(1) IN GENERAL.—Section 1927(e) of the So-
cial Security Act (42 U.S.C. 1396r–8(e)) is amend-
ed— 
(A) in paragraph (4), by striking ‘‘(or, ef-
fective January 1, 2007, two or more)’’; and 
(B) by striking paragraph (5) and insert-
ing the following: 
‘‘(5) USE OF AMP IN UPPER PAYMENT LIM-
ITS.—The Secretary shall calculate the Federal 
upper reimbursement limit established under para-
graph (4) as no less than 300 percent of the weight-
ed average (determined on the basis of utilization) of 
the most recent average manufacturer prices for 
pharmaceutically and therapeutically equivalent mul-
tiple source drug products that are available for pur-
chase by retail community pharmacies on a nation-
wide basis. The Secretary shall implement a smooth-
ing process for average manufacturer prices to en-
sure that Federal upper reimbursement limits do not 
vary significantly from month to month as a result 
of rebates, discounts, and other pricing practices. 
Such process shall be similar to the smoothing proc-
ess used in determining the average sales price of a 
drug or biological under section 1847A.’’. 
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(2) DEFINITION OF AMP.—Section 1927(k)(1) 
of such Act (42 U.S.C. 1396r–8(k)(1)) is amend-
ed— 
(A) in subparagraph (A), by striking ‘‘by’’ 
and all that follows through the period and in-
serting ‘‘by— 
‘‘(i) wholesalers for drugs distributed 
to retail community pharmacies; and 
‘‘(ii) retail community pharmacies 
that purchase drugs directly from the man-
ufacturer.’’; and 
(B) in subparagraph (B)— 
(i) in the subparagraph heading, by 
striking ‘‘EXTENDED
TO
WHOLESALERS’’ 
and inserting ‘‘AND
OTHER
PAYMENTS’’; 
and 
(ii) by striking ‘‘regard to’’ and all 
that follows through the period and insert-
ing ‘‘regard to— 
‘‘(i) customary prompt pay discounts 
extended to wholesalers; 
‘‘(ii) bona fide service fees paid by 
manufacturers to wholesalers or retail 
community pharmacies, including (but not 
limited to) distribution service fees, inven-
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tory management fees, product stocking al-
lowances, and fees associated with adminis-
trative services agreements and patient 
care programs (such as medication compli-
ance programs and patient education pro-
grams); 
‘‘(iii) reimbursement by manufactur-
ers for recalled, damaged, expired, or oth-
erwise unsalable returned goods, including 
(but not limited to) reimbursement for the 
cost of the goods and any reimbursement 
of costs associated with return goods han-
dling and processing, reverse logistics, and 
drug destruction; 
‘‘(iv) payments received from, and re-
bates or discounts provided to, pharmacy 
benefit managers, managed care organiza-
tions, health maintenance organizations, 
insurers, hospitals, clinics, mail order phar-
macies, long term care providers, manufac-
turers, or any other entity that does not 
conduct business primarily as a wholesaler 
or a retail community pharmacy; 
‘‘(v) any payments made by manufac-
turers that are associated with drugs dis-
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pensed by retail community pharmacies; 
and 
‘‘(vi) any other discounts, rebates, 
payments, or other financial transactions 
that are not received by, paid by, or passed 
through to, retail community pharmacies.’’. 
(3) 
DEFINITION
OF
MULTIPLE
SOURCE 
DRUG.—Section 1927(k)(7)(A)(i) of such Act (42 
U.S.C. 1396r–8(k)(7)(A)(i)) is amended— 
(A) in the matter preceding subclause (I), 
by striking ‘‘there at least 1 other drug prod-
uct’’ and inserting ‘‘there are at least 2 other 
drug products’’; and 
(B) in subclauses (I), (II), and (III), by 
striking ‘‘is’’ each place it appears and inserting 
‘‘are’’. 
(4) DEFINITIONS OF RETAIL COMMUNITY PHAR-
MACY; WHOLESALER.—Section 1927(k) of such Act 
(42 U.S.C. 1396r–8(k)) is amended by adding at the 
end the following new paragraphs: 
‘‘(10) RETAIL
COMMUNITY
PHARMACY.—The 
term ‘retail community pharmacy’ means a tradi-
tional independent pharmacy, traditional chain phar-
macy, a supermarket pharmacy, or a mass merchan-
diser pharmacy that is licensed as a pharmacy by a 
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State and that dispenses medications to the general 
public at retail prices. Such term does not include a 
pharmacy that dispenses prescription medications to 
patients primarily through the mail, nursing home 
pharmacies, long-term care facility pharmacies, hos-
pital pharmacies, clinics, charitable or not-for-profit 
pharmacies, government pharmacies, or pharmacy 
benefit managers. 
‘‘(11) WHOLESALER.—The term ‘wholesaler’ 
means a drug wholesaler that is licensed as a whole-
saler by a State and that is engaged in wholesale 
distribution of prescription drugs to retail commu-
nity pharmacies, including (but not limited to) man-
ufacturers, repackers, own-label distributors, private- 
label distributors, jobbers, brokers, warehouses (in-
cluding manufacturer’s and distributor’s warehouses, 
chain drug warehouses, and wholesale drug ware-
houses) independent wholesale drug traders, and re-
tail pharmacies that conduct wholesale distribu-
tions.’’. 
(b) REQUIREMENTS OF PRIOR AUTHORIZATION PRO-
GRAMS.—Section 1927(d)(5) of such Act (42 U.S.C. 
1396r–8(d)(5)) is amended— 
(1) in the matter preceding subparagraph (A), 
by striking ‘‘of the drug before its dispensing for 
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any medically accepted indication (as defined in sub-
section (k)(6)) only if the system providing for such 
approval’’ and inserting ‘‘by the State of the use of 
the drug before its dispensing for any medically ac-
cepted indication (as defined in subsection (k)(6)). A 
State plan under this title shall, as a condition of 
coverage or payment for a covered outpatient drug 
for which Federal financial participation is available 
in accordance with this section, subject to prior au-
thorization all covered outpatient drug products that 
are innovator multiple source drugs if such drug 
products are more expensive than other biologically 
and therapeutically equivalent drug products that 
are available for purchase in that State by retail 
community pharmacies. The system providing for 
such approval shall’’; 
(2) in each of subparagraphs (A) and (B), by 
striking ‘‘provides’’ and inserting ‘‘provide’’; 
(3) by redesignating subparagraphs (A) and 
(B) (as so amended) as subparagraphs (C) and (D), 
respectively; and 
(4) by inserting before subparagraph (C) (as so 
redesignated), the following new subparagraphs: 
‘‘(A) require the prescriber to request prior 
authorization by substantiating the medical ne-
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cessity of dispensing the covered outpatient 
drug as opposed to dispensing a substitute cov-
ered outpatient drug; 
‘‘(B) require that a prior authorization 
number assigned to the approved request by the 
State be included on the order for the covered 
outpatient drug issued by the prescriber or re-
layed to the dispensing pharmacist by the pre-
scriber if the prescription is orally trans-
mitted;’’. 
(c) DISCLOSURE OF PRICE INFORMATION TO THE 
PUBLIC.—Section 1927(b)(3) of such Act (42 U.S.C. 
1396r–8(b)(3)) is amended— 
(1) in subparagraph (A)— 
(A) in clause (i), in the matter preceding 
subclause (I), by inserting ‘‘month of a’’ after 
‘‘each’’; and 
(B) in the last sentence, by striking ‘‘and 
shall,’’ and all that follows through the period; 
and 
(2) in subparagraph (D)— 
(A) in clause (iii), by inserting ‘‘and’’ after 
the comma; 
(B) in clause (iv), by striking ‘‘, and’’ and 
inserting a period; and 
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(C) by striking clause (v). 
(d) TECHNICAL AMENDMENT.—Section 1927(d)(1) 
of such Act (42 U.S.C. 1396r–8(d)(1)) is amended in the 
paragraph heading by inserting ‘‘AND MANDATORY’’ after 
‘‘PERMISSIBLE’’. 
(e) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall take effect as if included in the enactment of 
the Deficit Reduction Act of 2005 (Public Law 109– 
171). 
(2) EXCEPTION.—The amendments made by 
subsection (b) shall take effect on the date that is 
180 days after the date of enactment of this Act. 
Æ 
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