I 
115TH CONGRESS 
2D SESSION 
H. R. 7223 
To amend title XIX of the Social Security Act to prevent the misclassification 
of drugs for purposes of the Medicaid drug rebate program. 
IN THE HOUSE OF REPRESENTATIVES 
DECEMBER 6, 2018 
Mr. SCHRADER (for himself and Mr. WELCH) 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 subse-
quently 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 title XIX of the Social Security Act to prevent 
the misclassification of drugs for purposes of the Med-
icaid drug rebate program. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Right Rebate Act of 
2018’’. 
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SEC. 2. PREVENTING THE MISCLASSIFICATION OF DRUGS 
UNDER THE MEDICAID DRUG REBATE PRO-
GRAM. 
(a) APPLICATION OF CIVIL MONEY PENALTY FOR 
MISCLASSIFICATION
OF
COVERED
OUTPATIENT 
DRUGS.— 
(1) IN GENERAL.—Section 1927(b)(3) of the 
Social Security Act (42 U.S.C. 1396r–8(b)(3)) is 
amended— 
(A) in the paragraph heading, by inserting 
‘‘AND DRUG PRODUCT’’ after ‘‘PRICE’’; 
(B) in subparagraph (A)— 
(i) in clause (ii), by striking ‘‘; and’’ 
at the end and inserting a semicolon; 
(ii) in clause (iii), by striking the pe-
riod at the end and inserting a semicolon; 
(iii) in clause (iv), by striking the 
semicolon at the end and inserting ‘‘; 
and’’; and 
(iv) by inserting after clause (iv) the 
following new clause: 
‘‘(v) not later than 30 days after the 
last day of each month of a rebate period 
under the agreement, such drug product 
information as the Secretary shall require 
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amount of the difference, as deter-
mined by the Secretary, between— 
‘‘(aa) the total amount of 
rebates that the manufacturer 
paid with respect to the drug to 
all States for all rebate periods 
during 
which 
the 
drug 
was 
misclassified; and 
‘‘(bb) the total amount of 
rebates that the manufacturer 
would have been required to pay, 
as determined by the Secretary, 
with respect to the drug to all 
States for all rebate periods dur-
ing 
which 
the 
drug 
was 
misclassified if the drug had been 
correctly classified. 
‘‘(II) OTHER
PENALTIES
AND 
RECOVERY
OF
UNDERPAID
RE-
BATES.—The civil money penalties de-
scribed in subclause (I) are in addi-
tion to other penalties as may be pre-
scribed by law and any other recovery 
of the underlying underpayment for 
rebates due under this section or the 
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terms of the rebate agreement as de-
termined by the Secretary. 
‘‘(iv) INCREASING
OVERSIGHT
AND 
ENFORCEMENT.—Each year the Secretary 
shall retain, in addition to any amount re-
tained by the Secretary to recoup inves-
tigation and litigation costs related to the 
enforcement of the civil money penalties 
under this subparagraph and subsection 
(c)(4)(B)(ii)(III), an amount equal to 25 
percent of the total amount of civil money 
penalties collected under this subparagraph 
and subsection (c)(4)(B)(ii)(III) for the 
year, and such retained amount shall be 
available to the Secretary, without further 
appropriation and until expended, for ac-
tivities related to the oversight and en-
forcement of this section and agreements 
under this section, including— 
‘‘(I) improving drug data report-
ing systems; 
‘‘(II) evaluating and ensuring 
manufacturer compliance with rebate 
obligations; and 
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‘‘(III) oversight and enforcement 
related to ensuring that manufactur-
ers accurately and fully report drug 
information, including data related to 
drug classification.’’; and 
(iii) in subparagraph (D)— 
(I) in clause (iv), by striking ‘‘; 
and’’ and inserting a semicolon; 
(II) in clause (v), by striking the 
period and inserting ‘‘; and’’; and 
(III) by inserting after clause (v) 
the following new clause: 
‘‘(vi) in the case of categories of drug 
product or classification information that 
were not considered confidential by the 
Secretary on the day before the date of the 
enactment of the Right Rebate Act of 
2018.’’. 
(2) TECHNICAL AMENDMENTS.— 
(A) Section 1903(i)(10) of the Social Secu-
rity Act (42 U.S.C. 1396b(i)(10)) is amended— 
(i) in subparagraph (C)— 
(I) by adjusting the left margin 
so as to align with the left margin of 
subparagraph (B); and 
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(II) by striking ‘‘, and’’ and in-
serting a semicolon; 
(ii) in subparagraph (D), by striking 
‘‘; or’’ and inserting ‘‘; and’’; and 
(iii) by adding at the end the fol-
lowing new subparagraph: 
‘‘(E) with respect to any amount expended 
for a covered outpatient drug for which a sus-
pension under section 1927(c)(4)(B)(ii)(II) is in 
effect; or’’. 
(B) Section 1927(b)(3)(C)(ii) of the Social 
Security Act (42 U.S.C. 1396r–8(b)(3)(C)(ii)) 
is amended by striking ‘‘subsections (a) and 
(b)’’ and inserting ‘‘subsections (a), (b), (f)(3), 
and (f)(4)’’. 
(b) RECOVERY OF UNPAID REBATE AMOUNTS DUE 
TO
MISCLASSIFICATION
OF
COVERED
OUTPATIENT 
DRUGS.— 
(1) IN GENERAL.—Section 1927(c) of the So-
cial Security Act (42 U.S.C. 1396r–8(c)) is amended 
by adding at the end the following new paragraph: 
‘‘(4) RECOVERY OF UNPAID REBATE AMOUNTS 
DUE
TO
MISCLASSIFICATION
OF
COVERED
OUT-
PATIENT DRUGS.— 
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‘‘(A) IN GENERAL.—If the Secretary deter-
mines that a manufacturer with an agreement 
under this section paid a lower per-unit rebate 
amount to a State for a rebate period as a re-
sult of the misclassification by the manufac-
turer of a covered outpatient drug (without re-
gard to whether the manufacturer knowingly 
made the misclassification or should have 
known that the misclassification would be 
made) than the per-unit rebate amount that the 
manufacturer would have paid to the State if 
the drug had been correctly classified, the man-
ufacturer shall pay to the State an amount 
equal to the product of— 
‘‘(i) the difference between— 
‘‘(I) the per-unit rebate amount 
paid to the State for the period; and 
‘‘(II) the per-unit rebate amount 
that the manufacturer would have 
paid to the State for the period, as 
determined by the Secretary, if the 
drug had been correctly classified; and 
‘‘(ii) the total units of the drug paid 
for under the State plan in the period. 
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‘‘(B) 
AUTHORITY
TO
CORRECT 
MISCLASSIFICATIONS.— 
‘‘(i) IN
GENERAL.—If the Secretary 
determines that a manufacturer with an 
agreement under this section has misclassi-
fied a covered outpatient drug (without re-
gard to whether the manufacturer know-
ingly made the misclassification or should 
have known that the misclassification 
would be made), the Secretary shall notify 
the manufacturer of the misclassification 
and require the manufacturer to correct 
the misclassification in a timely manner. 
‘‘(ii) ENFORCEMENT.—If, after receiv-
ing notice of a misclassification from the 
Secretary under clause (i), a manufacturer 
fails to correct the misclassification by 
such time as the Secretary shall require, 
until the manufacturer makes such correc-
tion, the Secretary may— 
‘‘(I) correct the misclassification 
on behalf of the manufacturer; 
‘‘(II) suspend the misclassified 
drug and the drug’s status as a cov-
ered outpatient drug under the manu-
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facturer’s national rebate agreement; 
or 
‘‘(III) impose a civil money pen-
alty (which shall be in addition to any 
other recovery or penalty which may 
be available under this section or any 
other provision of law) for each rebate 
period during which the drug is 
misclassified not to exceed an amount 
equal to the product of— 
‘‘(aa) the total number of 
units of each dosage form and 
strength of such misclassified 
drug paid for under any State 
plan during such a rebate period; 
and 
‘‘(bb) 23.1 percent of the av-
erage manufacturer price for the 
dosage form and strength of such 
misclassified drug. 
‘‘(C) REPORTING AND TRANSPARENCY.— 
‘‘(i) IN
GENERAL.—The Secretary 
shall submit a report to Congress on at 
least an annual basis that includes infor-
mation on the covered outpatient drugs 
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that have been identified as misclassified, 
the steps taken to reclassify such drugs, 
the actions the Secretary has taken to en-
sure the payment of any rebate amounts 
which were unpaid as a result of such 
misclassification, and a disclosure of ex-
penditures from the fund created in sub-
section (b)(3)(C)(iv), including an account-
ing of how such funds have been allocated 
and spent in accordance with such sub-
section. 
‘‘(ii) PUBLIC ACCESS.—The Secretary 
shall make the information contained in 
the report required under clause (i) avail-
able to the public on a timely basis. 
‘‘(D) OTHER PENALTIES AND ACTIONS.— 
Actions taken and penalties imposed under this 
clause shall be in addition to other remedies 
available to the Secretary including terminating 
the manufacturer’s rebate agreement for non-
compliance with the terms of such agreement 
and shall not exempt a manufacturer from, or 
preclude the Secretary from pursuing, any civil 
money penalty under this title or title XI, or 
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any other penalty or action as may be pre-
scribed by law.’’. 
(2) OFFSET OF RECOVERED AMOUNTS AGAINST 
MEDICAL
ASSISTANCE.—Section 1927(b)(1)(B) of 
the 
Social 
Security 
Act 
(42 
U.S.C. 
1396r– 
8(b)(1)(B)) is amended by inserting ‘‘, including 
amounts received by a State under subsection 
(c)(4),’’ after ‘‘in any quarter’’. 
(c) 
CLARIFYING
DEFINITIONS.—Section 
1927(k)(7)(A) of the Social Security Act (42 U.S.C. 
1396r–8(k)(7)(A)) is amended— 
(1) by striking ‘‘an original new drug applica-
tion’’ and inserting ‘‘a new drug application’’ each 
place it appears; 
(2) in clause (i), by inserting ‘‘but including a 
drug product approved for marketing as a non-pre-
scription drug that is regarded as a covered out-
patient drug under paragraph (4)’’ after ‘‘drug de-
scribed in paragraph (5)’’; 
(3) in clause (ii), by striking ‘‘was originally 
marketed’’ and inserting ‘‘is marketed’’; and 
(4) in clause (iv)— 
(A) by inserting ‘‘, including a drug prod-
uct approved for marketing as a non-prescrip-
tion drug that is regarded as a covered out-
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patient drug under paragraph (4),’’ after ‘‘cov-
ered outpatient drug’’; and 
(B) by adding at the end the following new 
sentence: ‘‘Such term also includes a covered 
outpatient drug that is a biological product li-
censed, produced, or distributed under a bio-
logics license application approved by the Food 
and Drug Administration.’’ 
(d) EXCLUSION OF MANUFACTURERS FOR KNOWING 
MISCLASSIFICATION
OF
COVERED
OUTPATIENT 
DRUGS.—Section 1128(b) of the Social Security Act (42 
U.S.C. 1320a–7(b)) is amended by adding at the end the 
following new paragraph: 
‘‘(17) KNOWINGLY
MISCLASSIFYING
COVERED 
OUTPATIENT DRUGS.—Any manufacturer or officer, 
director, agent, or managing employee of such man-
ufacturer that knowingly misclassifies a covered out-
patient drug under an agreement under section 
1927, knowingly fails to correct such misclassifica-
tion, or knowingly provides false information related 
to drug pricing, drug product information, or data 
related to drug pricing or drug product informa-
tion.’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on the date of the enactment 
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of this Act, and shall apply to covered outpatient drugs 
supplied by manufacturers under agreements under sec-
tion 1927 of the Social Security Act (42 U.S.C. 1396r– 
8) on or after such date. 
Æ 
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