I 
116TH CONGRESS 
1ST SESSION H. R. 1559 
To amend the Public Health Service Act to strengthen program integrity 
and enhance low-income patient benefits for safety net providers. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 6, 2019 
Mr. COLLINS of New York introduced the following bill; which was referred 
to the Committee on Energy and Commerce 
A BILL 
To amend the Public Health Service Act to strengthen pro-
gram integrity and enhance low-income patient benefits 
for safety net providers. 
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 ‘‘340B Protection and 
Accountability Act of 2019’’. 
SEC. 2. STRENGTHENING 340B PROGRAM INTEGRITY AND 
ENHANCING LOW-INCOME PATIENT BENE-
FITS FOR SAFETY NET PROVIDERS. 
(a) DEFINITION OF PATIENT.—Section 340B(b) of 
the Public Health Service Act (42 U.S.C. 256b(b)) is 
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amended by adding at the end the following new para-
graph: 
‘‘(3) PATIENT.— 
‘‘(A) IN
GENERAL.—In this section, the 
term ‘patient’ means, with respect to a covered 
entity described in subparagraph (L) or (M) of 
subsection (a)(4), an individual who, on a pre-
scription-by-prescription 
or 
order-by-order 
basis— 
‘‘(i) receives a health care service at a 
covered entity or an outpatient hospital fa-
cility described in subsection (c)(3) which 
is registered for the drug discount program 
under this section and listed on the public 
internet website of the Department of 
Health and Human Services relating to 
this section; 
‘‘(ii) receives an outpatient in-person 
health care service from a health care pro-
vider employed by the covered entity or 
who is an independent contractor of the 
covered entity, such that the covered entity 
bills for services on behalf of the provider; 
‘‘(iii) receives a drug that is ordered 
or prescribed by the covered entity pro-
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vider, including any renewals of existing 
prescriptions, as a result of the service de-
scribed in clause (ii); 
‘‘(iv) in the case of a covered entity 
that has a contract with a State or local 
government described in subclause (III) of 
subsection (a)(4)(L)(i), receives a health 
care service or range of such services, to 
include the ordering or prescribing of a 
covered outpatient drug, from the covered 
entity pursuant to such contract; 
‘‘(v) is classified as an outpatient 
when the drug is ordered or prescribed, as 
demonstrated by how the service was reim-
bursed by the applicable payer, or, where 
the covered entity does not seek such reim-
bursement, how the service would have 
been reimbursed under title XVIII of the 
Social Security Act; and 
‘‘(vi) has a relationship with the cov-
ered entity such that the covered entity 
creates and maintains auditable health 
care records which demonstrate that— 
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‘‘(I) the covered entity has a pro-
vider-to-patient relationship with the 
individual; and 
‘‘(II) responsibility for the indi-
vidual’s health care service that re-
sulted in the prescription or order for 
the drug described in clause (iii) is 
with the covered entity. 
‘‘(B) EXCLUSIONS.—For purposes of this 
section, an individual shall not be considered a 
patient of a covered entity described in sub-
paragraph (L) or (M) of subsection (a)(4) if— 
‘‘(i) the individual is an inmate of a 
correctional facility; 
‘‘(ii) the health care service described 
in clause (ii) of subparagraph (A) received 
by the individual from the covered entity 
consists only of the administration or infu-
sion of a drug or drugs, or the dispensing 
of a drug or drugs for subsequent self-ad-
ministration or administration in the home 
setting, without a covered entity provider- 
to-patient encounter; 
‘‘(iii) the health care service described 
in clause (ii) of subparagraph (A) received 
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by the individual from the covered entity is 
provided by a health care organization that 
has only an affiliation arrangement with 
the covered entity, even if the covered enti-
ty has access to the affiliated organiza-
tion’s records; or 
‘‘(iv) the primary relationship between 
the individual and the covered entity is one 
of employment. 
‘‘(C) REGULATIONS.—Not later than 180 
days after the date of enactment of the 340B 
Protection and Accountability Act of 2019, the 
Secretary shall promulgate final regulations 
through notice-and-comment rulemaking to de-
fine the term ‘patient’ with respect to covered 
entities described in subparagraph (L) or (M) 
of subsection (a)(4) to reflect the requirements 
described in subparagraphs (A) and (B) of this 
paragraph. 
‘‘(D) DEFINITION
RELATING
TO
OTHER 
COVERED ENTITIES.—In this section, the term 
‘patient’, with respect to a covered entity de-
scribed in subparagraphs (A) through (K) of 
subsection (a)(4), has the meaning given such 
term in the October 24, 1996, HRSA Final No-
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tice Regarding Section 602 of the Veterans 
Health Care Act of 1992 Patient and Entity 
Eligibility (61 Fed Reg. 55156). 
‘‘(E) RECORD RETENTION.—A covered en-
tity described in subparagraph (L) or (M) of 
subsection (a)(4) shall retain auditable health 
care records which demonstrate the existence of 
a patient relationship in accordance with this 
paragraph for each prescription or order for a 
rolling period of not less than five years, or 
longer to the extent required by State or Fed-
eral law.’’. 
(b) TREATMENT OF CONTRACTED SERVICES.—Sub-
section (a) of section 340B of the Public Health Service 
Act (42 U.S.C. 256b) is amended by adding at the end 
the following new paragraphs: 
‘‘(11) CONTRACTED SERVICES.—In the case of 
a covered entity described in subparagraph (L) or 
(M) of subsection (a)(4) that elects to enter into a 
contractual arrangement with a third party for serv-
ices related to the drug discount program under this 
section, such as to dispense covered outpatient drugs 
subject to an agreement under this section to pa-
tients of the covered entity, to administer contracted 
pharmacy services, or to provide any other service 
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related to the drug discount program under this sec-
tion, the remuneration for which is based in whole 
or in part on the volume of dispensed covered out-
patient drugs subject to an agreement under this 
section, such covered entity shall— 
‘‘(A) have a contractual agreement in place 
between the covered entity and each contracted 
entity, including with each location of a phar-
macy contracted to dispense covered outpatient 
drugs subject to an agreement under this sec-
tion to patients (as so defined) of the covered 
entity, which shall specify that the contracted 
entity shall adhere to all requirements of the 
drug discount program under this section, but 
that ultimate responsibility for program compli-
ance and oversight of compliance by each con-
tracted entity shall remain with the covered en-
tity and that all covered outpatient drugs sub-
ject to an agreement under this section shall be 
purchased by the covered entity; 
‘‘(B) register each such agreement with 
the Secretary, include in such registration such 
information as shall be specified by the Sec-
retary, and make available such agreement 
upon request by the Secretary; 
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‘‘(C) ensure the compliance of each such 
agreement with the requirements of this section 
to prevent drug diversion in violation of sub-
paragraph (B) of paragraph (5) and to prevent 
duplicate discounts in violation of subparagraph 
(A) of such paragraph before utilizing the serv-
ices of the contracted entity, including by— 
‘‘(i) developing and implementing, 
with each contracted entity subject to such 
an agreement, a system to verify eligibility 
of patients (as so defined) of the entity; 
‘‘(ii) developing and implementing, 
with each such contracted entity, a mecha-
nism for tracking the inventory of covered 
outpatient drugs that are subject to an 
agreement under this section that is suit-
able to prevent diversion in violation of 
subparagraph (B) of paragraph (5) and to 
prevent duplicate discounts in violation of 
subparagraph (A) of such paragraph, such 
as a separate inventory for such drugs; 
and 
‘‘(iii) establishing a mechanism with 
each such contracted entity and each appli-
cable State Medicaid agency that is suit-
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able to prevent duplicate discounts for cov-
ered outpatient drugs that are subject to 
an agreement under this section, including 
such drugs dispensed to enrollees of Med-
icaid managed care organizations, and 
complies with regulations on methodologies 
to prevent duplicate discounts issued by 
the Secretary; 
‘‘(D) make available, to the extent the cov-
ered entity offers a charity care policy or has 
an obligation under subsection (a)(5)(E) to 
have a sliding fee scale, patient access to a cov-
ered entity’s prescription drug charity care ben-
efit and its sliding fee scale, and developing and 
implementing, with each such contracted entity, 
a mechanism for documenting the income and 
insurance status of each patient (as so defined) 
of the covered entity and the amount each such 
patient pays to receive covered outpatient drugs 
that are subject to an agreement under this sec-
tion; 
‘‘(E) maintain, and ensure that each such 
contracted entity maintains, auditable records 
that pertain to the compliance of the covered 
entity and the contracted entity with the re-
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quirements described in this paragraph, for a 
rolling period of not less than 5 years; 
‘‘(F) establish a process for, and conduct, 
periodic comparisons of the covered entity’s pre-
scribing records with the dispensing records of 
each such contracted entity, as applicable, to 
detect potential irregularities and to ensure that 
all drugs dispensed by the contracted entity are 
for patients (as so defined) of the covered enti-
ty; 
‘‘(G) provide for annual on-site audits of 
each such contracted entity to be conducted by 
an independent outside auditor; 
‘‘(H) maintain arrangements to dispense 
covered outpatient drugs that are subject to an 
agreement under this section to patients (as so 
defined) of the covered entity with no more 
than 5 contract pharmacy locations at any 
given time, all of which must be located within 
(or, for mail-order pharmacies, serve patients 
residing in) lower-income (using American 
Community Survey data as determined by the 
Secretary) census tracts served by the covered 
entity, except in the case that the covered entity 
files a publicly available exception request with 
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the Secretary that seeks authorization to estab-
lish a particular contract pharmacy arrange-
ment in a higher-income census tract and ex-
plains the reason in that particular case such a 
contract pharmacy would best meet the needs of 
low-income patients of the covered entity, and 
the Secretary decides to grant the request to es-
tablish one of the 5 contract pharmacies in the 
census tract requested; 
‘‘(I) ensure, as applicable, that patients (as 
so defined) of the covered entity have access to 
the covered entity’s prescription drug charity 
care benefit through each contract pharmacy lo-
cation at the time of purchase of each covered 
outpatient drug subject to an agreement under 
this section to the same extent such patients 
have access to the benefit with respect to such 
drugs purchased directly through the covered 
entity; and 
‘‘(J) limit any amount paid by the covered 
entity, or any agent of the covered entity, to the 
contracted entity for dispensing covered out-
patient drugs subject to an agreement under 
this section or for any other service related to 
the drug discount program under this section to 
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a reasonable amount, which shall not exceed the 
fair market value of such drug dispensing or 
other service. 
In the case the Secretary grants a request under 
subparagraph (H) to establish a particular contract 
pharmacy arrangement in a higher-income census 
tract, the Secretary shall make such decision avail-
able on a public website. 
‘‘(12) AUDITING.—A covered entity described in 
subparagraph (L) or (M) of subsection (a)(4) and a 
contracted entity that enter into a contractual ar-
rangement described in paragraph (11) shall per-
mit— 
‘‘(A) the Secretary to audit the records of 
the covered entity and of the contracted entity 
that pertain to the covered entity’s and the con-
tracted entity’s compliance with the require-
ments described in such paragraph; and 
‘‘(B) the manufacturer of a covered out-
patient drug that is subject to an agreement 
under this section (or its designee) to audit 
such records of the covered entity and of the 
contracted entity solely with respect to such 
drugs of the manufacturer. 
‘‘(13) REGULATIONS.— 
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‘‘(A) Not later than 180 days after the 
date of enactment of this paragraph, the Sec-
retary 
shall 
promulgate 
final 
regulations 
through notice-and-comment rulemaking to im-
plement the requirements of paragraph (11) 
and paragraph (12). Such regulations shall in-
clude model terms for the contractual agree-
ment described in subparagraph (A) of para-
graph (11). 
‘‘(B) Not later than 180 days after the 
date of enactment of this paragraph, the Sec-
retary 
shall 
promulgate 
final 
regulations 
through notice-and-comment rulemaking to es-
tablish procedures, in the case in which the Sec-
retary determines that a violation of the annual 
contract pharmacy independent on-site audit re-
quirement in subparagraph (F) of paragraph 
(11), with respect to a contract pharmacy ar-
rangement, was knowing and intentional— 
‘‘(i) for removing the contract phar-
macy arrangement from a covered entity’s 
contract pharmacy network and disquali-
fying the entity from adding any additional 
contract pharmacies for a reasonable pe-
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riod, to be determined by the Secretary, of 
not less than two years; and 
‘‘(ii) for requiring that the entity pay 
a monetary penalty to a manufacturer or 
manufacturers in the form of interest on 
sums that are owed to the manufacturer 
due to violations of subparagraph (A) or 
(B) of subsection (a)(5) that occurred at 
one or more contract pharmacies and that 
were discovered later than such violations 
would have been if the entity had complied 
with its obligation to have annual inde-
pendent audits of contract pharmacies con-
ducted. 
‘‘(14) MAIL
ORDER
STUDY
AND
REGULA-
TIONS.— 
‘‘(A) REPORT.—Not later than 180 days 
after the date of the enactment of this para-
graph, the Secretary shall conduct a study (and 
submit to Congress a report containing the re-
sults of such study) regarding compliance con-
cerns associated with covered entities described 
in subparagraph (L) or (M) of subsection (a)(4) 
contracting with mail order pharmacies to dis-
pense covered outpatient drugs subject to an 
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agreement under this section, and any addi-
tional safeguards or limitations necessary and 
appropriate to reduce those compliance con-
cerns. 
‘‘(B) REGULATIONS.—Not later than 180 
days after the submission of the report under 
subparagraph (A), the Secretary shall promul-
gate final regulations applicable to covered enti-
ties described in such subparagraph, through 
notice-and-comment rulemaking, to implement 
any additional safeguards or limitations rec-
ommended by the study. 
‘‘(15) CONTRACT
PHARMACY
MORATORIUM.— 
No covered entity described in subparagraphs (L) or 
(M) of subsection (a)(4) shall enter into a new or ex-
panded contractual arrangement pursuant to which 
a third party dispenses covered outpatient drugs 
subject to an agreement under this section to pa-
tients (as so defined) of the covered entity during 
the period beginning on the date of the enactment 
of this paragraph and ending on the latter of— 
‘‘(A) the effective date of final regulations 
described in paragraph (13); 
‘‘(B) the effective date of final regulations 
described in paragraph (14); 
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‘‘(C) the effective date of final regulations 
issued through Secretarial notice-and-comment 
rulemaking that take into consideration the 
findings and recommendations in the report 
from the Inspector General of the Department 
of Health and Human Services required under 
subsection (g)(3).’’. 
(c) REGULATIONS TO REDUCE DUPLICATE DIS-
COUNT RISKS.—Subsection (a)(5)(A) of section 340B of 
the Public Health Service Act (42 U.S.C. 256b) is amend-
ed by adding at the end the following new clause: 
‘‘(iii) Not later than one year after 
the date of the enactment of this clause, 
the Secretary shall promulgate final regu-
lations through notice-and-comment rule-
making, describing methodologies for State 
Medicaid programs and all covered entities 
under subsection (a)(4) to identify and bill 
drugs subject to an agreement under this 
section in a manner that ensures compli-
ance with 340B Program prohibitions re-
garding duplicate discounts, including the 
duplicate discount prohibition under sec-
tion 1927(j)(1) of the Social Security Act, 
to include the application of such prohibi-
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tions to Medicaid managed care enrollees. 
Such methodologies shall include the use of 
340B-specific claims identifiers, and the 
provision of claims-level data by covered 
entities to States as well as manufacturers 
of covered outpatient drugs sufficient to 
identify claims that include drugs subject 
to an agreement under this section and to 
prevent duplicate discounts.’’. 
(d) AMOUNT
CHARGED
TO
LOW-INCOME
PA-
TIENTS.— 
(1) IN GENERAL.—Subsection (a)(5) of section 
340B of the Public Health Service Act (42 U.S.C. 
256b) is amended by adding at the end the following 
new subparagraphs: 
‘‘(E) AMOUNT CHARGED TO LOW-INCOME 
PATIENTS.—As a condition of certification or 
recertification under subparagraph (E) of para-
graph (7), each covered entity described in sub-
paragraph (L) or (M) of subsection (a)(4) must 
establish a sliding scale fee schedule for pro-
viding covered outpatient drugs that are subject 
to an agreement under this section, directly or 
under a contractual arrangement pursuant to 
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which a third party dispenses such drugs, to 
patients of the covered entity who are— 
‘‘(i) low-income individuals; and 
‘‘(ii) not covered under minimum es-
sential coverage, as defined in section 
5000A(f) of the Internal Revenue Code. 
‘‘(F) REGULATIONS.—Not later than 180 
days after the date of enactment of this sub-
paragraph, the Secretary shall promulgate final 
regulations through notice-and-comment rule-
making, to implement the requirements under 
subparagraph (E). Such regulations shall— 
‘‘(i) define the term ‘low-income indi-
vidual’; 
‘‘(ii) provide a methodology for estab-
lishing the sliding scale fee schedule, which 
shall apply, where otherwise applicable to a 
covered entity, regardless of whether the 
covered outpatient drug is dispensed by the 
covered entity directly or a child site of the 
covered entity or by a contracted entity de-
scribed in paragraph (11); and 
‘‘(iii) ensure the security and protec-
tion of privileged or otherwise confidential 
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