagraph (D), 
                and'' after ``finds,''.

SEC. 3. EFFECTIVE DATES.

    (a) In General.--The amendments made by this Act shall take effect 
on January 1, 2010, and shall apply to drugs purchased on or after 
January 1, 2010.
    (b) Effectiveness.--The amendments made by this Act shall be 
effective, and shall be taken into account in determining whether a 
manufacturer is deemed to meet the requirements of section 340B(a) of 
the Public Health Service Act (42 U.S.C. 256b(a)) and of section 
1927(a)(5) of the Social Security Act (42 U.S.C. 1396r-8(a)(5)), 
notwithstanding any other provision of law.
                                 <all>
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