assistance for such drugs (as so determined); 
and 
‘‘(B) the State percentage determined for the 
State under section 1905(b).’’. 
(b) ANNUAL DETERMINATION OF STATE GENERIC 
SUBSTITUTION RATES AND PERFORMANCE RANKINGS.— 
Section 1927 of the Social Security Act (42 U.S.C. 1396r– 
8) is amended by adding at the end the following: 
‘‘(l) ANNUAL DETERMINATION OF STATE GENERIC 
SUBSTITUTION RATES AND PERFORMANCE RANKINGS.— 
‘‘(1) IN GENERAL.—Not later than January 1, 
2012, and annually thereafter, the Secretary shall 
determine the generic substitution rate (as defined 
in paragraph (2)) for each State for the most recent 
preceding fiscal year and the second most recent 
preceding fiscal year for which data are available. 
The Secretary annually shall publish on the Internet 
Web site of the Centers for Medicare & Medicaid 
Services the generic substitution rates determined 
for each State for such preceding fiscal years and, 
with respect to a State, the percentage increase or 
decrease in such rates when compared with each 
other. On the basis of such comparison, the Sec-
retary shall list the States in order of the States 
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with the greatest increase in the generic substitution 
rate. 
‘‘(2) GENERIC SUBSTITUTION RATE.—In para-
graph (1), the term ‘generic substitution rate’ 
means, with respect to a State, the share of all drug 
units for which payment is made to the State under 
this title for the 20 most widely prescribed multiple 
source drugs under the State program under this 
title that have a specific National Drug Code and 
meet the requirements of subsection (k)(7)(A)(i).’’. 
(c) EVALUATION AND REPORT.— 
(1) IN GENERAL.—Not later than December 31, 
2014, the Secretary of Health and Human Services 
shall evaluate and report to Congress on the effec-
tiveness of the generic drug utilization savings pay-
ments authorized under section 1903(h) of the So-
cial Security Act (42 U.S.C. 1396b(h)) (as added by 
subsection (a)) in encouraging States to increase 
their Medicaid generic substitution rate. The evalua-
tion shall include the following: 
(A) An analysis of the amounts each State 
Medicaid program saves through increased ge-
neric drug substitution. 
(B) An analysis of any indirect savings to 
State Medicaid programs through increased 
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medication adherence due to increased accessi-
bility and affordability of prescriptions. 
(C) An analysis of future estimated sav-
ings to State Medicaid programs and the Fed-
eral Government after termination of the ge-
neric drug utilization savings payments author-
ized under such section. 
(2) MEDICAID GENERIC SUBSTITUTION RATE.— 
In paragraph (1), the term ‘‘Medicaid generic substi-
tution rate’’ has the meaning given the term ‘‘ge-
neric substitution rate’’ under section 1927(l)(2) of 
the Social Security Act (42 U.S.C. 1396r–8(l)(2)) 
(as added by subsection (b)). 
SEC. 3. INNOVATIVE HEALTH CARE SAVINGS PROGRAM. 
(a) IN GENERAL.—Section 1903 of the Social Secu-
rity Act (42 U.S.C. 1396b) is amended by adding at the 
end the following: 
‘‘(aa) INNOVATIVE HEALTH CARE SAVINGS PRO-
GRAM.— 
‘‘(1) IN
GENERAL.—In addition to the pay-
ments provided under subsection (a), subject to 
paragraph (5), the Secretary shall provide for pay-
ments to eligible States for the implementation of 
programs to achieve reductions in expenditures 
under this title or under title XVIII. 
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‘‘(2) ELIGIBLE STATE.—A State is eligible for 
a payment under this subsection if the State 
achieves a generic substitution rate (as determined 
under section 1927(l)(2)) of at least 92 percent. 
‘‘(3) USE OF FUNDS.—A State may only use 
funds received through a payment under this sub-
section to implement programs to achieve reductions 
in expenditures under this title or title XVIII (such 
as innovative approaches to cost savings and health 
care delivery). 
‘‘(4) APPLICATION, TERMS, AND CONDITIONS.— 
‘‘(A) APPLICATION.—No payments shall be 
made to a State under this subsection unless 
the State applies to the Secretary for such pay-
ments in a form, manner, and time specified by 
the Secretary and such application is approved 
by the Secretary. 
‘‘(B) TERMS AND CONDITIONS.—Payments 
made under this subsection are made under 
such terms and conditions consistent with this 
subsection as the Secretary prescribes. 
‘‘(5) FUNDING.— 
‘‘(A) LIMITATION.—The total amount of 
payments under this subsection for a quarter 
shall not exceed 5 percent of the sum of the ge-
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neric drug utilization savings amount (as deter-
mined under subsection (h)(2)) for all States 
for the quarter. This subsection constitutes 
budget authority in advance of appropriations 
Acts and represents the obligation of the Sec-
retary to provide for the payment of amounts 
provided under this subsection. 
‘‘(B) ALLOCATION OF FUNDS.—The Sec-
retary shall specify a method for allocating the 
funds made available under this subsection 
among eligible States. 
‘‘(C) FORM AND MANNER OF PAYMENT.— 
Payment to an eligible State under this sub-
section shall be made in the same manner as 
other payments under section 1903(a). There is 
no requirement for State matching funds to re-
ceive payments under this subsection.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall be effective for quarters beginning on 
or after the date of enactment of this Act. 
Æ 
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