I 

112TH CONGRESS 

1ST SESSION H. R. 2674 

To amend section 340B of the Public Health Service Act to improve the 

provision of discounts on drug purchases for certain safety net providers. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 27, 2011 

Mrs. MCMORRIS RODGERS (for herself, Mr. RUSH, Mrs. EMERSON, Ms. 

BROWN of Florida, Mr. OWENS, Mr. CLARKE of Michigan, Mrs. CAPITO, 

Mr. CLEAVER, and Mr. YOUNG of Florida) 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 section 340B of the Public Health Service 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 Act’’. 


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1 SEC. 2. EXTENSION OF DISCOUNTS TO INPATIENT DRUGS. 

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

3 Health Service Act (42 U.S.C. 256b) is amended— 

4 (1) in subsection (a)— 

5 (A) in paragraphs (1), (2), and (5), by 

6 striking ‘‘covered outpatient drug’’ each place 

7 such term appears and inserting ‘‘covered 

8 drug’’; and 

9 (B) in paragraphs (1), (7), and (9), by 

10 striking ‘‘covered outpatient drugs’’ each place 

11 such term appears and inserting ‘‘covered 

12 drugs’’; 

13 (2) in subsection (b)(2)(B) by striking ‘‘para14 graph (3)(A)’’ and inserting ‘‘paragraph (3)’’; and 

15 (3) in subsection (d), by striking ‘‘covered out16 patient drugs’’ each place such term appears and in17 serting ‘‘covered drugs’’. 

18 (b) MEDICAID CREDITS ON INPATIENT DRUGS.— 

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

20 256b) is amended by inserting after subsection (b) the fol21 lowing new subsection: 

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

23 ‘‘(1) IN GENERAL.—For each cost reporting pe24 riod, based on the most recently filed Medicare cost 

25 report under title XVIII of the Social Security Act 

26 and subject to paragraph (5), a hospital described in 


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

2 (a)(4) and enrolled to participate in the drug dis3 count program under this section shall provide to 

4 each State that has a plan for medical assistance 

5 under title XIX of such Act and that makes pay6 ment to such hospital for covered drugs provided to 

7 Medicaid recipients for inpatient use, a credit on the 

8 estimated annual purchases by such hospital of such 

9 covered drugs provided to such Medicaid recipients. 

10 ‘‘(2) AMOUNT OF CREDIT.— 

11 ‘‘(A) IN GENERAL.—The credit described 

12 in paragraph (1), with respect to a hospital and 

13 cost reporting period described in such para14 graph shall be equal to— 

15 ‘‘(i) the product of— 

16 ‘‘(I) the sum of the annual credit 

17 amounts (described in subparagraph 

18 (B)) calculated under subparagraph 

19 (B)(i) for each dosage form and 

20 strength of each covered drug pur21 chased by the hospital during the cost 

22 reporting period; and 

23 ‘‘(II) the estimated percentage of 

24 the purchases of covered drugs by the 

25 hospital during such period attribVerDate Mar 15 2010 05:28 Jul 28, 2011 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H2674.IH H2674

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1 utable to Medicaid recipients for inpa2 tient use, as determined in accordance 

3 with subparagraph (D); and 

4 ‘‘(ii) subject to paragraph (3)(D), re5 duced by the amount by which the Med6 icaid inpatient reimbursement (as defined 

7 in subparagraph (E)(ii)) of the hospital for 

8 such period was reduced as a result of par9 ticipation in the drug discount program 

10 under this section during such period by 

11 the hospital, as determined in accordance 

12 with subparagraph (E). 

13 ‘‘(B) ANNUAL CREDIT AMOUNTS.—For 

14 purposes of subparagraph (A)(i)(I), an annual 

15 credit amount, with respect to a covered drug 

16 purchased by a hospital described in paragraph 

17 (1) during a cost reporting period of the hos18 pital— 

19 ‘‘(i) is equal to the sum of the quar20 terly credit amounts calculated under sub21 paragraph (C)(i), for each of the 4 quar22 ters of the cost reporting period for such 

23 covered drug; and 


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1 ‘‘(ii) shall be calculated for each dos2 age form and strength of such covered 

3 drug. 

4 ‘‘(C) QUARTERLY CREDIT AMOUNTS.—For 

5 purposes of subparagraph (B)(ii), a quarterly 

6 credit amount, with respect to a covered drug 

7 purchased by a hospital described in paragraph 

8 (1) during a quarter of the cost reporting pe9 riod of the hospital— 

10 ‘‘(i) is equal to the product of— 

11 ‘‘(I) the total number of units of 

12 each dosage form and strength of 

13 such covered drug purchased by the 

14 hospital during such quarter; 

15 ‘‘(II) the average manufacturer 

16 price of the covered drug (for the unit 

17 of the dosage form and strength in18 volved) during such quarter; and 

19 ‘‘(III) half of the rebate percent20 age for the covered drug, as defined in 

21 subsection (a)(2); and 

22 ‘‘(ii) shall be calculated for— 

23 ‘‘(I) each dosage form and 

24 strength of the covered drug pur25 chased by the hospital; and 


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1 ‘‘(II) each of the 4 quarters of 

2 such cost reporting period. 

3 ‘‘(D) PERCENTAGE OF DRUG PURCHASES

4 ATTRIBUTABLE TO MEDICAID RECIPIENTS FOR

5 IMPATIENT USE.—For purposes of subpara6 graph (A)(i)(II), the estimated percentage of 

7 the drug purchases of the hospital attributable 

8 to Medicaid recipients for inpatient use shall be 

9 equal to the Medicaid inpatient drug charges as 

10 reported on the most recently filed Medicare 

11 cost report of the hospital, divided by the total 

12 drug charges reported on the cost report. 

13 ‘‘(E) CREDIT OFFSET.— 

14 ‘‘(i) IN GENERAL.—For purposes of 

15 subparagraph (A)(ii), the amount by which 

16 the Medicaid inpatient reimbursement of a 

17 hospital, with respect to a cost reporting 

18 period, is reduced as a result of the partici19 pation in the drug discount program under 

20 this section by the hospital shall be com21 puted as the difference between— 

22 ‘‘(I) the Medicaid inpatient reim23 bursement that would have otherwise 

24 been payable to the hospital for the 

25 cost reporting period if the hospital 


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1 did not participate in such drug dis2 count program; and 

3 ‘‘(II) the actual Medicaid inpa4 tient reimbursement payable to the 

5 hospital for the cost reporting period. 

6 ‘‘(ii) MEDICAID INPATIENT REIM7 BURSEMENT DEFINED.—For purposes of 

8 this subsection, the term ‘Medicaid inpa9 tient reimbursement’ means the total pay10 ments received by the hospital under the 

11 State plan under title XIX of the Social 

12 Security Act for providing inpatient serv13 ices to Medicaid recipients. 

14 ‘‘(3) REQUIREMENTS.— 

15 ‘‘(A) IN GENERAL.—A hospital shall not be 

16 required to provide a credit under paragraph 

17 (1) to a State unless, not later than 30 days 

18 after receiving the information described in sub19 paragraph (B), the State calculates in accord20 ance with paragraph (2) the amount of the 

21 credit owed by the hospital under paragraph (1) 

22 and provides the hospital with both the amount 

23 of such credit so owed and an explanation of 

24 how the State calculated such credit. 


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1 ‘‘(B) HOSPITAL PROVISION OF INFORMA2 TION.—Not later than 30 days after the date of 

3 the filing of the most recently filed Medicare 

4 cost report of a hospital described in paragraph 

5 (1), the hospital shall provide the State involved 

6 with the information described in subpara7 graphs (C)(i)(I) and (D) of paragraph (2). 

8 With respect to each covered drug purchased 

9 during the cost reporting period, the hospital 

10 shall provide the National Drug Code, date of 

11 purchase, and the number of units purchased. 

12 Submission of such information shall not be re13 quired if a covered drug has not been assigned 

14 a National Drug Code at the time of purchase. 

15 ‘‘(C) ACCESS TO AMP AND REBATE

16 DATA.—The Secretary shall establish a system 

17 for giving States access to the information nec18 essary for them to calculate credits under para19 graph (2), with respect to covered drugs, in20 cluding the average manufacturer price and re21 bate percentage for such covered drugs. 

22 ‘‘(D) CREDIT OFFSET.—Paragraph 

23 (2)(A)(ii) shall be applied, with respect to a 

24 credit owed by a hospital under paragraph (1), 

25 only if, not later than 30 days after filing the 


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1 most recent Medicare cost report, the hospital 

2 submits to the State involved— 

3 ‘‘(i) a request for the State to apply 

4 such paragraph and to calculate the 

5 amount described in such paragraph in ac6 cordance with paragraph (2)(E); and 

7 ‘‘(ii) the data needed by the State to 

8 determine the amount of the Medicaid in9 patient reimbursement described in para10 graph (2)(E)(i)(I) for such hospital. 

11 ‘‘(E) DISPUTES.—A State and hospital de12 scribed in paragraph (1) shall have access to 

13 the same State dispute resolution procedures 

14 and system applicable to Medicaid reimburse15 ment matters under title XIX of the Social Se16 curity Act. 

17 ‘‘(4) PAYMENT DEADLINE.—A hospital shall 

18 provide to a State the credits owed by such hospital 

19 under paragraph (1) not later than 60 days after 

20 the hospital receives the information described in 

21 paragraph (3)(A). 

22 ‘‘(5) OPT OUT.—A hospital shall not be re23 quired to provide a credit under paragraph (1) to a 

24 State if the hospital and State agree to an alter25 native arrangement. 


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1 ‘‘(6) OFFSET AGAINST MEDICAL ASSISTANCE.— 

2 Amounts received by a State under this subsection 

3 shall be considered to be a reduction in the amount 

4 expended under the State plan for medical assist5 ance for purposes of section 1903(a)(1) of the Social 

6 Security Act. 

7 ‘‘(7) MEDICAID RECIPIENT DEFINED.—For 

8 purposes of this subsection, the term ‘Medicaid re9 cipient’ means, with respect to a State, an individual 

10 who receives benefits under the State plan under 

11 title XIX of the Social Security Act.’’. 

12 (c) CONFORMING AMENDMENTS.—Section 1927 of 

13 the Social Security Act (42 U.S.C. 1396r–8) is amended— 

14 (1) in subsection (a)(5)— 

15 (A) in subparagraph (A), by striking ‘‘cov16 ered outpatient drugs’’ and inserting ‘‘covered 

17 drugs (as defined in section 340B(b)(2) of the 

18 Public Health Service Act)’’; and 

19 (B) by striking subparagraphs (D) and 

20 (E); and 

21 (2) in subsection (c)(1)(C)(i)— 

22 (A) by redesignating subclauses (II) 

23 through (VI) as subclauses (III) through (VII), 

24 respectively; and 


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1 (B) by inserting after subclause (I) the fol2 lowing: 

3 ‘‘(II) any prices charged for a 

4 covered drug, as defined in section 

5 340B(b)(2) of the Public Health Serv6 ice Act;’’. 

7 SEC. 3. PROHIBITION AGAINST DUPLICATE DISCOUNTS 

8 FOR PHYSICIAN ADMINISTERED DRUGS. 

9 Section 340B(a)(5)(A) of the Public Health Service 

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

11 the following: 

12 ‘‘(iii) PHYSICIAN ADMINISTERED

13 DRUGS.—A hospital described in subpara14 graph (L), (M), (N), or (O) of paragraph 

15 (4) shall not be required under section 

16 1927(a)(7) of the Social Security Act to 

17 report National Drug Code numbers for 

18 drugs administered by a physician (or 

19 under a physician’s supervision) if the 

20 State is precluded from seeking a rebate 

21 on such drugs because such drugs were 

22 purchased at a discount under this section. 

23 Nothing in this clause shall relieve a hos24 pital of its obligation to submit National 


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1 Drug Codes in accordance with subsection 

2 (c)(3)(B).’’. 

3 SEC. 4. CONTINUED INCLUSION OF ORPHAN DRUGS IN DEF4 INITION OF COVERED OUTPATIENT DRUGS; 

5 TECHNICAL AMENDMENT. 

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

7 Health Service Act (42 U.S.C. 256b) is amended by strik8 ing subsection (e). 

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

10 subsection (a) shall apply to drugs purchased on or after 

11 March 30, 2010. 

12 SEC. 5. APPLICATION OF RULES FOR DETERMINING PRO13 VIDER-BASED STATUS FOR CERTAIN ENTI14 TIES. 

15 Notwithstanding any other provision of law, in mak16 ing determinations of provider-based status under title 

17 XVIII of the Social Security Act, the facility or organiza18 tion shall be treated as satisfying any requirements and 

19 standards for geographic location in relation to a hospital 

20 or a critical access hospital if the facility or organization 

21 is described in subparagraph (L), (M), (N), or (O) of sec22 tion 340B(a)(4) of the Public Health Service Act (42 

23 U.S.C. 256b(a)(4)). 

Æ 


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