II 

110TH CONGRESS 

1ST SESSION S. 1376 

To amend the Public Health Service Act to revise and expand the drug 

discount program under section 340B of such Act to improve the provision of discounts on drug purchases for certain safety net providers. 

IN THE SENATE OF THE UNITED STATES 

MAY 14, 2007 

Mr. BINGAMAN (for himself and Mr. THUNE) introduced the following bill; 

which was read twice and referred to the Committee on Health, Education, Labor, and Pensions 

A BILL 

To amend the Public Health Service Act to revise and expand the drug discount program under section 340B 

of such Act to improve the provision of discounts on 

drug purchases for certain 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 Program Im5 provement and Integrity Act of 2007’’. 


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1 SEC. 2. EXPANDED PARTICIPATION IN SECTION 340B PRO2 GRAM. 

3 (a) EXPANSION OF COVERED ENTITIES RECEIVING

4 DISCOUNTED PRICES.—Section 340B(a)(4) of the Public 

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

6 adding at the end the following: 

7 ‘‘(M) A children’s hospital excluded from 

8 the Medicare prospective payment system pur9 suant to section 1886(d)(1)(B)(iii) of the Social 

10 Security Act which would meet the require11 ments of subparagraph (L), including the dis12 proportionate share adjustment percentage re13 quirement under clause (ii) of such subpara14 graph, if the hospital were a subsection (d) hos15 pital as defined by section 1886(d)(1)(B) of the 

16 Social Security Act. 

17 ‘‘(N) An entity that is a critical access hos18 pital (as determined under section 1820(c)(2) 

19 of the Social Security Act), and that meets the 

20 requirements of subparagraph (L)(i). 

21 ‘‘(O) An entity that is a rural referral cen22 ter, as defined by section 1886(d)(5)(C)(i) of 

23 the Social Security Act, or a sole community 

24 hospital, as defined by section 

25 1886(d)(5)(C)(iii) of such Act, and that both 

26 meets the requirements of subparagraph (L)(i) 


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1 and has a disproportionate share adjustment 

2 percentage equal to or greater than 8 percent.’’. 

3 (b) PROHIBITION ON GROUP PURCHASING ARRANGE4 MENTS.—Section 340B(a) of the Public Health Service 

5 Act (42 U.S.C. 256b(a)) is amended— 

6 (1) in paragraph (4)(L), by striking clause (iii); 

7 and 

8 (2) in paragraph (5)— 

9 (A) by redesignating subparagraphs (C) 

10 and (D) as subparagraphs (D) and (E); respec11 tively; and 

12 (B) by inserting after subparagraph (B), 

13 the following: 

14 ‘‘(C) PROHIBITING THE USE OF GROUP

15 PURCHASING ARRANGEMENTS.— 

16 ‘‘(i) IN GENERAL.—A hospital de17 scribed in subparagraphs (L), (M), (N), or 

18 (O) of paragraph (4) shall not obtain cov19 ered outpatient drugs through a group 

20 purchasing organization or other group 

21 purchasing arrangement, except as per22 mitted or provided for pursuant to clauses 

23 (ii) or (iii). 


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1 ‘‘(ii) INPATIENT DRUGS.—Clause (i) 

2 shall not apply to drugs purchased for in3 patient use. 

4 ‘‘(iii) EXCEPTIONS.—The Secretary 

5 shall establish reasonable exceptions to 

6 clause (i)— 

7 ‘‘(I) with respect to a covered 

8 outpatient drug that is unavailable to 

9 be purchased through the program 

10 under this section due to a drug 

11 shortage problem, manufacturer non12 compliance, or any other circumstance 

13 beyond the hospital’s control; 

14 ‘‘(II) to facilitate generic substi15 tution when a generic covered out16 patient drug is available at a lower 

17 price; or 

18 ‘‘(III) to reduce in other ways 

19 the administrative burdens of man20 aging both inventories of drugs sub21 ject to this section and inventories of 

22 drugs that are not subject to this sec23 tion, so long as the exceptions do not 

24 create a duplicate discount problem in 

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1 version problem in violation of sub2 paragraph (B).’’. 

3 SEC. 3. EXTENSION OF DISCOUNTS TO INPATIENT DRUGS. 

4 (a) DEFINITIONS.— 

5 (1) IN GENERAL.—Section 340B(b) of the Pub6 lic Health Service Act (42 U.S.C. 256b(b)) is 

7 amended— 

8 (A) by striking ‘‘In this section’’ and in9 serting the following: 

10 ‘‘(1) IN GENERAL.—In this section’’; and 

11 (B) adding at the end the following: 

12 ‘‘(2) COVERED DRUG.—In this section, the term 

13 ‘covered drug’ means— 

14 ‘‘(A) a ‘covered outpatient drug’ as defined 

15 in section 1927(k)(2) of the Social Security 

16 Act; and 

17 ‘‘(B) notwithstanding the limiting defini18 tion set forth in section 1927(k)(3) of such Act, 

19 a drug used in connection with an inpatient or 

20 outpatient service provided by a hospital de21 scribed in subparagraph (L), (M), (N), or (O) 

22 of subsection (a)(4), and enrolled to participate 

23 in the drug discount program under this sec24 tion.’’. 


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1 (2) CONFORMING AMENDMENTS.—Paragraphs 

2 (2)(A), (5)(B), (5)(D), (5)(E), (7)(B), (7)(C), and 

3 (9) of section 340B(a) of the Public Health Service 

4 Act (42 U.S.C. 256b(a)) are amended— 

5 (A) by striking ‘‘covered outpatient drug’’ 

6 each place that such appears and inserting 

7 ‘‘covered drug’’; and 

8 (B) by striking ‘‘covered outpatient drugs’’ 

9 each place that such appears and inserting 

10 ‘‘covered drugs’’. 

11 (b) MEDICAID CREDITS ON INPATIENT DRUGS.— 

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

13 256b) is amended by striking subsection (c) and inserting 

14 the following: 

15 ‘‘(c) MEDICAID CREDITS ON INPATIENT DRUGS.— 

16 ‘‘(1) IN GENERAL.—With respect to the cost re17 porting period covered by the most recently filed 

18 Medicare cost report, a hospital described in sub19 paragraph (L), (M), (N), or (O) of subsection (a)(4) 

20 and enrolled to participate in the drug discount pro21 gram under this section shall provide to each State 

22 with an approved State plan under title XIX of the 

23 Social Security Act— 

24 ‘‘(A) a credit on the estimated annual 

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1 vator multiple source drugs provided to Med2 icaid recipients for inpatient use; and 

3 ‘‘(B) a credit on the estimated annual 

4 costs to such hospital of noninnovator multiple 

5 source drugs provided to Medicaid recipients for 

6 inpatient use. 

7 ‘‘(2) CALCULATION OF CREDITS.— 

8 ‘‘(A) SINGLE SOURCE AND INNOVATOR

9 MULTIPLE SOURCE DRUGS.—For purposes of 

10 paragraph (1)(A)— 

11 ‘‘(i) the credit under such paragraph 

12 shall be determined by multiplying— 

13 ‘‘(I) the product of— 

14 ‘‘(aa) the estimated annual 

15 costs of single source and inno16 vator multiple source drugs pro17 vided by the hospital to Medicaid 

18 recipients for inpatient use; and 

19 ‘‘(bb) the average manufac20 turer price adjustment; and 

21 ‘‘(II) the minimum rebate per22 centage described in section 

23 1927(c)(1)(B) of the Social Security 

24 Act; 


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1 ‘‘(ii) the estimated annual costs of 

2 single source drugs and innovator multiple 

3 source drugs provided by the hospital to 

4 Medicaid recipients for inpatient use under 

5 clause (i)(I)(aa) shall be determined by 

6 multiplying— 

7 ‘‘(I) the product of— 

8 ‘‘(aa) the hospital’s actual 

9 acquisition costs of all drugs pur10 chased during the cost reporting 

11 period for inpatient use; and 

12 ‘‘(bb)(AA) the Medicaid in13 patient drug charges as reported 

14 on the hospital’s most recently 

15 filed Medicare cost report; di16 vided by 

17 ‘‘(BB) the total inpatient 

18 drug charges reported on the cost 

19 report; and 

20 ‘‘(II) the percentage of the hos21 pital’s annual inpatient drug costs de22 scribed in subclause (I) that arise out 

23 of the purchase of single source and 

24 innovator multiple source drugs; 


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1 ‘‘(iii) the average manufacturer price 

2 adjustment referred to in clause (i)(I)(bb) 

3 shall be determined annually by the Sec4 retary for single source and innovator mul5 tiple source drugs by dividing on an aggre6 gate basis— 

7 ‘‘(I) the average manufacturer 

8 price as defined in section 

9 1927(k)(1)(D) of the Social Security 

10 Act, averaged across all covered drugs 

11 reported to the Secretary pursuant to 

12 section 1927(b)(3) of such Act; by 

13 ‘‘(II) the average ceiling price 

14 under this section for covered drugs 

15 calculated pursuant to subsection 

16 (a)(1); and 

17 ‘‘(iv) the terms ‘single source drug’ 

18 and ‘innovator multiple source drug’ have 

19 the meanings given such terms in section 

20 1927(k)(7) of the Social Security Act. 

21 ‘‘(B) NONINNOVATOR MULTIPLE SOURCE

22 DRUGS.—For purposes of subparagraph 

23 (1)(B)— 

24 ‘‘(i) the credit under such paragraph 

25 shall be calculated by multiplying— 


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1 ‘‘(I) the product of— 

2 ‘‘(aa) the estimated annual 

3 costs to the hospital of noninno4 vator multiple source drugs pro5 vided to Medicaid recipients for 

6 inpatient use; and 

7 ‘‘(bb) the average manufac8 turer price adjustment; and 

9 ‘‘(II) the applicable percentage as 

10 defined in section 1927(c)(3)(B) of 

11 the Social Security Act; 

12 ‘‘(ii) the estimated annual costs to a 

13 hospital of noninnovator multiple source 

14 drugs provided to Medicaid recipients for 

15 inpatient use under clause (i)(I)(aa) shall 

16 be determined by multiplying— 

17 ‘‘(I) the product of— 

18 ‘‘(aa) the hospital’s actual 

19 acquisition cost of all drugs pur20 chased during the cost reporting 

21 period for inpatient use; and 

22 ‘‘(bb)(AA) the Medicaid in23 patient drug charges as reported 

24 on the hospital’s most recently 


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1 filed Medicare cost report; di2 vided by 

3 ‘‘(BB) total inpatient drug 

4 charges reported on the cost re5 port; and 

6 ‘‘(II) the percentage of the hos7 pital’s annual inpatient drug costs de8 scribed in subclause (I) arising out of 

9 the purchase of noninnovator multiple 

10 source drugs; 

11 ‘‘(iii) the average manufacturer price 

12 adjustment referred to in clause (i)(I)(bb) 

13 shall be determined annually by the Sec14 retary for noninnovator multiple source 

15 drugs by dividing on an aggregate basis— 

16 ‘‘(I) the average manufacturer 

17 price as defined in section 

18 1927(k)(1)(D) of the Social Security 

19 Act, averaged across all covered drugs 

20 reported to the Secretary pursuant to 

21 section 1927(b)(3) of such Act; by 

22 ‘‘(II) the average ceiling price 

23 under this section for covered drugs 

24 calculated pursuant to subsection 

25 (a)(1); and 


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1 ‘‘(iv) the term ‘noninnovator multiple 

2 source drug’ has the meaning given such 

3 term in section 1927(k)(7) of the Social 

4 Security Act. 

5 ‘‘(3) PAYMENT DEADLINE.—The credits pro6 vided by a hospital under paragraph (1) shall be 

7 paid not later than 90 days after the date of the fil8 ing of the hospital’s most recently filed Medicare 

9 cost report. 

10 ‘‘(4) OPT-OUT.—A hospital shall not be re11 quired to provide the Medicaid credit required under 

12 this subsection if the hospital is able to demonstrate 

13 to the State that the credits would be less than or 

14 equal to the loss of reimbursement under the State 

15 plan resulting from the extension of discounts to in16 patient drugs under subsection (b)(2), or if the hos17 pital and State agree to an alternative arrangement. 

18 Any dispute between the hospital and the State re19 garding the applicability of this paragraph shall be 

20 adjudicated through the administrative dispute reso21 lution process described in subsection (e)(3). 

22 ‘‘(5) OFFSET AGAINST MEDICAL ASSISTANCE.— 

23 Amounts received by a State under this subsection 

24 in any quarter shall be considered to be a reduction 

25 in the amount expended under the State plan in the 


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1 quarter for medical assistance for purposes of sec2 tion 1903(a)(1) of the Social Security Act. 

3 ‘‘(6) EFFECTIVENESS NOTWITHSTANDING

4 OTHER PROVISIONS OF LAW.—Notwithstanding any 

5 other provision of law, all references to provisions of 

6 the Social Security Act in this section shall be 

7 deemed to be references to the Social Security Act 

8 as in effect on the date of enactment of the 340B 

9 Program Improvement and Integrity Act of 2007.’’. 

10 SEC. 4. IMPROVEMENTS TO 340B PROGRAM INTEGRITY. 

11 (a) INTEGRITY IMPROVEMENTS.—Section 340B of 

12 the Public Health Service Act (42 U.S.C. 256b) is amend13 ed by adding at the end the following: 

14 ‘‘(e) IMPROVEMENTS IN PROGRAM INTEGRITY.— 

15 ‘‘(1) MANUFACTURER COMPLIANCE.— 

16 ‘‘(A) IN GENERAL.—From amounts appro17 priated under paragraph (4), the Secretary 

18 shall carry out activities to provide for improve19 ment in the compliance of manufacturers with 

20 the requirements of this section in order to pre21 vent overcharges and other violations of the dis22 counted pricing requirements specified in this 

23 section. 

24 ‘‘(B) ACTIVITIES.—The activities described 

25 in subparagraph (A) shall include the following: 


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1 ‘‘(i) The development of a system to 

2 enable the Secretary to verify the accuracy 

3 of ceiling prices calculated by manufactur4 ers under subsection (a)(1) and charged to 

5 covered entities, which shall include— 

6 ‘‘(I) developing and publishing, 

7 through an appropriate policy or regu8 latory issuance, precisely defined 

9 standards and methodologies for the 

10 calculation of ceiling prices under sub11 section (a)(1); 

12 ‘‘(II) comparing regularly the 

13 ceiling prices calculated by the Sec14 retary with the quarterly pricing data 

15 that is reported by manufacturers to 

16 the Secretary; 

17 ‘‘(III) performing spot checks of 

18 sales transactions by covered entities; 

19 and 

20 ‘‘(IV) inquiring into the cause of 

21 any pricing discrepancies that may be 

22 identified and either taking, or requir23 ing manufacturers to take, such cor24 rective action as is appropriate in re25 sponse to such price discrepancies. 


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1 ‘‘(ii) The establishment of procedures 

2 for manufacturers to issue refunds to cov3 ered entities in the event that there is an 

4 overcharge by the manufacturers, includ5 ing— 

6 ‘‘(I) providing the Secretary with 

7 an explanation of why and how the 

8 overcharge occurred, how the refunds 

9 will be calculated, and to whom the 

10 refunds will be issued; and 

11 ‘‘(II) oversight by the Secretary 

12 to ensure that the refunds are issued 

13 accurately and within a reasonable pe14 riod of time, both in routine instances 

15 of retroactive adjustment to relevant 

16 pricing data and exceptional cir17 cumstances such as erroneous or in18 tentional overcharging for covered 

19 drugs. 

20 ‘‘(iii) The provision of access, through 

21 the Internet website of the Department of 

22 Health and Human Services, to the appli23 cable ceiling prices for covered drugs as 

24 calculated and verified by the Secretary in 

25 accordance with this section, in a manner 


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1 (such as through the use of password pro2 tection) that limits such access to covered 

3 entities and adequately ensures security 

4 and the protection of privileged pricing 

5 data from unauthorized redisclosure. 

6 ‘‘(iv) The development of a mecha7 nism by which— 

8 ‘‘(I) rebates and other discounts 

9 provided by manufacturers to other 

10 purchasers, subsequent to the sale of 

11 covered drugs to covered entities, are 

12 reported to the Secretary; and 

13 ‘‘(II) appropriate credits and re14 funds are issued to covered entities if 

15 such credits and refunds have the ef16 fect of lowering the applicable ceiling 

17 price for the relevant quarter for the 

18 drugs involved. 

19 ‘‘(v) Selective auditing of manufactur20 ers and wholesalers to ensure the integrity 

21 of the drug discount program under this 

22 section. 

23 ‘‘(vi) The imposition of sanctions in 

24 the form of civil monetary penalties, 

25 which— 


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1 ‘‘(I) shall be assessed according 

2 to standards established in regulations 

3 to be promulgated by the Secretary 

4 within 180 days of the date of enact5 ment of this subsection; 

6 ‘‘(II) shall not exceed $5,000 for 

7 each instance of overcharging a cov8 ered entity that may have occurred; 

9 and 

10 ‘‘(III) shall apply to any manu11 facturer with an agreement under this 

12 section that knowingly and inten13 tionally charges a covered entity a 

14 price for the purchase of a drug that 

15 exceeds the maximum applicable price 

16 under subsection (a)(1). 

17 ‘‘(2) COVERED ENTITY COMPLIANCE.— 

18 ‘‘(A) IN GENERAL.—From amounts appro19 priated under paragraph (4), the Secretary 

20 shall carry out activities to provide for improve21 ment in compliance by covered entities with the 

22 requirements of this section in order to prevent 

23 diversion and other violations of the duplicate 

24 discount requirements specified under sub25 section (a)(5). 


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1 ‘‘(B) ACTIVITIES.—The activities described 

2 in subparagraph (A) shall include the following: 

3 ‘‘(i) The development of procedures to 

4 enable and require covered entities to regu5 larly update (at least annually) the infor6 mation on the Internet website of the De7 partment of Health and Human Services 

8 relating to this section. 

9 ‘‘(ii) The development of a system for 

10 the Secretary to verify the accuracy of in11 formation regarding covered entities that is 

12 listed on the website described in clause 

13 (i). 

14 ‘‘(iii) The development of more de15 tailed guidance describing methodologies 

16 and options available to covered entities for 

17 billing covered drugs to State Medicaid 

18 agencies in a manner that avoids duplicate 

19 discounts pursuant to subsection (a)(5)(A). 

20 ‘‘(iv) The establishment of a single, 

21 universal, and standardized identification 

22 system by which each covered entity site 

23 can be identified by manufacturers, dis24 tributors, covered entities and the Sec25 retary for purposes of facilitating the orVerDate Aug 31 2005 01:22 May 15, 2007 Jkt 059200 PO 00000 Frm 00018 Fmt 6652 Sfmt 6201 E:\BILLS\S1376.IS S1376

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1 dering, purchasing, and delivery of covered 

2 drugs under this section, including the 

3 processing of chargebacks for such drugs. 

4 ‘‘(v) The imposition of sanctions, as 

5 determined appropriate by the Secretary, 

6 in addition to the sanctions to which cov7 ered entities are subject to under sub8 section (a)(5)(D), through 1 or more of the 

9 following actions: 

10 ‘‘(I) Where a covered entity 

11 knowingly and intentionally violates 

12 subsection (a)(5)(B), the covered enti13 ty shall be required to pay a monetary 

14 penalty to a manufacturer or manu15 facturers in the form of interest on 

16 sums for which the covered entity is 

17 found liable under subsection 

18 (a)(5)(E), and such interest to be 

19 compounded monthly and equal to the 

20 current short-term interest rate as de21 termined by the Federal Reserve for 

22 the time period for which the covered 

23 entity is liable. 

24 ‘‘(II) Where the Secretary deter25 mines that a violation of subsection 


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1 (a)(5)(B) was systematic and egre2 gious as well as knowing and inten3 tional, removing the covered entity 

4 from the program under this section 

5 and disqualifying the entity from re6 entry into the program for a reason7 able period of time to be determined 

8 by the Secretary. 

9 ‘‘(III) Referring matters to ap10 propriate Federal authorities within 

11 the Food and Drug Administration, 

12 the Office of Inspector General, or 

13 other Federal agencies for consider14 ation of appropriate action under 

15 other Federal law, such as the Pre16 scription Drug Marketing Act. 

17 ‘‘(3) ADMINISTRATIVE DISPUTE RESOLUTION

18 PROCESS.— 

19 ‘‘(A) IN GENERAL.—Not later than 180 

20 days after the date of enactment of this sub21 section, the Secretary shall promulgate regula22 tions to establish and implement an administra23 tive process for the resolution of claims by cov24 ered entities that they have been overcharged 

25 for drugs purchased under this section, and 


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1 claims by manufacturers, after the conduct of 

2 audits as authorized by subsection (a)(5)(D), of 

3 violations of subsections (a)(5)(A) or (a)(5)(B), 

4 including appropriate procedures for the provi5 sion of remedies and enforcement of determina6 tions made pursuant to such process through 

7 mechanisms and sanctions described in para8 graphs (1)(B) and (2)(B) of this subsection. 

9 Such regulations shall also establish an admin10 istrative process for resolution of disputes de11 scribed in subsection (c)(4). 

12 ‘‘(B) DEADLINES AND PROCEDURES.— 

13 Regulations promulgated by the Secretary 

14 under subparagraph (A) shall— 

15 ‘‘(i) designate or establish a decision16 making official or decisionmaking body 

17 within the Department of Health and 

18 Human Services to be responsible for re19 viewing and finally resolving claims by cov20 ered entities that they have been charged 

21 prices for covered drugs in excess of the 

22 ceiling price described in subsection (a)(1), 

23 and claims by manufacturers that viola24 tions of subsection (a)(5)(A) or (a)(5)(B) 

25 have occurred; 


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1 ‘‘(ii) establish such deadlines and pro2 cedures as may be necessary to ensure that 

3 claims shall be resolved fairly, efficiently, 

4 and expeditiously; 

5 ‘‘(iii) establish procedures by which a 

6 covered entity may discover and obtain 

7 such information and documents from 

8 manufacturers and third parties as may be 

9 relevant to demonstrate the merits of a 

10 claim that charges for a manufacturer’s 

11 product have exceeded the applicable ceil12 ing price under this section, and may sub13 mit such documents and information to the 

14 administrative official or body responsible 

15 for adjudicating such claim; 

16 ‘‘(iv) require that a manufacturer 

17 must conduct an audit of a covered entity 

18 pursuant to subsection (a)(5)(D) as a pre19 requisite to initiating administrative dis20 pute resolution proceedings against a cov21 ered entity; 

22 ‘‘(v) permit the official or body des23 ignated in clause (i), at the request of a 

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1 facturer against the same covered entity 

2 where, in the judgment of such official or 

3 body, consolidation is appropriate and con4 sistent with the goals of fairness and econ5 omy of resources; and 

6 ‘‘(vi) include provisions and proce7 dures to permit multiple covered entities to 

8 jointly assert claims of overcharges by the 

9 same manufacturer for the same drug or 

10 drugs in one administrative proceeding, 

11 and permit such claims to be asserted on 

12 behalf of covered entities by associations or 

13 organizations representing the interests of 

14 such covered entities and of which the cov15 ered entities are members. 

16 ‘‘(C) FINALITY OF ADMINISTRATIVE RESO17 LUTION.—The administrative resolution of a 

18 claim or claims under the regulations promul19 gated under subparagraph (A) shall be a final 

20 agency decision and shall be binding upon the 

21 parties involved, unless invalidated by an order 

22 of a court of competent jurisdiction. 

23 ‘‘(4) AUTHORIZATION OF APPROPRIATIONS.— 

24 There are authorized to be appropriated to carry out 


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1 this subsection, such sums as may be necessary for 

2 fiscal year 2008, and each succeeding fiscal year.’’. 

3 (b) RELATED AMENDMENTS.—Section 340B(a)(1) of 

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

5 amended by adding at the end the following: ‘‘Each such 

6 agreement shall require that the manufacturer furnish the 

7 Secretary with reports, on a quarterly basis, of the price 

8 for each covered drug subject to the agreement that, ac9 cording to the manufacturer, represents the maximum 

10 price that covered entities may permissibly be required to 

11 pay for the drug (referred to in this section as the ‘ceiling 

12 price’), and shall require that the manufacturer offer each 

13 covered entity covered drugs for purchase at or below the 

14 applicable ceiling price if such drug is made available to 

15 any other purchaser at any price.’’. 

16 SEC. 5. OTHER IMPROVEMENTS. 

17 (a) GENERAL.—Section 340B of the Public Health 

18 Service Act (42 U.S.C. 256b), as amended by section 4, 

19 is further amended by adding at the end the following: 

20 ‘‘(f) USE OF MULTIPLE CONTRACT PHARMACIES

21 PERMITTED.—Nothing in this section shall be construed 

22 as prohibiting a covered entity from entering into con23 tracts with more than 1 pharmacy for the provision of cov24 ered drugs, including a contract that supplements the use 


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1 of an in-house pharmacy arrangement or requires the ap2 proval of the Secretary for entering into such a contract. 

3 ‘‘(g) INTRAAGENCY COORDINATION.—The Secretary 

4 shall establish specific measures, policies, and procedures 

5 to ensure effective communication and coordination be6 tween the Centers for Medicare & Medicaid Services and 

7 the Health Resources and Services Administration with 

8 respect to all agency actions and all aspects of policy and 

9 administration affecting or pertaining to the drug discount 

10 program under this section and in which the functions and 

11 responsibilities of those agency components are inter12 related or interdependent, including through the establish13 ment of a permanent working group that is composed of 

14 representatives of both the Health Resources and Services 

15 Administration and the Centers for Medicare & Medicaid 

16 Services, to identify and oversee matters requiring such 

17 coordination.’’. 

18 (b) EFFECTIVE DATES.— 

19 (1) AMENDMENT.—Section 340B(d) of the 

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

21 amended by striking ‘‘Veterans Health Care Act of 

22 1992’’ and inserting ‘‘340B Program Improvement 

23 and Integrity Act of 2007’’. 


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1 (2) APPLICATION OF ACT.—The amendments 

2 made by this Act shall apply to drugs purchased on 

3 or after January 1, 2008. 

4 (c) EFFECTIVENESS NOTWITHSTANDING OTHER

5 PROVISIONS OF LAW.—Notwithstanding any other provi6 sion of law, the amendments made by this Act shall be7 come effective on January 1, 2008, and shall be taken into 

8 account in determining whether a manufacturer is deemed 

9 to meet the requirements of section 340B(a) of the Public 

10 Health Service Act (42 U.S.C. 256b(a)), and the require11 ments of section 1927(a)(5) of the Social Security Act (42 

12 U.S.C. 1396r–8(a)(5)). 

13 SEC. 6. CONFORMING AMENDMENTS. 

14 Section 1927 of the Social Security Act (42 U.S.C. 

15 1396r–8) is amended— 

16 (1) in subsection (a)(5)— 

17 (A) in subparagraph (A), by striking ‘‘cov18 ered outpatient’’ and inserting ‘‘covered’’; 

19 (B) by redesignating subparagraphs (C) 

20 through (E), as subparagraphs (D) through 

21 (F), respectively; 

22 (C) by inserting after subparagraph (B) 

23 the following: 

24 ‘‘(C) COVERED DRUG DEFINED.—In this 

25 subsection, the term ‘covered drug’ means a 


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•S 1376 IS

1 drug defined in section 340B(b)(2) of the Pub2 lic Health Service Act.’’; 

3 (D) in subparagraph (E), as so redesig4 nated, by striking ‘‘title VI of the Veterans 

5 Health Care Act of 1992’’ and inserting ‘‘340B 

6 Program Improvement and Integrity Act of 

7 2007.’’; and 

8 (E) in subparagraph (F), as so redesig9 nated— 

10 (i) by striking ‘‘as in effect imme11 diately after the enactment of this para12 graph’’ and inserting ‘‘as in effect upon 

13 the effective date of the 340B Program 

14 Improvement and Integrity Act of 2007,’’; 

15 and 

16 (ii) by striking ‘‘after the date of the 

17 enactment of this paragraph’’ and insert18 ing ‘‘after the date of enactment of such 

19 Act.’’; 

20 (2) in subsection (c)(1)(C)(i)— 

21 (A) by redesignating subclauses (II) 

22 through (IV) as subclauses (III) through (V), 

23 respectively; and 

24 (B) by inserting after subclause (I) the fol25 lowing: 


hmoore on PRODPC68 with HMBILLS
28 

•S 1376 IS

1 ‘‘(II) any prices charged for a 

2 covered drug as defined in section 

3 340B(b)(2) of the Public Health Serv4 ice Act;’’; and 

5 (3) in subsection (k)(1), by adding at the end 

6 the following: 

7 ‘‘(D) CALCULATION FOR COVERED

8 DRUGS.—Notwithstanding any other provision 

9 of this subsection, with respect to a covered 

10 drug as defined in section 340B(b)(2) of the 

11 Public Health Service Act, average manufac12 turer price means the average price paid to the 

13 manufacturer for the drug in the United States 

14 by wholesalers for drugs distributed to both the 

15 retail pharmacy and acute care classes of trade, 

16 after deducting customary prompt pay dis17 counts.’’. 

Æ 


hmoore on PRODPC68 with HMBILLS