I 
110TH CONGRESS 
1ST SESSION H. R. 3140 
To amend title XIX of the Social Security Act to ensure and foster continued 
beneficiary access to generic drugs under the Medicaid Program by 
setting pharmacy reimbursement based on retail acquisition cost and 
to promote the use of generic drugs. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 24, 2007 
Mrs. BOYDA of Kansas (for herself, Mr. WEINER, Mrs. EMERSON, Mr. 
ADERHOLT, Mr. ALEXANDER, Mr. BERRY, Mr. BONNER, Mr. BOREN, 
Mr. BOUCHER, Mr. BOUSTANY, Mr. BRALEY of Iowa, Mr. CARNEY, Mr. 
CUMMINGS, Mr. DAVID DAVIS of Tennessee, Mr. DAVIS of Kentucky, Mr. 
ETHERIDGE, Mr. FARR, Mr. GORDON of Tennessee, Mr. HIGGINS, Mr. 
JONES of North Carolina, Mr. LOBIONDO, Mr. LOEBSACK, Mr. MOORE 
of Kansas, Mr. MORAN of Kansas, Mr. ORTIZ, Mr. ROGERS of Alabama, 
Mr. ROSS, Mr. SKELTON, Mr. TIAHRT, and Mr. WALZ of Minnesota) in-
troduced the following bill; which was referred to the Committee on En-
ergy and Commerce 
A BILL 
To amend title XIX of the Social Security Act to ensure 
and foster continued beneficiary access to generic drugs 
under the Medicaid Program by setting pharmacy reim-
bursement based on retail acquisition cost and to pro-
mote the use of generic drugs. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
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SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Saving Our Commu-
nity Pharmacies Act of 2007’’. 
SEC. 2. USING MEDIAN RETAIL ACQUISITION COST AS 
BASIS FOR MEDICAID REIMBURSEMENT LIM-
ITS ON GENERIC DRUGS. 
(a) IN GENERAL.—Subsection (e) of section 1927 of 
the Social Security Act (42 U.S.C. 1396r–8) is amended 
by striking paragraph (5) and inserting the following: 
‘‘(5) APPLICATION
OF
FEDERAL
UPPER
PAY-
MENT LIMITS.— 
‘‘(A) CONTINUED USE OF AWP.—Effective 
January 1, 2007, and until subparagraph (B) is 
in effect, in applying the Federal upper reim-
bursement limit under paragraph (4) and sec-
tion 447.332(b) of title 42 of the Code of Fed-
eral Regulations, the Secretary shall continue to 
apply the methodology in effect before the date 
of the enactment of the Deficit Reduction Act 
of 2005. 
‘‘(B) USE OF MEDIAN RETAIL ACQUISITION 
COST.— Effective on the first day of the second 
quarter that begins after the date of the enact-
ment of the Saving Our Community Phar-
macies Act of 2007, in applying the Federal 
upper reimbursement limit under paragraph (4) 
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and section 447.332(b) of title 42 of the Code 
of Federal Regulations (as in effect but for sub-
paragraph (A)), the Secretary shall substitute 
the median retail acquisition cost (as computed 
under subparagraph (C)) for the published 
price. 
‘‘(C) COMPUTATION
OF
MEDIAN
RETAIL 
ACQUISITION COST.— 
‘‘(i) SMOOTHING AND TRANSITIONS.— 
Except as otherwise provided in this sub-
paragraph, the Secretary shall calculate 
the median retail acquisition cost for a 
multiple source drug subject to a Federal 
upper limit for months in a calendar quar-
ter by computing the median of the retail 
acquisition costs (as defined in subsection 
(k)(10)) over the 4-calendar-quarter period 
ending with the second preceding calendar 
quarter. 
‘‘(ii) LIMITATION
ON
SALES
TO
BE 
COUNTED.—In computing the median re-
tail acquisition cost for a drug, the Sec-
retary shall not take into account sales 
other than sales to community retail phar-
macies and shall not include the following: 
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‘‘(I) Sales to mail order facilities. 
‘‘(II) Prices paid under a State 
supplemental program, State only pro-
gram, or a State Pharmacy Assistance 
Programs (SPAP). 
‘‘(iii) TRANSITION FOR FIRST IMPLE-
MENTATION.—For the first 4 calendar 
quarters in which subparagraph (B) is in 
effect, subject to clause (iv), in calculating 
the median retail acquisition cost for all 
drugs the Secretary shall only use the re-
tail acquisition costs for those quarters be-
ginning with the last calendar quarter that 
began before the date of the enactment of 
this paragraph for which data are released. 
‘‘(iv) TRANSITION FOR DRUGS NEWLY 
QUALIFYING
AS
MULTIPLE
SOURCE.—In 
the case of a drug product for the first 
four calendar quarters in which it qualifies 
as a multiple source drug, in calculating 
the median retail acquisition cost for the 
drug the Secretary shall only use the retail 
acquisition costs for the drug beginning 
with the first such quarter for which data 
are collected.’’. 
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(b) DEFINITION OF RETAIL ACQUISITION COST AND 
RELATED DEFINITIONS.—Subsection (k) of such section 
is amended by adding at the end the following new para-
graph: 
‘‘(10) RETAIL ACQUISITION COST AND RELATED 
DEFINITIONS.— 
‘‘(A) RETAIL
ACQUISITION
COST.—The 
term ‘retail acquisition cost’ means, for a mul-
tiple source drug furnished, the costs of com-
munity retail pharmacies (as defined in sub-
paragraph (D)) to obtain the drug, as deter-
mined under subsection (f)(5). 
‘‘(B) ITEMS NOT INCLUDED IN RETAIL AC-
QUISITION COST.—In computing the retail ac-
quisition costs for a drug, the following shall 
not be taken into account: 
‘‘(i) Discounts, rebates, and price con-
cessions to pharmacy benefit managers. 
‘‘(ii) Non-contingent free goods. 
‘‘(iii) Patient assistance programs, 
such as specialty services for cancer treat-
ment. 
‘‘(iv) Administrative service agree-
ments. 
‘‘(v) Inventory management fees. 
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‘‘(vi) Fee-for-service agreements to 
wholesalers. 
‘‘(vii) Adjustments that reduce the ac-
tual price realized, except to the extent 
that they are not reflective of purchasing 
costs of retail pharmacies. 
‘‘(viii) Costs of other classes of trade 
not reflective of retail pharmacy pur-
chasing costs. 
‘‘(ix) Prompt pay discounts extended 
to retail community pharmacies. 
‘‘(C) ITEMS TAKEN INTO ACCOUNT IN DE-
TERMINING
RETAIL
ACQUISITION
COST.—In 
computing the retail acquisition cost for a drug, 
the Secretary shall take into account the fol-
lowing: 
‘‘(i) Volume (or comparable discounts) 
discounts, chargebacks, and allowances for 
free goods contingent on purchase require-
ments, to the extent actually paid or cred-
ited to the retail pharmacy. Discounts that 
may be paid in a calendar quarter for an 
aggregate purchase of generic drugs, ap-
plied to each drug in proportion to the per-
centage purchased. 
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‘‘(ii) An estimate of the rebates and 
discounts that may be earned by retail 
community pharmacies but not credited in 
the time period in which the average retail 
acquisition cost is calculated for each drug 
in the survey, as determined in accordance 
with a methodology specified by the survey 
contractor after consultation with the af-
fected stakeholders. 
‘‘(iii) In the event of a reduction in 
the acquisition price of a drug by a manu-
facturer where that manufacturer issues a 
credit to the pharmacy to lower the cost of 
existing inventory to the new acquisition 
price, such credit shall be applied to the 
existing inventory, acquired at the higher 
cost, to lower the cost basis of that exist-
ing inventory and such lower cost basis 
shall be the acquisition price for such in-
ventory in any price reported. 
‘‘(iv) With respect to drugs dispensed 
by pharmacies that own and operate their 
own warehouse distribution systems, inso-
far as the retail acquisition costs takes into 
account the costs associated with the own-
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ership and operation of such distribution 
system, such costs shall be a fixed percent-
age of the average wholesaler markup, as 
promulgated each year by the Secretary. 
‘‘(D) COMMUNITY
RETAIL
PHARMACY.— 
The term ‘community retail pharmacy’ means a 
traditional independent, chain, mass merchan-
dise, or supermarket pharmacy. 
‘‘(E) PHARMACY
BENEFITS
MANAGER.— 
The term ‘pharmacy benefits manager’ means 
an entity that contracts with a managed care 
organization, self-insured company, or govern-
ment program to provide a range of pharmacy 
management benefit services, including phar-
macy network management, drug utilization re-
view, outcomes management, and disease man-
agement. 
‘‘(F) 
WIDELY
AVAILABLE.—The 
term 
‘widely available’ means, with respect to a mul-
tiple source drug, that the drug is available for 
purchase by retail community pharmacies 
throughout the nation from at least two na-
tional wholesalers.’’. 
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(c) SURVEYS OF COMMUNITY RETAIL PRICES.—Sub-
section (f) of such section is amended by adding at the 
end the following new paragraph: 
‘‘(5) SURVEYS FOR DETERMINING COMMUNITY 
RETAIL PRICES FOR MULTIPLE SOURCE DRUGS.— 
The following rules apply to the determination of re-
tail acquisition costs for multiple source drugs for 
purposes of computing the median retail acquisition 
cost under subsection (e)(5): 
‘‘(A) IN
GENERAL.—The Secretary shall 
conduct national surveys on a quarterly basis of 
community retail pharmacies using the criteria 
described in such subsection to determine retail 
acquisition costs for all multiple source drugs. 
The first such survey shall be for the calendar 
quarter in which Saving Our Community Phar-
macies Act of 2007 is enacted. 
‘‘(B) SAMPLE.—Each such survey shall 
consist of a randomly selected sample that— 
‘‘(i) represents at least 5 percent of 
the community retail pharmacies; and 
‘‘(ii) contains a representative per-
centage of business among the types of 
community retail pharmacies, including 
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independent, chain, mass merchandise, and 
supermarket pharmacies. 
‘‘(C) SURVEY
INFORMATION.—The cost 
surveys shall include surveys of the elements 
used in computing retail acquisition costs, in-
cluding those items excluded (or included) in 
computing such costs under subparagraphs (B) 
and (C) of subsection (k)(10). In completing 
the cost surveys and disclosing other informa-
tion under this section, retail community phar-
macies may make reasonable assumptions and 
interpretations that are reasonably consistent 
with the terms of this section. 
‘‘(D) TREATMENT OF PHARMACIES UNDER 
COMMON
OWNERSHIP
OR
PURCHASING
AR-
RANGEMENTS.—In the case of retail community 
pharmacies that purchase a multiple source 
drug through common ownership, management, 
or other arrangements, such pharmacies shall 
report the average price paid for the multiple 
source drug across all pharmacies operating 
under such common ownership, management, or 
arrangement. 
‘‘(E) CONFIDENTIALITY.—The information 
disclosed in response to surveys under this 
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paragraph is confidential and the Secretary (or 
any contractor therewith) shall not disclose 
such information in a form which discloses the 
identity of a specific pharmacy or company, or 
the retail acquisition costs for multiple source 
drugs of such a pharmacy or company, ex-
cept— 
‘‘(i) as the Secretary determines to be 
necessary to carry out this section; 
‘‘(ii) to permit the Comptroller Gen-
eral to review the information provided; 
‘‘(iii) to permit the Director of the 
Congressional Budget Office to review the 
information provided; and 
‘‘(iv) to the Secretary to disclose 
(through a website accessible to the public) 
median retail acquisition costs. 
The Secretary shall post on a public Federal 
website for the Medicaid program (and other-
wise make available to States) the median retail 
acquisition costs for multiple source drugs. 
‘‘(F) CONTRACTOR
BIDDING.—The Sec-
retary shall provide for surveys under this para-
graph to be conducted through a contract with 
a qualified entity. In contracting for such serv-
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ices, the Secretary shall competitively bid for an 
outside vendor in accordance with the Federal 
Acquisition Regulations. The Secretary shall 
consult with retail community pharmacies dur-
ing the process of developing a request for pro-
posals, receiving and reviewing bids, and con-
tracting with such a vendor. Any contract en-
tered into as part of this bidding process shall 
require the successful bidder to keep confiden-
tial and not disclose to any other Federal agen-
cy or other third parties, including State agen-
cies, all survey responses and any other disclo-
sure made by a retail community pharmacy 
under this section. 
‘‘(G) AUDITING.—If the Secretary has rea-
sonable cause to believe that a survey response 
submitted by a retail community pharmacy is 
not complete or accurate, the Secretary may 
conduct an audit of the records used by the re-
tail community pharmacy to develop that survey 
response. In conducting such inspection the 
Secretary may require a retail community phar-
macy to produce for inspection, consistent with 
subparagraph (C), only the records actually re-
lied upon by the retail community pharmacy in 
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