II 

110TH CONGRESS 

1ST SESSION S. 1589 

To amend title XIX of the Social Security Act to reduce the costs of prescription drugs for enrollees of Medicaid managed care organizations by 

extending the discounts offered under fee-for-service Medicaid to such 

organizations. 

IN THE SENATE OF THE UNITED STATES 

JUNE 11, 2007 

Mr. BINGAMAN (for himself, Mr. KERRY, Mr. AKAKA, Mr. SALAZAR, Mr. 

WHITEHOUSE, and Ms. MIKULSKI) introduced the following bill; which 

was read twice and referred to the Committee on Finance 

A BILL 

To amend title XIX of the Social Security Act to reduce 

the costs of prescription drugs for enrollees of Medicaid 

managed care organizations by extending the discounts 

offered under fee-for-service Medicaid to such organizations. 

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 ‘‘Drug Rebate Equali5 zation Act of 2007’’. 


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1 SEC. 2. EXTENSION OF PRESCRIPTION DRUG DISCOUNTS 

2 TO ENROLLEES OF MEDICAID MANAGED 

3 CARE ORGANIZATIONS. 

4 (a) IN GENERAL.—Section 1903(m)(2)(A) (42 

5 U.S.C. 1396b(m)(2)(A)) is amended— 

6 (1) in clause (xi), by striking ‘‘and’’ at the end; 

7 (2) in clause (xii), by striking the period at the 

8 end and inserting ‘‘; and’’; and 

9 (3) by adding at the end the following: 

10 ‘‘(xiii) such contract provides that (I) 

11 payment for covered outpatient drugs dis12 pensed to individuals eligible for medical 

13 assistance who are enrolled with the entity 

14 shall be subject to the same rebate re15 quired by the agreement entered into 

16 under section 1927 as the State is subject 

17 to and that the State shall allow the entity 

18 to collect such rebates from manufacturers, 

19 and (II) capitation rates paid to the entity 

20 shall be based on actual cost experience re21 lated to rebates and subject to the Federal 

22 regulations requiring actuarially sound 

23 rates.’’. 

24 (b) CONFORMING AMENDMENTS.—Section 1927 (42 

25 U.S.C. 1396r–8) is amended— 

26 (1) in subsection (d)— 


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1 (A) in paragraph (1), by adding at the end 

2 the following: 

3 ‘‘(C) Notwithstanding the subparagraphs 

4 (A) and (B)— 

5 ‘‘(i) a medicaid managed care organi6 zation with a contract under section 

7 1903(m) may exclude or otherwise restrict 

8 coverage of a covered outpatient drug on 

9 the basis of policies or practices of the or10 ganization, such as those affecting utiliza11 tion management, formulary adherence, 

12 and cost sharing or dispute resolution, in 

13 lieu of any State policies or practices relat14 ing to the exclusion or restriction of cov15 erage of such drugs; and 

16 ‘‘(ii) nothing in this section or para17 graph (2)(A)(xiii) of section 1903(m) shall 

18 be construed as requiring a medicaid man19 aged care organization with a contract 

20 under such section to maintain the same 

21 such polices and practices as those estab22 lished by the State for purposes of individ23 uals who receive medical assistance for cov24 ered outpatient drugs on a fee-for service 

25 basis.’’; and 


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1 (B) in paragraph (4), by inserting after 

2 subparagraph (E) the following: 

3 ‘‘(F) Notwithstanding the preceding sub4 paragraphs of this paragraph, any formulary 

5 established by medicaid managed care organiza6 tion with a contract under section 1903(m) may 

7 be based on positive inclusion of drugs selected 

8 by a formulary committee consisting of physi9 cians, pharmacists, and other individuals with 

10 appropriate clinical experience as long as drugs 

11 excluded from the formulary are available 

12 through prior authorization, as described in 

13 paragraph (5).’’; and 

14 (2) in subsection (j), by striking paragraph (1) 

15 and inserting the following: 

16 ‘‘(1) Covered outpatients drugs are not subject 

17 to the requirements of this section if such drugs 

18 are— 

19 ‘‘(A) dispensed by a health maintenance 

20 organization other than a medicaid managed 

21 care organization with a contract under section 

22 1903(m); and 

23 ‘‘(B) subject to discounts under section 

24 340B of the Public Health Service Act.’’. 


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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section take effect on the date of enactment of this 

3 Act and apply to rebate agreements entered into or re4 newed under section 1927 of the Social Security Act (42 

5 U.S.C. 1396r–8) on or after such date. 

Æ 


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