I 

116TH CONGRESS 

1ST SESSION H. R. 1559 

To amend the Public Health Service Act to strengthen program integrity 

and enhance low-income patient benefits for safety net providers. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 6, 2019 

Mr. COLLINS of New York introduced the following bill; which was referred 

to the Committee on Energy and Commerce 

A BILL 

To amend the Public Health Service Act to strengthen program integrity and enhance low-income patient benefits 

for safety net providers. 

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. 

4 This Act may be cited as the ‘‘340B Protection and 

5 Accountability Act of 2019’’. 

6 SEC. 2. STRENGTHENING 340B PROGRAM INTEGRITY AND 

7 ENHANCING LOW-INCOME PATIENT BENE8 FITS FOR SAFETY NET PROVIDERS. 

9 (a) DEFINITION OF PATIENT.—Section 340B(b) of 

10 the Public Health Service Act (42 U.S.C. 256b(b)) is 


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1 amended by adding at the end the following new para2 graph: 

3 ‘‘(3) PATIENT.— 

4 ‘‘(A) IN GENERAL.—In this section, the 

5 term ‘patient’ means, with respect to a covered 

6 entity described in subparagraph (L) or (M) of 

7 subsection (a)(4), an individual who, on a pre8 scription-by-prescription or order-by-order 

9 basis— 

10 ‘‘(i) receives a health care service at a 

11 covered entity or an outpatient hospital fa12 cility described in subsection (c)(3) which 

13 is registered for the drug discount program 

14 under this section and listed on the public 

15 internet website of the Department of 

16 Health and Human Services relating to 

17 this section; 

18 ‘‘(ii) receives an outpatient in-person 

19 health care service from a health care pro20 vider employed by the covered entity or 

21 who is an independent contractor of the 

22 covered entity, such that the covered entity 

23 bills for services on behalf of the provider; 

24 ‘‘(iii) receives a drug that is ordered 

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1 vider, including any renewals of existing 

2 prescriptions, as a result of the service de3 scribed in clause (ii); 

4 ‘‘(iv) in the case of a covered entity 

5 that has a contract with a State or local 

6 government described in subclause (III) of 

7 subsection (a)(4)(L)(i), receives a health 

8 care service or range of such services, to 

9 include the ordering or prescribing of a 

10 covered outpatient drug, from the covered 

11 entity pursuant to such contract; 

12 ‘‘(v) is classified as an outpatient 

13 when the drug is ordered or prescribed, as 

14 demonstrated by how the service was reim15 bursed by the applicable payer, or, where 

16 the covered entity does not seek such reim17 bursement, how the service would have 

18 been reimbursed under title XVIII of the 

19 Social Security Act; and 

20 ‘‘(vi) has a relationship with the cov21 ered entity such that the covered entity 

22 creates and maintains auditable health 

23 care records which demonstrate that— 


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1 ‘‘(I) the covered entity has a pro2 vider-to-patient relationship with the 

3 individual; and 

4 ‘‘(II) responsibility for the indi5 vidual’s health care service that re6 sulted in the prescription or order for 

7 the drug described in clause (iii) is 

8 with the covered entity. 

9 ‘‘(B) EXCLUSIONS.—For purposes of this 

10 section, an individual shall not be considered a 

11 patient of a covered entity described in sub12 paragraph (L) or (M) of subsection (a)(4) if— 

13 ‘‘(i) the individual is an inmate of a 

14 correctional facility; 

15 ‘‘(ii) the health care service described 

16 in clause (ii) of subparagraph (A) received 

17 by the individual from the covered entity 

18 consists only of the administration or infu19 sion of a drug or drugs, or the dispensing 

20 of a drug or drugs for subsequent self-ad21 ministration or administration in the home 

22 setting, without a covered entity provider23 to-patient encounter; 

24 ‘‘(iii) the health care service described 

25 in clause (ii) of subparagraph (A) received 


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1 by the individual from the covered entity is 

2 provided by a health care organization that 

3 has only an affiliation arrangement with 

4 the covered entity, even if the covered enti5 ty has access to the affiliated organiza6 tion’s records; or 

7 ‘‘(iv) the primary relationship between 

8 the individual and the covered entity is one 

9 of employment. 

10 ‘‘(C) REGULATIONS.—Not later than 180 

11 days after the date of enactment of the 340B 

12 Protection and Accountability Act of 2019, the 

13 Secretary shall promulgate final regulations 

14 through notice-and-comment rulemaking to de15 fine the term ‘patient’ with respect to covered 

16 entities described in subparagraph (L) or (M) 

17 of subsection (a)(4) to reflect the requirements 

18 described in subparagraphs (A) and (B) of this 

19 paragraph. 

20 ‘‘(D) DEFINITION RELATING TO OTHER

21 COVERED ENTITIES.—In this section, the term 

22 ‘patient’, with respect to a covered entity de23 scribed in subparagraphs (A) through (K) of 

24 subsection (a)(4), has the meaning given such 

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1 tice Regarding Section 602 of the Veterans 

2 Health Care Act of 1992 Patient and Entity 

3 Eligibility (61 Fed Reg. 55156). 

4 ‘‘(E) RECORD RETENTION.—A covered en5 tity described in subparagraph (L) or (M) of 

6 subsection (a)(4) shall retain auditable health 

7 care records which demonstrate the existence of 

8 a patient relationship in accordance with this 

9 paragraph for each prescription or order for a 

10 rolling period of not less than five years, or 

11 longer to the extent required by State or Fed12 eral law.’’. 

13 (b) TREATMENT OF CONTRACTED SERVICES.—Sub14 section (a) of section 340B of the Public Health Service 

15 Act (42 U.S.C. 256b) is amended by adding at the end 

16 the following new paragraphs: 

17 ‘‘(11) CONTRACTED SERVICES.—In the case of 

18 a covered entity described in subparagraph (L) or 

19 (M) of subsection (a)(4) that elects to enter into a 

20 contractual arrangement with a third party for serv21 ices related to the drug discount program under this 

22 section, such as to dispense covered outpatient drugs 

23 subject to an agreement under this section to pa24 tients of the covered entity, to administer contracted 

25 pharmacy services, or to provide any other service 


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1 related to the drug discount program under this sec2 tion, the remuneration for which is based in whole 

3 or in part on the volume of dispensed covered out4 patient drugs subject to an agreement under this 

5 section, such covered entity shall— 

6 ‘‘(A) have a contractual agreement in place 

7 between the covered entity and each contracted 

8 entity, including with each location of a phar9 macy contracted to dispense covered outpatient 

10 drugs subject to an agreement under this sec11 tion to patients (as so defined) of the covered 

12 entity, which shall specify that the contracted 

13 entity shall adhere to all requirements of the 

14 drug discount program under this section, but 

15 that ultimate responsibility for program compli16 ance and oversight of compliance by each con17 tracted entity shall remain with the covered en18 tity and that all covered outpatient drugs sub19 ject to an agreement under this section shall be 

20 purchased by the covered entity; 

21 ‘‘(B) register each such agreement with 

22 the Secretary, include in such registration such 

23 information as shall be specified by the Sec24 retary, and make available such agreement 

25 upon request by the Secretary; 


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1 ‘‘(C) ensure the compliance of each such 

2 agreement with the requirements of this section 

3 to prevent drug diversion in violation of sub4 paragraph (B) of paragraph (5) and to prevent 

5 duplicate discounts in violation of subparagraph 

6 (A) of such paragraph before utilizing the serv7 ices of the contracted entity, including by— 

8 ‘‘(i) developing and implementing, 

9 with each contracted entity subject to such 

10 an agreement, a system to verify eligibility 

11 of patients (as so defined) of the entity; 

12 ‘‘(ii) developing and implementing, 

13 with each such contracted entity, a mecha14 nism for tracking the inventory of covered 

15 outpatient drugs that are subject to an 

16 agreement under this section that is suit17 able to prevent diversion in violation of 

18 subparagraph (B) of paragraph (5) and to 

19 prevent duplicate discounts in violation of 

20 subparagraph (A) of such paragraph, such 

21 as a separate inventory for such drugs; 

22 and 

23 ‘‘(iii) establishing a mechanism with 

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1 able to prevent duplicate discounts for cov2 ered outpatient drugs that are subject to 

3 an agreement under this section, including 

4 such drugs dispensed to enrollees of Med5 icaid managed care organizations, and 

6 complies with regulations on methodologies 

7 to prevent duplicate discounts issued by 

8 the Secretary; 

9 ‘‘(D) make available, to the extent the cov10 ered entity offers a charity care policy or has 

11 an obligation under subsection (a)(5)(E) to 

12 have a sliding fee scale, patient access to a cov13 ered entity’s prescription drug charity care ben14 efit and its sliding fee scale, and developing and 

15 implementing, with each such contracted entity, 

16 a mechanism for documenting the income and 

17 insurance status of each patient (as so defined) 

18 of the covered entity and the amount each such 

19 patient pays to receive covered outpatient drugs 

20 that are subject to an agreement under this sec21 tion; 

22 ‘‘(E) maintain, and ensure that each such 

23 contracted entity maintains, auditable records 

24 that pertain to the compliance of the covered 

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1 quirements described in this paragraph, for a 

2 rolling period of not less than 5 years; 

3 ‘‘(F) establish a process for, and conduct, 

4 periodic comparisons of the covered entity’s pre5 scribing records with the dispensing records of 

6 each such contracted entity, as applicable, to 

7 detect potential irregularities and to ensure that 

8 all drugs dispensed by the contracted entity are 

9 for patients (as so defined) of the covered enti10 ty; 

11 ‘‘(G) provide for annual on-site audits of 

12 each such contracted entity to be conducted by 

13 an independent outside auditor; 

14 ‘‘(H) maintain arrangements to dispense 

15 covered outpatient drugs that are subject to an 

16 agreement under this section to patients (as so 

17 defined) of the covered entity with no more 

18 than 5 contract pharmacy locations at any 

19 given time, all of which must be located within 

20 (or, for mail-order pharmacies, serve patients 

21 residing in) lower-income (using American 

22 Community Survey data as determined by the 

23 Secretary) census tracts served by the covered 

24 entity, except in the case that the covered entity 

25 files a publicly available exception request with 


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1 the Secretary that seeks authorization to estab2 lish a particular contract pharmacy arrange3 ment in a higher-income census tract and ex4 plains the reason in that particular case such a 

5 contract pharmacy would best meet the needs of 

6 low-income patients of the covered entity, and 

7 the Secretary decides to grant the request to es8 tablish one of the 5 contract pharmacies in the 

9 census tract requested; 

10 ‘‘(I) ensure, as applicable, that patients (as 

11 so defined) of the covered entity have access to 

12 the covered entity’s prescription drug charity 

13 care benefit through each contract pharmacy lo14 cation at the time of purchase of each covered 

15 outpatient drug subject to an agreement under 

16 this section to the same extent such patients 

17 have access to the benefit with respect to such 

18 drugs purchased directly through the covered 

19 entity; and 

20 ‘‘(J) limit any amount paid by the covered 

21 entity, or any agent of the covered entity, to the 

22 contracted entity for dispensing covered out23 patient drugs subject to an agreement under 

24 this section or for any other service related to 

25 the drug discount program under this section to 


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1 a reasonable amount, which shall not exceed the 

2 fair market value of such drug dispensing or 

3 other service. 

4 In the case the Secretary grants a request under 

5 subparagraph (H) to establish a particular contract 

6 pharmacy arrangement in a higher-income census 

7 tract, the Secretary shall make such decision avail8 able on a public website. 

9 ‘‘(12) AUDITING.—A covered entity described in 

10 subparagraph (L) or (M) of subsection (a)(4) and a 

11 contracted entity that enter into a contractual ar12 rangement described in paragraph (11) shall per13 mit— 

14 ‘‘(A) the Secretary to audit the records of 

15 the covered entity and of the contracted entity 

16 that pertain to the covered entity’s and the con17 tracted entity’s compliance with the require18 ments described in such paragraph; and 

19 ‘‘(B) the manufacturer of a covered out20 patient drug that is subject to an agreement 

21 under this section (or its designee) to audit 

22 such records of the covered entity and of the 

23 contracted entity solely with respect to such 

24 drugs of the manufacturer. 

25 ‘‘(13) REGULATIONS.— 


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1 ‘‘(A) Not later than 180 days after the 

2 date of enactment of this paragraph, the Sec3 retary shall promulgate final regulations 

4 through notice-and-comment rulemaking to im5 plement the requirements of paragraph (11) 

6 and paragraph (12). Such regulations shall in7 clude model terms for the contractual agree8 ment described in subparagraph (A) of para9 graph (11). 

10 ‘‘(B) Not later than 180 days after the 

11 date of enactment of this paragraph, the Sec12 retary shall promulgate final regulations 

13 through notice-and-comment rulemaking to es14 tablish procedures, in the case in which the Sec15 retary determines that a violation of the annual 

16 contract pharmacy independent on-site audit re17 quirement in subparagraph (F) of paragraph 

18 (11), with respect to a contract pharmacy ar19 rangement, was knowing and intentional— 

20 ‘‘(i) for removing the contract phar21 macy arrangement from a covered entity’s 

22 contract pharmacy network and disquali23 fying the entity from adding any additional 

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1 riod, to be determined by the Secretary, of 

2 not less than two years; and 

3 ‘‘(ii) for requiring that the entity pay 

4 a monetary penalty to a manufacturer or 

5 manufacturers in the form of interest on 

6 sums that are owed to the manufacturer 

7 due to violations of subparagraph (A) or 

8 (B) of subsection (a)(5) that occurred at 

9 one or more contract pharmacies and that 

10 were discovered later than such violations 

11 would have been if the entity had complied 

12 with its obligation to have annual inde13 pendent audits of contract pharmacies con14 ducted. 

15 ‘‘(14) MAIL ORDER STUDY AND REGULA16 TIONS.— 

17 ‘‘(A) REPORT.—Not later than 180 days 

18 after the date of the enactment of this para19 graph, the Secretary shall conduct a study (and 

20 submit to Congress a report containing the re21 sults of such study) regarding compliance con22 cerns associated with covered entities described 

23 in subparagraph (L) or (M) of subsection (a)(4) 

24 contracting with mail order pharmacies to dis25 pense covered outpatient drugs subject to an 


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1 agreement under this section, and any addi2 tional safeguards or limitations necessary and 

3 appropriate to reduce those compliance con4 cerns. 

5 ‘‘(B) REGULATIONS.—Not later than 180 

6 days after the submission of the report under 

7 subparagraph (A), the Secretary shall promul8 gate final regulations applicable to covered enti9 ties described in such subparagraph, through 

10 notice-and-comment rulemaking, to implement 

11 any additional safeguards or limitations rec12 ommended by the study. 

13 ‘‘(15) CONTRACT PHARMACY MORATORIUM.— 

14 No covered entity described in subparagraphs (L) or 

15 (M) of subsection (a)(4) shall enter into a new or ex16 panded contractual arrangement pursuant to which 

17 a third party dispenses covered outpatient drugs 

18 subject to an agreement under this section to pa19 tients (as so defined) of the covered entity during 

20 the period beginning on the date of the enactment 

21 of this paragraph and ending on the latter of— 

22 ‘‘(A) the effective date of final regulations 

23 described in paragraph (13); 

24 ‘‘(B) the effective date of final regulations 

25 described in paragraph (14); 


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1 ‘‘(C) the effective date of final regulations 

2 issued through Secretarial notice-and-comment 

3 rulemaking that take into consideration the 

4 findings and recommendations in the report 

5 from the Inspector General of the Department 

6 of Health and Human Services required under 

7 subsection (g)(3).’’. 

8 (c) REGULATIONS TO REDUCE DUPLICATE DIS9 COUNT RISKS.—Subsection (a)(5)(A) of section 340B of 

10 the Public Health Service Act (42 U.S.C. 256b) is amend11 ed by adding at the end the following new clause: 

12 ‘‘(iii) Not later than one year after 

13 the date of the enactment of this clause, 

14 the Secretary shall promulgate final regu15 lations through notice-and-comment rule16 making, describing methodologies for State 

17 Medicaid programs and all covered entities 

18 under subsection (a)(4) to identify and bill 

19 drugs subject to an agreement under this 

20 section in a manner that ensures compli21 ance with 340B Program prohibitions re22 garding duplicate discounts, including the 

23 duplicate discount prohibition under sec24 tion 1927(j)(1) of the Social Security Act, 

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1 tions to Medicaid managed care enrollees. 

2 Such methodologies shall include the use of 

3 340B-specific claims identifiers, and the 

4 provision of claims-level data by covered 

5 entities to States as well as manufacturers 

6 of covered outpatient drugs sufficient to 

7 identify claims that include drugs subject 

8 to an agreement under this section and to 

9 prevent duplicate discounts.’’. 

10 (d) AMOUNT CHARGED TO LOW-INCOME PA11 TIENTS.— 

12 (1) IN GENERAL.—Subsection (a)(5) of section 

13 340B of the Public Health Service Act (42 U.S.C. 

14 256b) is amended by adding at the end the following 

15 new subparagraphs: 

16 ‘‘(E) AMOUNT CHARGED TO LOW-INCOME

17 PATIENTS.—As a condition of certification or 

18 recertification under subparagraph (E) of para19 graph (7), each covered entity described in sub20 paragraph (L) or (M) of subsection (a)(4) must 

21 establish a sliding scale fee schedule for pro22 viding covered outpatient drugs that are subject 

23 to an agreement under this section, directly or 

24 under a contractual arrangement pursuant to 


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1 which a third party dispenses such drugs, to 

2 patients of the covered entity who are— 

3 ‘‘(i) low-income individuals; and 

4 ‘‘(ii) not covered under minimum es5 sential coverage, as defined in section 

6 5000A(f) of the Internal Revenue Code. 

7 ‘‘(F) REGULATIONS.—Not later than 180 

8 days after the date of enactment of this sub9 paragraph, the Secretary shall promulgate final 

10 regulations through notice-and-comment rule11 making, to implement the requirements under 

12 subparagraph (E). Such regulations shall— 

13 ‘‘(i) define the term ‘low-income indi14 vidual’; 

15 ‘‘(ii) provide a methodology for estab16 lishing the sliding scale fee schedule, which 

17 shall apply, where otherwise applicable to a 

18 covered entity, regardless of whether the 

19 covered outpatient drug is dispensed by the 

20 covered entity directly or a child site of the 

21 covered entity or by a contracted entity de22 scribed in paragraph (11); and 

23 ‘‘(iii) ensure the security and protec24 tion of privileged or otherwise confidential 


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1 data from unauthorized disclosure or re2 disclosure.’’. 

3 (e) PRIVATE NON-PROFIT DSH HOSPITALS AND

4 OUTPATIENT HOSPITAL FACILITIES.— 

5 (1) DEFINITION.—Subparagraph (L) of section 

6 340B(a)(4) of the Public Health Service Act (42 

7 U.S.C. 256b(a)(4)) is amended to read as follows: 

8 ‘‘(L) A subsection (d) hospital (as defined 

9 in section 1886(d)(1)(B) of the Social Security 

10 Act) that— 

11 ‘‘(i) is— 

12 ‘‘(I) owned or operated by a unit 

13 of State or local government; 

14 ‘‘(II) a public or private non15 profit corporation which is formally 

16 granted governmental powers by a 

17 unit of State or local government; or 

18 ‘‘(III) a private non-profit hos19 pital which has a contract with a 

20 State or local government to provide 

21 health care services, which include the 

22 ordering or prescribing of covered out23 patient drugs that are subject to an 

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1 tled to benefits under title XVIII of 

2 the Social Security Act or eligible for 

3 assistance under the State plan for 

4 medical assistance under title XIX of 

5 such Act; 

6 ‘‘(ii) for the most recent cost report7 ing period that ended before the calendar 

8 quarter involved, had a disproportionate 

9 share adjustment percentage (as deter10 mined under section 1886(d)(5)(F) of the 

11 Social Security Act) greater than 11.75 

12 percent or was described in section 

13 1886(d)(5)(F)(i)(II) of such Act; and 

14 ‘‘(iii) does not obtain covered out15 patient drugs through a group purchasing 

16 organization or other group purchasing ar17 rangement. 

18 If the Secretary determines that a hospital that 

19 is eligible for participation in the 340B pro20 gram under this subparagraph obtained covered 

21 outpatient drugs through a group purchasing 

22 organization or another group purchasing ar23 rangement while that hospital was participating 

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1 pital from such program and the hospital shall 

2 not be permitted to seek re-enrollment for a pe3 riod of at least 12 months after its removal 

4 from the program.’’. 

5 (2) STUDY AND REPORT; MORATORIUM; OUT6 PATIENT HOSPITAL FACILITIES; AUDITS.—Sub7 section (c) of section 340B of the Public Health 

8 Service Act (42 U.S.C. 256b) is amended to read as 

9 follows: 

10 ‘‘(c) COVERED ENTITIES THAT ARE PRIVATE, NON11 PROFIT DSH HOSPITALS.— 

12 ‘‘(1) STUDY AND REPORT.— 

13 ‘‘(A) STUDY.—The Comptroller General of 

14 the United States shall conduct a study on the 

15 relationship between the disproportionate share 

16 adjustment percentages of private covered enti17 ties described in subclauses (II) and (III) of 

18 subsection (a)(4)(L)(i) and the levels of charity 

19 care provided by such entities to outpatients. 

20 ‘‘(B) REPORT.—Not later than 180 days 

21 after the date of enactment of the 340B Protec22 tion and Accountability Act of 2019, the Comp23 troller General shall submit to the appropriate 

24 committees of Congress a report on the results 

25 of the study conducted under subparagraph 


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1 (A), including recommendations on a metric 

2 that, as applied to a private covered entity de3 scribed in such subparagraph, reflects a high 

4 level of charity care provided to outpatients as 

5 a percentage of the covered entity’s overall ex6 penses for outpatient care, and could replace 

7 the metric described in subclause (ii) of sub8 section (a)(4)(L). The Comptroller General 

9 shall recommend the metric that best aligns 

10 with the level of charity care provided to out11 patients as a percentage of overall hospital op12 erating expenses on outpatient care if no metric 

13 is identified that provides a precise measure of 

14 such percentage. 

15 ‘‘(2) MORATORIUM.— 

16 ‘‘(A) IN GENERAL.—For the period de17 scribed in subparagraph (B)— 

18 ‘‘(i) a private covered entity described 

19 in subclauses (II) or (III) of subsection 

20 (a)(4)(L)(i) may participate in the drug 

21 discount program under this section as a 

22 covered entity only if it was properly en23 rolled as a covered entity in the drug dis24 count program under this section as of the 

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1 tion and Accountability Act of 2019 and 

2 continuously enrolled thereafter; and 

3 ‘‘(ii) with respect to a facility or orga4 nization described in paragraph (3) of this 

5 subsection that is wholly owned by a pri6 vate covered entity described in subclause 

7 (II) or (III) of subsection (a)(4)(L)(i), only 

8 a facility or organization that was properly 

9 enrolled as a child site in the drug discount 

10 program under this section as of the date 

11 of the enactment of the 340B Protection 

12 and Accountability Act of 2019 and con13 tinuously enrolled thereafter may partici14 pate in the drug discount program under 

15 this section. 

16 ‘‘(B) PERIOD DESCRIBED.—For purposes 

17 of subparagraph (A), the period described in 

18 this subparagraph is the period beginning on 

19 the date of enactment of the 340B Protection 

20 and Accountability Act of 2019 and ending on 

21 the effective date described in subparagraph 

22 (C). 

23 ‘‘(C) EFFECTIVE DATE OF REPLACEMENT

24 METRIC.— 


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1 ‘‘(i) IN GENERAL.—For purposes of 

2 subparagraph (B), subject to clause (ii), 

3 the effective date described in this sub4 paragraph is the effective date specified in 

5 legislation that, with respect to private cov6 ered entities described in subclauses (II) 

7 and (III) of subsection (a)(4)(L)(i)— 

8 ‘‘(I) replaces the metric described 

9 in clause (ii) of subsection (a)(4)(L) 

10 with a metric that more accurately re11 flects the levels of outpatient charity 

12 care as a percentage of overall ex13 penses for outpatient care provided by 

14 such entities; and 

15 ‘‘(II) takes into account the re16 port submitted under paragraph (1), 

17 including by addressing the Comp18 troller General’s recommendations in19 cluded in such report. 

20 ‘‘(ii) EXCEPTION.—If legislation de21 scribed in clause (i) is not enacted by the 

22 date that is one year after the date of sub23 mission of the report under paragraph 

24 (1)— 


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1 ‘‘(I) the Secretary shall promul2 gate final regulations that implement, 

3 to the extent practicable, the Comp4 troller General’s recommendations in5 cluded within such report not later 

6 than the date that is 180 days after 

7 such one-year date; and 

8 ‘‘(II) for purposes of subpara9 graph (B), the effective date described 

10 in this subparagraph is the effective 

11 date of such final regulations. 

12 ‘‘(3) OUTPATIENT HOSPITAL FACILITIES.—A 

13 facility or organization may participate in the drug 

14 discount program under this section as a child site 

15 of a covered entity described in subparagraph (L) or 

16 (M) of subsection (a)(4) only if such facility or orga17 nization— 

18 ‘‘(A) is wholly owned by a covered entity 

19 described in subparagraph (L) or (M) of sub20 section (a)(4); 

21 ‘‘(B) except in the case in which the parent 

22 covered entity is a children’s hospital described 

23 in subparagraph (M) of subsection (a)(4) which 

24 does not file a Medicare cost report, is listed on 

25 the Medicare cost report most recently filed by 


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1 the parent covered entity on a line that is reim2 bursable under this title, if such cost report 

3 demonstrates that the services provided at the 

4 facility or organization have associated out5 patient costs and charges under this title, and 

6 if the parent covered entity has provided a copy 

7 of such cost report to the Office of Pharmacy 

8 Affairs of the Health Resources and Services 

9 Administration; 

10 ‘‘(C) in the case that the parent covered 

11 entity is a children’s hospital described in sub12 paragraph (M) of subsection (a)(4) which does 

13 not file a Medicare cost report, would be cor14 rectly included on a reimbursable line with as15 sociated outpatient costs and charges under 

16 title XVIII on a Medicare cost report of the 

17 parent covered entity, if filed, and the parent 

18 covered entity authorizing official has submitted 

19 a signed statement to the Secretary which cer20 tifies the foregoing and that the requested out21 patient facility is an integral part of the chil22 dren’s hospital and is providing health care 

23 services to patients of such hospital; 

24 ‘‘(D) meets the provider-based status re25 quirements under section 413.65 of title 42, 


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1 Code of Federal Regulations or under any suc2 cessor to such section; 

3 ‘‘(E) provides outpatient health care serv4 ices and is not limited to providing only drugs 

5 or drug administration; 

6 ‘‘(F) provides a level of free or discounted 

7 health care services to individuals who meet the 

8 parent covered entity’s criteria for financial as9 sistance and are unable to pay for all or a por10 tion of the services, as reported at cost to the 

11 Internal Revenue Service under section 

12 501(r)(4) of the Internal Revenue Code for the 

13 calendar year, that is similar to that of the par14 ent covered entity; and 

15 ‘‘(G) adheres to the parent covered entity’s 

16 sliding scale fee schedule for providing covered 

17 outpatient drugs that are subject to an agree18 ment under this section to patients who are (i) 

19 low-income individuals; and (ii) not covered 

20 under minimum essential coverage, as defined 

21 in section 5000A(f) of the Internal Revenue 

22 Code. Such sliding fee schedules must be made 

23 publicly available in a similar manner to a 

24 501(c)(3) hospital’s financial assistance policy 


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1 as required under section 501(r) of the Internal 

2 Revenue Code of 1986. 

3 ‘‘(4) CERTIFICATION AND AUDITING.— 

4 ‘‘(A) A covered entity described in sub5 clause (III) of subsection (a)(4)(L)(i) shall— 

6 ‘‘(i) not less than annually, provide to 

7 the Secretary a certification executed by 

8 the hospital’s 340B Program authorizing 

9 official and an appropriate government of10 ficial (such as the governor, county execu11 tive, mayor, or an individual authorized to 

12 represent and bind the governmental enti13 ty), certifying that— 

14 ‘‘(I) a contract is currently in 

15 force between such covered entity and 

16 the State or local government to pro17 vide health care services, to include 

18 direct medical care and the ordering 

19 or prescribing of covered outpatient 

20 drugs that are subject to an agree21 ment under this section, to low-income 

22 individuals who are not entitled to 

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1 ance under the State plan under title 

2 XIX of such Act; 

3 ‘‘(II) such contract creates en4 forceable expectations for such cov5 ered entity for the provision of the 

6 health care services described in sub7 clause (I) to the individuals described 

8 in such subclause; and 

9 ‘‘(III) the health care services de10 scribed in subclause (I) represent a 

11 significant portion of the hospital’s 

12 operating revenues, and are not for 

13 services the covered entity is otherwise 

14 obligated to provide under State or 

15 Federal law; 

16 ‘‘(ii) make available the contract de17 scribed in subclause (III) of subsection 

18 (a)(4)(L)(i) to the Secretary for publica19 tion on the public internet website of the 

20 Department of Health and Human Serv21 ices relating to this section; and 

22 ‘‘(iii) permit the Secretary to audit 

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1 ments described in subclause (III) of sub2 section (a)(4)(L)(i) and this subparagraph. 

3 ‘‘(B) A facility or organization that partici4 pates in the drug discount program under this 

5 section pursuant to paragraph (3) shall permit 

6 the Secretary to audit the records of such facil7 ity or organization that pertain to its compli8 ance with the requirements described in such 

9 paragraph. 

10 ‘‘(C) The Secretary shall issue guidelines 

11 to implement the requirements described in this 

12 paragraph, which shall, at a minimum, define 

13 the term ‘low-income individuals’ for purposes 

14 of subclause (I) of subparagraph (A)(i), and 

15 identify the applicable methodology and thresh16 old for determining that the health care services 

17 described in such subclause represent a signifi18 cant portion of the hospital’s operating reve19 nues.’’. 

20 (f) REPORTING REQUIREMENTS.—Section 340B of 

21 the Public Health Service Act (42 U.S.C. 256b) is amend22 ed by adding at the end the following new subsections: 

23 ‘‘(f) REPORTING REQUIREMENTS FOR COVERED EN24 TITIES.— 


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1 ‘‘(1) IN GENERAL.—A covered entity described 

2 in subparagraph (L) or (M) of subsection (a)(4) 

3 shall annually submit to the Secretary an electronic 

4 and searchable data report in a machine-readable 

5 format. Such report shall contain, with respect to 

6 the year covered by the report, information on— 

7 ‘‘(A) the number and percentage of pa8 tients of the covered entity, disaggregated by 

9 insurance status (including at least the Medi10 care program under title XVIII of the Social 

11 Security Act, the Medicaid program under title 

12 XIX of such Act, the Children’s Health Insur13 ance Program under title XXI of such Act, the 

14 TRICARE program under chapter 55 of title 

15 10, United States Code, health insurance cov16 erage or a group health plan, and uninsured), 

17 and by the type of site of the dispensing of the 

18 covered outpatient drug subject to an agree19 ment under this section (parent covered entity, 

20 facility or organization described in subsection 

21 (c)(3), contracted entity described in subsection 

22 (a)(11)); 

23 ‘‘(B) the aggregate amount of gross reim24 bursement received by the covered entity (cal25 culated before subtracting any administrative or 


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1 other fees using a methodology provided by the 

2 Secretary) for covered outpatient drugs subject 

3 to an agreement under this section, including 

4 reimbursement received through facilities or or5 ganizations described in subsection (c)(3) or 

6 pursuant to contractual arrangements described 

7 in subsection (a)(11); 

8 ‘‘(C) the aggregate acquisition cost for cov9 ered outpatient drugs subject to an agreement 

10 under this section dispensed during the year; 

11 ‘‘(D) the aggregate amount paid by the 

12 covered entity, or any agent of the covered enti13 ty, to contracted entities described in subsection 

14 (a)(11) for dispensing covered outpatient drugs 

15 subject to an agreement under this section or 

16 for any other service related to the drug dis17 count program under this section; 

18 ‘‘(E) how the entity prevents duplicate dis19 counts under subparagraph (A) of subsection 

20 (a)(5) and drug diversion under subparagraph 

21 (B) of such subsection; 

22 ‘‘(F) the volume of covered outpatient 

23 drugs subject to an agreement under this sec24 tion dispensed by the covered entity and, in the 

25 case of a covered entity that has entered into 


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1 a contractual arrangement pursuant to which a 

2 third party dispenses covered outpatient drugs 

3 subject to an agreement under this section to 

4 patients of the covered entity, by each such con5 tracted entity; 

6 ‘‘(G) quantitative data in terms of the 

7 amount and percentage of charitable care, as 

8 such term is defined for purposes of Medicare 

9 cost reporting or other reporting requirements 

10 identified by the Secretary, provided to patients 

11 of the covered entity by the covered entity in 

12 the form of covered outpatient drugs subject to 

13 an agreement under this section; 

14 ‘‘(H) the name of any third-party vendor 

15 or other similar entity (if any) that the covered 

16 entity retains to administer the covered entity’s 

17 inventory management system or contract phar18 macy arrangement; and 

19 ‘‘(I) other reporting requirements as the 

20 Secretary determines is necessary or appro21 priate for effective management and oversight 

22 of the drug discount program under this sec23 tion. 

24 ‘‘(2) TIMING OF FIRST REPORT.—The first re25 port submitted under paragraph (1) shall be subVerDate Sep 11 2014 18:53 Mar 21, 2019 Jkt 089200 PO 00000 Frm 00033 Fmt 6652 Sfmt 6201 E:\BILLS\H1559.IH H1559

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1 mitted not later than 18 months after the date of 

2 enactment of this subsection. 

3 ‘‘(3) ATTESTATION.—Each report submitted 

4 under paragraph (1) shall be accompanied by an at5 testation, in a form and manner specified by the 

6 Secretary, that the information submitted in such 

7 report is complete and accurate. Such attestation 

8 shall be subject to section 1001 of title 18, United 

9 States Code. 

10 ‘‘(4) SANCTIONS.—If the Secretary finds that a 

11 covered entity is in violation of the requirement 

12 under paragraph (1) and the Secretary determines 

13 that such violation was knowing and intentional, the 

14 Secretary shall remove the entity from the drug dis15 count program under this section and disqualify the 

16 entity from re-entry into such program for a reason17 able period of time to be determined by the Sec18 retary. 

19 ‘‘(5) REGULATIONS.—Not later than 180 days 

20 after the date of enactment of this subsection, the 

21 Secretary shall promulgate final regulations through 

22 notice-and-comment rulemaking to implement the re23 quirements under paragraphs (1) through (4). 

24 ‘‘(6) PUBLIC DATABASE.—The Secretary shall 

25 make the data reported by covered entities under 


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1 this subsection available to the public on the website 

2 of the Department of Health and Human Services in 

3 an electronic and searchable format, which shall 

4 make each category of data reported available both 

5 in the aggregate and broken down by parent covered 

6 entities, child sites, and contract pharmacies, but 

7 shall not identify specific parent covered entities, 

8 child sites, or contract pharmacies. 

9 ‘‘(g) REPORTS TO CONGRESS.— 

10 ‘‘(1) REPORT BY THE SECRETARY.—Not later 

11 than two years after the date of the enactment of 

12 this subsection, the Secretary shall submit to the 

13 Committee on Energy and Commerce of the House 

14 of Representatives and the Committee on Health, 

15 Education, Labor, and Pensions of the Senate a re16 port, which shall contain— 

17 ‘‘(A) with respect to covered entities de18 scribed in subparagraph (L) or (M) of sub19 section (a)(4), the information contained in the 

20 first report submitted by such entities to the 

21 Secretary under subsection (f); and 

22 ‘‘(B) a description of the audits conducted 

23 by the Secretary pursuant to subparagraph (C) 

24 of subsection (a)(5), including the methodology 

25 used for conducting such audits, the results of 


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1 such audits, and actions taken by the Secretary 

2 in response to such audits, as well as actions 

3 taken by the Secretary in response to audits 

4 conducted by manufacturers pursuant to such 

5 subparagraph. 

6 ‘‘(2) REPORT BY THE COMPTROLLER GEN7 ERAL.—Not later than one year after the date of the 

8 enactment of this subsection, the Comptroller Gen9 eral of the United States shall submit to the Com10 mittee on Energy and Commerce of the House of 

11 Representatives and the Committee on Health, Edu12 cation, Labor, and Pensions of the Senate a report 

13 on the use by covered entities of contractual ar14 rangements pursuant to which a third party dis15 penses covered outpatient drugs subject to an agree16 ment under this section to patients of the covered 

17 entity, disaggregated by covered entity types and the 

18 physical distance of the contracted entity’s location 

19 from the respective parent covered entity location. 

20 ‘‘(3) ANNUAL REPORTS BY THE INSPECTOR

21 GENERAL.—Not later than July 1 of each year (be22 ginning with 2018), the Inspector General of the 

23 Department of Health and Human Services shall 

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1 ered entities and third parties described in para2 graph (11) of subsection (a), including the methods 

3 and amounts of remuneration exchanged between 

4 such covered entities and such contracted entities, 

5 and the extent to which contract pharmacies are im6 proving access to medicines by patients of such cov7 ered entities. The first such annual report shall in8 clude recommendations, as the Inspector General de9 termines appropriate, that address safeguards to re10 duce duplicate discounting and diversion within con11 tract pharmacy arrangements and reforms to ensure 

12 these arrangements are targeted exclusively at im13 proving access to medicines for low-income or vul14 nerable patients of covered entities. Subsequent re15 ports under this paragraph should continue to mon16 itor such issues and be updated as changes are made 

17 to the drug discount program under this section.’’. 

18 (g) USER FEES UNDER THE 340B DRUG DISCOUNT

19 PROGRAM.—Section 340B of the Public Health Service 

20 Act (42 U.S.C. 256b), as previously amended, is further 

21 amended by adding at the end the following new sub22 section: 

23 ‘‘(h) USER FEES.— 

24 ‘‘(1) IN GENERAL.—Subject to paragraph (6), 

25 the Secretary shall assess and collect a user fee from 


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1 covered entities described in subparagraph (L), (M), 

2 (N), or (O) of subsection (a)(4). In carrying out this 

3 subsection, the Secretary shall not require manufac4 turers to collect any user fee or to administer the 

5 user fee program established under this subsection. 

6 ‘‘(2) PAYMENT.—A covered entity described in 

7 subparagraph (L), (M), (N), or (O) of subsection 

8 (a)(4) shall pay to the Secretary a fee assessed 

9 under paragraph (1) by such date that is the later 

10 of— 

11 ‘‘(A) the date of the certification or recer12 tification of the covered entity, as applicable; or 

13 ‘‘(B) the date that is 30 days after the 

14 date of the enactment of an appropriations Act 

15 providing for the collection and obligation of 

16 fees under this subsection for a fiscal year. 

17 ‘‘(3) AMOUNT OF FEE.—The amount of a fee 

18 under paragraph (1) shall be equal to the amount 

19 determined by the Secretary under paragraph (4). 

20 ‘‘(4) DETERMINATION OF AMOUNT OF FEE.— 

21 ‘‘(A) IN GENERAL.—The Secretary shall, 

22 not later than 180 days before the start of each 

23 fiscal year that begins after September 30, 

24 2019, establish, for the next fiscal year, the 

25 amount of the fee payable under this subsection 


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1 by a covered entity using purchase data sub2 mitted by covered entities described in para3 graph (1), and using data submitted by manu4 facturers on sales to covered entities of covered 

5 outpatient drugs subject to an agreement under 

6 this section, pursuant to regulations to be 

7 issued by the Secretary. Such amount, with re8 spect to a covered entity and year, shall not ex9 ceed 0.1 percent of the total paid during the 

10 previous year by such covered entity to manu11 facturers for purchases of covered outpatient 

12 drugs subject to an agreement under this sec13 tion. 

14 ‘‘(5) USE OF FEES.— 

15 ‘‘(A) IN GENERAL.—Any fee collected 

16 under paragraph (1) shall be used for purposes 

17 of administering this section, enhancing pro18 gram integrity and oversight activities under 

19 this section (including through audits under 

20 this section of covered entities and manufactur21 ers), and promoting access to clinical and cost22 effective pharmacy services among safety net 

23 clinics and hospitals that participate under this 

24 section, such as through— 


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1 ‘‘(i) the development of a multi-func2 tional web-based system to collect fees 

3 under paragraph (1); 

4 ‘‘(ii) the improvement of the integrity, 

5 transparency, security, and reliability of 

6 the Office of Pharmacy Affairs Informa7 tion System, including to ensure that the 

8 database continues to meet the needs of 

9 external stakeholders; and 

10 ‘‘(iii) improvements to the compliance 

11 tool of the Office of Pharmacy Affairs, 

12 used to integrate all information related to 

13 covered entities and manufacturers with 

14 agreements under this section. 

15 ‘‘(B) SUPPLEMENT NOT SUPPLANT.—Any 

16 fee collected under paragraph (1) shall be used 

17 to supplement and not supplant the amount 

18 otherwise provided in appropriations Acts to 

19 carry out this section. 

20 ‘‘(6) AVAILABILITY OF FEES.—Fees authorized 

21 under paragraph (1) shall be collected and available 

22 for obligation only to the extent and in the amount 

23 provided in advance in appropriations Acts. Such 

24 fees are authorized to remain available until ex25 pended. 


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1 ‘‘(7) REGULATIONS.—Not later than 180 days 

2 after the date of enactment of this subsection, the 

3 Secretary shall promulgate final regulations through 

4 notice-and-comment rulemaking to implement the 

5 user fee collection pursuant to this subsection. 

6 ‘‘(8) OVERSIGHT OF USER FEE PROGRAM.— 

7 ‘‘(A) STUDY.—The Inspector General of 

8 the Department of Health and Human Services 

9 shall conduct an annual review of the user fee 

10 program established by this subsection. 

11 ‘‘(B) REPORT.—Not later than July 1 of 

12 each year (beginning with 2019), the Inspector 

13 General of the Department of Health and 

14 Human Services shall submit to the appropriate 

15 committees of Congress a report on the study 

16 conducted under subparagraph (A), together 

17 with such recommendations as the Inspector 

18 General determines appropriate.’’. 

19 (h) DIRECT-HIRE AUTHORITY.—Section 340B(d) of 

20 the Public Health Service Act (42 U.S.C. 256b(d)) is 

21 amended by adding at the end the following new para22 graph: 

23 ‘‘(5) DIRECT-HIRE AUTHORITY.—Notwith24 standing section 3304(a)(3) of title 5, United States 

25 Code, and sections 3309 through 3318 of such title, 


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1 and section 337 of title 5 of the Code of Federal 

2 Regulations (or any successor regulations), the Sec3 retary may, beginning on the date of the enactment 

4 of this paragraph, exercise direct-hire authority to 

5 appoint a minimum of ten qualified candidates to 

6 permanent positions within the competitive service in 

7 order to carry out management and oversight activi8 ties under this section.’’. 

9 (i) APPLICABILITY.—Except as otherwise indicated, 

10 the provisions of, including amendments made by, this Act 

11 shall not apply to covered entities defined under subpara12 graphs (A) through (K), (N), or (O) of subsection (a)(4). 

Æ 


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