I 

115TH CONGRESS 

2D SESSION H. R. 6071 

To amend the Public Health Service Act to clarify the intent of the 340B 

program and provide for enhanced 340B program integrity, and for 

other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 12, 2018 

Ms. MATSUI introduced the following bill; which was referred to the Committee on Energy and Commerce, and in addition to the Committee on 

Ways and Means, for a period to be subsequently determined by the 

Speaker, in each case for consideration of such provisions as fall within 

the jurisdiction of the committee concerned 

A BILL 

To amend the Public Health Service Act to clarify the intent 

of the 340B program and provide for enhanced 340B 

program integrity, 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. 

4 This Act may be cited as the ‘‘Stretching Entity Re5 sources for Vulnerable Communities Act’’ or the ‘‘SERV 

6 Communities Act’’. 


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1 SEC. 2. SENSE OF CONGRESS RELATED TO PURPOSE OF 

2 THE 340B PROGRAM. 

3 It is the sense of Congress that— 

4 (1) the program under section 340B of the 

5 Public Health Service Act (42 U.S.C. 256b) (in this 

6 section referred to as the ‘‘340B program’’) enables 

7 covered entities to stretch scarce resources as far as 

8 possible, reaching more patients and providing more 

9 comprehensive services than without such program; 

10 (2) the 340B program provides health care set11 tings that serve a disproportionate share of under12 served patient populations (referred to as covered 

13 entities) a discount from drug manufacturers on the 

14 covered outpatient drugs they purchase to meet 

15 health care needs of the community; 

16 (3) covered entities that qualify for participa17 tion under the 340B program meet rigorous eligi18 bility criteria, proving they are safety net health care 

19 providers for many underserved patients; 

20 (4) such discounts are provided to such covered 

21 entities on the basis of meeting eligibility criteria 

22 under the 340B program, and not directly to indi23 vidual patients; 

24 (5) the 340B Program enables covered entities 

25 to provide comprehensive services to the commu26 nities they serve, which may include providing free 


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1 or discounted drugs to vulnerable populations, but 

2 providing free or discounted drugs to patients is not 

3 the sole purpose of the program; 

4 (6) the 340B Program is designed to help cov5 ered entities promote health for underserved commu6 nities and patients, regardless of a particular pa7 tient’s insurance status or inability to pay; 

8 (7) savings from the 340B program are used by 

9 covered entities to reach more patients and provide 

10 more comprehensive services, and covered entities 

11 are in the best position to assess the use of their 

12 savings for community needs; and 

13 (8) drugs purchased under the 340B program 

14 account for a small proportion of overall drug spend15 ing and the discounts described in paragraph (2) 

16 provided through the 340B program are not funded 

17 by taxpayers. 

18 SEC. 3. CODIFYING DEFINITION OF PATIENT UNDER 340B 

19 PROGRAM. 

20 Section 340B(b) of the Public Health Service Act (42 

21 U.S.C. 256b) is amended by adding at the end the fol22 lowing new paragraph: 

23 ‘‘(3) PATIENT.— 

24 ‘‘(A) IN GENERAL.—For purposes of car25 rying out this section, the term ‘patient’ shall 


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1 have the definition given to such term on pages 

2 55156 through 55158 of title 61 of the Federal 

3 Register published on October 24, 1996. 

4 ‘‘(B) CLARIFICATION.—For purposes of 

5 this section, the Secretary shall not implement 

6 the definition under subparagraph (A) more 

7 narrowly than the definition specified in sub8 paragraph (A), including by limiting the appli9 cation of the definition to particular individuals 

10 based on their insurance status.’’. 

11 SEC. 4. NON-DISCRIMINATION WITH RESPECT TO COVERED 

12 ENTITIES. 

13 Section 340B of the Public Health Service Act (42 

14 U.S.C. 256b) is amended by adding at the end the fol15 lowing new subsection: 

16 ‘‘(f) NON-DISCRIMINATION WITH RESPECT TO COV17 ERED ENTITIES.— 

18 ‘‘(1) TERMS OF AGREEMENT.—Subject to para19 graph (3), no entity that reimburses a covered entity 

20 or its contract pharmacy for drugs that are subject 

21 to an agreement under this section may discriminate 

22 against such covered entity with respect to the terms 

23 of such reimbursement, including terms relating to 

24 the level and amount of reimbursement, on the basis 


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1 that the covered entity participates in the program 

2 under this section. 

3 ‘‘(2) PATIENT’S CHOICE.—With respect to a pa4 tient eligible to receive drugs that are subject to an 

5 agreement under this section from a covered entity 

6 or its contract pharmacy, no entity that makes pay7 ment for such drugs shall discriminate against the 

8 covered entity or its contract pharmacy in a manner 

9 that prevents or interferes with the patient’s choice 

10 to receive such drugs from the covered entity or con11 tract pharmacy. 

12 ‘‘(3) EXCEPTION.—Paragraph (1) shall not 

13 apply to States with respect to retail drugs that are 

14 reimbursed by the State on a fee-for-service basis 

15 pursuant to a State plan approved under title XIX 

16 of the Social Security Act.’’. 

17 SEC. 5. PROGRAM INTEGRITY. 

18 (a) FINDINGS.—Congress finds the following: 

19 (1) In response to findings by the Office of the 

20 Inspector General of the Department of Health and 

21 Human Services that nearly 100 percent of covered 

22 entities were overcharged by manufacturers for at 

23 least one of the drugs reviewed, Congress directed 

24 the Secretary of Health and Human Services in 

25 2010 to publish the ceiling prices under section 


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1 340B of the Public Health Service Act (42 U.S.C. 

2 256b) (in this section referred to as the ‘‘340B ceil3 ing price’’) via Internet website so that covered enti4 ties could verify they were being charged the correct 

5 price, however this website has not yet been estab6 lished, leaving covered entities vulnerable to con7 tinuing manufacturer overcharges. 

8 (2) In response to findings by the Office of the 

9 Inspector General of the Department of Health and 

10 Human Services of widespread overcharges by man11 ufacturers and a lack of oversight and authority by 

12 the Secretary of Health and Human Services to en13 sure that covered entities paid no more than the 

14 340B ceiling price, Congress directed the Secretary 

15 to develop standards for calculating 340B ceiling 

16 prices and civil monetary penalties to apply to man17 ufacturers that violate these rules, however those 

18 standards and penalties have not yet been developed, 

19 significantly limiting the Secretary’s ability to over20 see manufacturer compliance with such section 340B 

21 of the Public Health Service Act (42 U.S.C. 256b). 

22 (3) There is no public transparency on drug 

23 manufacturers’ average manufacturer price, best 

24 price in the marketplace, or how much the average 


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1 manufacturer price of a drug has increased relative 

2 to the rate of inflation. 

3 (4) Information on the average manufacturer 

4 price and best price are reported to the Centers for 

5 Medicare & Medicaid Services, but rarely does the 

6 Federal Government audit the raw data underlying 

7 those calculations. 

8 (5) Such data is not submitted and reviewed by 

9 the Health Resources and Services Administration 

10 as part of a 340B program audit. 

11 (6) Furthermore, the Office of Pharmacy Af12 fairs has conducted only 11 total audits of manufac13 turers. 

14 (b) PARITY IN AUDITS BETWEEN MANUFACTURER

15 AND HOSPITAL AUDITS.—Section 340B(d)(1)(B)(v) of 

16 the Public Health Service Act (42 U.S.C. 

17 256b(d)(1)(B)(v)) is amended to read as follows: 

18 ‘‘(v) Selective auditing of manufactur19 ers and wholesalers to ensure the integrity 

20 of the drug discount program under this 

21 section, consistent with the following: 

22 ‘‘(I) Such audits shall be con23 ducted in a form and manner that, to 

24 the greatest extent practicable, results 

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1 dits under subsection (a)(5)(C) of cov2 ered entities, as measured by com3 paring the percentage of total manu4 facturer audits under this clause to 

5 the percentage of total audits con6 ducted under such subsection of cov7 ered entities described in subsection 

8 (a)(4)(L). 

9 ‘‘(II) Such audits shall include 

10 review of average manufacturer price, 

11 best price, and the inflationary pen12 alty to ensure that manufacturers are 

13 calculating the ceiling price accu14 rately.’’. 

15 (c) DEADLINE FOR INTERNET WEBSITE WITH AP16 PLICABLE CEILING PRICES FOR COVERED OUTPATIENT

17 DRUGS.—Section 340B(d)(1)(B)(iii) of the Public Health 

18 Service Act (42 U.S.C. 256b(d)(1)(B)(iii)) is amended by 

19 striking ‘‘The provision’’ and inserting ‘‘Not later than 90 

20 days after the date of the enactment of the Stretching En21 tity Resources for Vulnerable Community Act, the provi22 sion’’. 

23 (d) CIVIL MONETARY PENALTY.— 

24 (1) IN GENERAL.—Clause (vi)(II) of section 

25 340B(d)(1)(B) of the Public Health Service Act (42 


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1 U.S.C. 256b(d)(1)(B)) is amended to read as fol2 lows: 

3 ‘‘(II) shall not exceed, for each 

4 instance of overcharging a covered en5 tity that may have occurred, the 

6 greater of— 

7 ‘‘(aa) $5,000; or 

8 ‘‘(bb) 200 percent of the 

9 amount of such overcharge; and’’. 

10 (2) CLARIFICATIONS.—Section 340B(d)(1) of 

11 the Public Health Service Act (42 U.S.C. 

12 256b(d)(1)) is amended by adding at the end the 

13 following new subparagraph: 

14 ‘‘(C) CLARIFICATIONS.—For purposes of 

15 subparagraph (B)(vi)— 

16 ‘‘(i) an instance of overcharging de17 scribed in subclause (II) of such subpara18 graph shall— 

19 ‘‘(I) apply to each unit of a na20 tional drug code within an order, 

21 whether placed directly with a manu22 facturer or through a wholesaler, au23 thorized distributor, or agent, and 

24 may not be offset by other discounts 

25 provided on any other National Drug 


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1 Code or discounts provided on the 

2 same National Drug Code on other 

3 transactions, orders or purchases; and 

4 ‘‘(II) include a manufacturer’s 

5 failure, such as through a limited dis6 tribution network, to offer a covered 

7 outpatient drug to a covered entity at 

8 the 340B ceiling price to the same ex9 tent the manufacturer makes the drug 

10 available to non-340B providers, un11 less such action is taken to narrowly 

12 address an actual or imminent short13 age and has been approved in advance 

14 by the Secretary pursuant to stand15 ards issued through an appropriate 

16 policy or regulatory issuance; and 

17 ‘‘(ii) in applying subclause (III) of 

18 such subparagraph— 

19 ‘‘(I) the term ‘knowingly’ shall 

20 have the meaning given the term 

21 ‘should know’ in section 1003.101 of 

22 title 42 of the Code of Federal Regu23 lations (or any successor regulation); 

24 and 


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1 ‘‘(II) the term ‘intentionally’ 

2 means, with respect to an overcharge, 

3 that such overcharge is not due to in4 advertent error.’’. 

5 (3) NON-APPLICATION OF 340B CEILING PRICE

6 AND CMP REGULATION.—The Secretary of Health 

7 and Human Services shall not take any action to im8 plement, administer, or enforce the provision of the 

9 final regulation titled ‘‘340B Drug Pricing Program 

10 Ceiling Price and Manufacturer Civil Monetary Pen11 alties Regulation’’ published on June 5, 2018 (83 

12 Fed. Reg. 25943 et seq.), that changes the effective 

13 date of the 340B Drug Pricing Program Ceiling 

14 Price and Manufacturer Civil Monetary Penalties 

15 Regulation from July 1, 2018 to July 1, 2019. The 

16 effective date shall be determined as if such final 

17 regulation published on June 5, 2018, did not apply. 

18 (4) IMPLEMENTATION.—The Secretary of 

19 Health and Human Services shall implement the 

20 amendments made by paragraphs (1) and (2) by 

21 program instruction or otherwise such that such 

22 amendment applies to instances of overcharges oc23 curring on or after the date that is 60 days after the 

24 date of the enactment of this Act. 


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1 (5) GAO REPORT.—Not later than one year 

2 after the date of the enactment of this Act, the 

3 Comptroller General of the United States shall sub4 mit to Congress a report evaluating the extent to 

5 which the Secretary of Health and Human Services 

6 is carrying out the provisions of clause (vi) of section 

7 340B(d)(1)(B) of the Public Health Service Act (42 

8 U.S.C. 256b(d)(1)(B)), as amended by this sub9 section. 

10 (e) MANUFACTURER TRANSPARENCY.—Section 

11 340B(d)(1)(B) of the Public Health Service Act (42 

12 U.S.C. 256b(d)(1)(B)) is amended by adding at the end 

13 the following new clauses: 

14 ‘‘(vii) The requirement that the appli15 cable ceiling price described in clause (iii) 

16 for a covered outpatient drug, with respect 

17 to a calendar quarter, shall be equal to the 

18 average manufacturer price under section 

19 1927(k)(1) of the Social Security Act from 

20 the preceding calendar quarter for the 

21 smallest unit of measure minus the unit 

22 rebate amount and will be calculated using 

23 six decimal places and will be published by 

24 the Secretary rounded to two decimal 

25 places, in accordance with the following: 


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1 ‘‘(I) In the case that the ceiling 

2 price calculation results in an amount 

3 less than $0.01, the ceiling price will 

4 be $0.01. 

5 ‘‘(II) For a new covered out6 patient drug— 

7 ‘‘(aa) manufacturers shall 

8 estimate the ceiling price as of 

9 the date the new drug is first 

10 available for sale; 

11 ‘‘(bb) the estimation shall be 

12 calculated as wholesale acquisi13 tion cost minus the appropriate 

14 rebate percentage until an aver15 age manufacturer price is avail16 able, which shall occur no later 

17 than the 4th quarter that the 

18 drug is available for sale; and 

19 ‘‘(cc) manufacturers shall 

20 calculate the actual ceiling price 

21 and shall offer to refund or credit 

22 the covered entity the difference 

23 between the estimated ceiling 

24 price and the actual ceiling price 

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1 mination by the manufacturer in2 volved that an overcharge oc3 curred. 

4 ‘‘(viii) The prohibition against dis5 criminatory distribution of drugs, con6 sistent with the following: 

7 ‘‘(I) A manufacturer shall make 

8 available each covered outpatient drug 

9 to covered entities on the same terms 

10 and conditions that the covered out11 patient drug is offered to purchasers 

12 that are not covered entities except 

13 that the manufacturer will charge the 

14 covered entity for the covered out15 patient drug at or below the ceiling 

16 price. 

17 ‘‘(II) If the Secretary finds, after 

18 audit as described in subparagraph 

19 (B)(v) and after notice and hearing, 

20 that a manufacturer is in violation of 

21 the requirement described in sub22 clause (I), the manufacturer shall be 

23 liable to the covered entity that was 

24 not able to purchase the covered out25 patient drug involved at a discounted 


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1 price in an amount equal to the reduc2 tion in the price of the drug provided 

3 under the agreement between the enti4 ty and the manufacturer under this 

5 section.’’. 

6 SEC. 6. INCLUDING PROGRAMS FUNDED UNDER THE COM7 MUNITY MENTAL HEALTH SERVICES BLOCK 

8 GRANT OR THE SUBSTANCE ABUSE PREVEN9 TION AND TREATMENT BLOCK GRANT AS 

10 COVERED ENTITIES. 

11 (a) IN GENERAL.—Section 340B(a)(4) of the Public 

12 Health Service Act (42 U.S.C. 256b(a)(4)) is amended by 

13 adding at the end the following new subparagraph: 

14 ‘‘(P) A program carried out through funds 

15 received under a grant under the Community 

16 Mental Health Services Block Grant or the 

17 Substance Abuse Prevention and Treatment 

18 Block Grant under part B of title XIX.’’. 

19 (b) EFFECTIVE DATE.—The amendment made by 

20 subsection (a) shall apply beginning on the date of the 

21 enactment of this Act. 


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1 SEC. 7. PREVENTING MEDICARE HOSPITAL OUTPATIENT 

2 PAYMENT CUTS FOR HOSPITALS THAT PUR3 CHASE DRUGS UNDER 340B PROGRAM. 

4 (a) IN GENERAL.—The Secretary of Health and 

5 Human Services shall not take any action to implement, 

6 administer, or enforce the provision of the final regulation 

7 titled the Medicare Program: Hospital Outpatient Pro8 spective Payment and Ambulatory Surgical Center Pay9 ment Systems and Quality Reporting Programs published 

10 on November 13, 2017 (82 Fed. Reg. 52356 et seq.), that 

11 changes the payment amount under the Prospective Pay12 ment System for Hospital Outpatient Department Serv13 ices under section 1833(t) of the Social Security Act (42 

14 U.S.C. 1395l(t)) for separately payable, nonpass-through 

15 drugs and biologicals purchased under the 340B drug 

16 pricing program under section 340B of the Public Health 

17 Service Act (42 U.S.C. 256b). The payment amount under 

18 such payment system under such section 1833(t) for such 

19 a drug or biological provided on or after January 1, 2018, 

20 shall be determined (or in the case of claims already proc21 essed, redetermined) through the same methodology as if 

22 such final regulation did not apply. 

23 (b) OPPS BUDGET NEUTRALITY ADJUSTMENT.— 

24 The first sentence of section 1833(t)(9)(B) of the Social 

25 Security Act (42 U.S.C. 1395l(t)(9)(B)) is amended by 


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1 striking ‘‘part’’ each place such term appears and insert2 ing ‘‘subsection’’ each such place. 

Æ 


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