‘‘(D) 
CALCULATION
FOR
COVERED 
DRUGS.—With respect to a covered drug (as de-
fined in section 340B(b)(2) of the Public 
Health Service Act), the average manufacturer 
price is the average price paid to the manufac-
turer for the drug in the United States by 
wholesalers for drugs distributed to both the re-
tail pharmacy and acute care classes of trade, 
after deducting customary prompt pay dis-
counts.’’. 
SEC. 4. IMPROVEMENTS TO 340B PROGRAM INTEGRITY. 
(a) INTEGRITY IMPROVEMENTS.—Section 340B of 
the Public Health Service Act (42 U.S.C. 256b) is amend-
ed by adding at the end the following: 
‘‘(e) IMPROVEMENTS IN PROGRAM INTEGRITY.— 
‘‘(1) MANUFACTURER COMPLIANCE.— 
‘‘(A) IN GENERAL.—From amounts appro-
priated under paragraph (4), the Secretary 
shall provide for improvements in compliance by 
manufacturers with the requirements of this 
section in order to prevent overcharges and 
other violations of the discounted pricing re-
quirements specified in this section. 
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‘‘(B) IMPROVEMENTS.—The improvements 
described in subparagraph (A) shall include the 
following: 
‘‘(i) The development of a system to 
enable the Secretary to verify the accuracy 
of ceiling prices calculated by manufactur-
ers under subsection (a)(1) and charged to 
covered entities, which shall include the 
following: 
‘‘(I) Developing and publishing 
through an appropriate policy or regu-
latory 
issuance, 
precisely 
defined 
standards and methodology for the 
calculation of ceiling prices under 
such subsection. 
‘‘(II) Comparing regularly the 
ceiling prices calculated by the Sec-
retary with the quarterly pricing data 
that is reported by manufacturers to 
the Secretary. 
‘‘(III) Performing spot checks of 
sales transactions by covered entities. 
‘‘(IV) Inquiring into the cause of 
any pricing discrepancies that may be 
identified and either taking, or requir-
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ing manufacturers to take, such cor-
rective action as is appropriate in re-
sponse to such price discrepancies. 
‘‘(ii) The establishment of procedures 
for manufacturers to issue refunds to cov-
ered entities in the event that there is an 
overcharge by the manufacturers, including 
the following: 
‘‘(I) Providing the Secretary with 
an explanation of why and how the 
overcharge occurred, how the refunds 
will be calculated, and to whom the 
refunds will be issued. 
‘‘(II) Oversight by the Secretary 
to ensure that the refunds are issued 
accurately and within a reasonable pe-
riod of time, both in routine instances 
of retroactive adjustment to relevant 
pricing data and exceptional cir-
cumstances such as erroneous or in-
tentional overcharging for covered 
drugs. 
‘‘(iii) The provision of access through 
the Internet website of the Department of 
Health and Human Services to the applica-
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ble ceiling prices for covered drugs as cal-
culated and verified by the Secretary in ac-
cordance with this section, in a manner 
(such as through the use of password pro-
tection) that limits such access to covered 
entities and adequately assures security 
and protection of privileged pricing data 
from unauthorized re-disclosure. 
‘‘(iv) The development of a mecha-
nism by which— 
‘‘(I) rebates and other discounts 
provided by manufacturers to other 
purchasers subsequent to the sale of 
covered drugs to covered entities are 
reported to the Secretary, and 
‘‘(II) appropriate credits and re-
funds are issued to covered entities if 
such discounts or rebates have the ef-
fect of lowering the applicable ceiling 
price for the relevant quarter for the 
drugs involved. 
‘‘(v) Selective auditing of manufactur-
ers and wholesalers to ensure the integrity 
of the drug discount program under this 
section. 
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‘‘(vi) The imposition of sanctions in 
the form of civil monetary penalties, 
which— 
‘‘(I) shall be assessed according 
to standards established in regulations 
to be promulgated by the Secretary 
within 180 days of enactment of this 
subsection; 
‘‘(II) shall not exceed $5,000 for 
each instance of overcharging a cov-
ered entity that may have occurred; 
and 
‘‘(III) shall apply to any manu-
facturer with an agreement under this 
section that knowingly and inten-
tionally charges a covered entity a 
price for purchase of a drug that ex-
ceeds the maximum applicable price 
under subsection (a)(1). 
‘‘(2) COVERED ENTITY COMPLIANCE.— 
‘‘(A) IN GENERAL.—From amounts appro-
priated under paragraph (4), the Secretary 
shall provide for improvements in compliance by 
covered entities with the requirements of this 
section in order to prevent diversion and other 
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violations of the duplicate discount require-
ments specified under subsection (a)(5). 
‘‘(B) IMPROVEMENTS.—The improvements 
described in subparagraph (A) shall include the 
following: 
‘‘(i) The development of procedures to 
enable and require covered entities to regu-
larly update (at least annually) the infor-
mation on the Internet website of the De-
partment of Health and Human Services 
relating to this section. 
‘‘(ii) The development of a system for 
the Secretary to verify the accuracy of in-
formation regarding covered entities that is 
listed on the website described in clause 
(i). 
‘‘(iii) The development of more de-
tailed guidance describing methodologies 
and options available to covered entities for 
billing covered drugs to State Medicaid 
agencies in a manner that avoids duplicate 
discounts pursuant to subsection (a)(5)(A). 
‘‘(iv) The establishment of a single, 
universal, and standardized identification 
system by which each covered entity site 
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can be identified by manufacturers, dis-
tributors, covered entities, and the Sec-
retary for purposes of facilitating the or-
dering, purchasing, and delivery of covered 
drugs under this section, including the 
processing of chargebacks for such drugs. 
‘‘(v) The imposition of sanctions, in 
appropriate cases as determined by the 
Secretary, additional to those to which cov-
ered entities are subject under subpara-
graph (a)(5)(D), through one or more of 
the following actions: 
‘‘(I) Where a covered entity 
knowingly and intentionally violates 
subparagraph (a)(5)(E), the covered 
entity shall be required to pay a mon-
etary penalty to a manufacturer or 
manufacturers in the form of interest 
on sums for which the covered entity 
is 
found 
liable 
under 
paragraph 
(a)(5)(E), such interest to be com-
pounded monthly and equal to the 
current short term interest rate as de-
termined by the Federal Reserve for 
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the time period for which the covered 
entity is liable. 
‘‘(II) Where the Secretary deter-
mines a violation of subparagraph 
(a)(5)(B) was systematic and egre-
gious as well as knowing and inten-
tional, removing the covered entity 
from the drug discount program 
under this section and disqualifying 
the entity from re-entry into such pro-
gram for a reasonable period of time 
to be determined by the Secretary. 
‘‘(III) Referring matters to ap-
propriate Federal authorities within 
the Food and Drug Administration, 
the Office of Inspector General of De-
partment of Health and Human Serv-
ices, or other Federal agencies for 
consideration of appropriate action 
under other Federal statutes, such as 
the Prescription Drug Marketing Act 
(21 U.S.C. 353). 
‘‘(3) ADMINISTRATIVE
DISPUTE
RESOLUTION 
PROCESS.— 
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‘‘(A) IN
GENERAL.—Not later than 180 
days after the date of enactment of this sub-
section, the Secretary shall promulgate regula-
tions to establish and implement an administra-
tive process for the resolution of claims by cov-
ered entities that they have been overcharged 
for drugs purchased under this section, and 
claims by manufacturers, after the conduct of 
audits as authorized by subsection (a)(5)(D), of 
violations of subsections (a)(5)(A) or (a)(5)(B), 
including appropriate procedures for the provi-
sion of remedies and enforcement of determina-
tions made pursuant to such process through 
mechanisms and sanctions described in para-
graphs (1)(B) and (2)(B). 
‘‘(B) DEADLINES
AND
PROCEDURES.— 
Regulations promulgated by the Secretary 
under subparagraph (A) shall— 
‘‘(i) designate or establish a decision- 
making official or decision-making body 
within the Department of Health and 
Human Services to be responsible for re-
viewing and finally resolving claims by cov-
ered entities that they have been charged 
prices for covered drugs in excess of the 
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ceiling price described in subsection (a)(1), 
and claims by manufacturers that viola-
tions of subsection (a)(5)(A) or (a)(5)(B) 
have occurred; 
‘‘(ii) establish such deadlines and pro-
cedures as may be necessary to ensure that 
claims shall be resolved fairly, efficiently, 
and expeditiously; 
‘‘(iii) establish procedures by which a 
covered entity may discover and obtain 
such information and documents from 
manufacturers and third parties as may be 
relevant to demonstrate the merits of a 
claim that charges for a manufacturer’s 
product have exceeded the applicable ceil-
ing price under this section, and may sub-
mit such documents and information to the 
administrative official or body responsible 
for adjudicating such claim; 
‘‘(iv) require that a manufacturer 
must conduct an audit of a covered entity 
pursuant to subsection (a)(5)(D) as a pre-
requisite to initiating administrative dis-
pute resolution proceedings against a cov-
ered entity; 
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‘‘(v) permit the official or body des-
ignated in clause (i), at the request of a 
manufacturer or manufacturers, to consoli-
date claims brought by more than one 
manufacturer against the same covered en-
tity where, in the judgment of such official 
or body, consolidation is appropriate and 
consistent with the goals of fairness and 
economy of resources; and 
‘‘(vi) include provisions and proce-
dures to permit multiple covered entities to 
jointly assert claims of overcharges by the 
same manufacturer for the same drug or 
drugs in one administrative proceeding, 
and permit such claims to be asserted on 
behalf of covered entities by associations or 
organizations representing the interests of 
such covered entities and of which the cov-
ered entities are members. 
‘‘(C) FINALITY OF ADMINISTRATIVE RESO-
LUTION.—The administrative resolution of a 
claim or claims under the regulations promul-
gated under subparagraph (A) shall be a final 
agency decision and shall be binding upon the 
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parties involved, unless invalidated by an order 
of a court of competent jurisdiction. 
‘‘(4) AUTHORIZATION
OF
APPROPRIATIONS.— 
There are authorized to be appropriated to carry out 
this subsection, such sums as may be necessary for 
fiscal year 2008 and each succeeding fiscal year.’’. 
(b) CONFORMING AMENDMENTS.—Section 340B(a) 
of such Act (42 U.S.C. 256b(a)) is amended— 
(1) in subsection (a)(1), by adding at the end 
the following: ‘‘Each such agreement shall require 
that the manufacturer furnish the Secretary with re-
ports, on a quarterly basis, of the price for each cov-
ered drug subject to the agreement that, according 
to the manufacturer, represents the maximum price 
that covered entities may permissibly be required to 
pay for the drug (referred to in this section as the 
‘ceiling price’), and shall require that the manufac-
turer offer each covered entity covered drugs for 
purchase at or below the applicable ceiling price if 
such drug is made available to any other purchaser 
at any price.’’; and 
(2) in the first sentence of subsection (a)(5)(E), 
as redesignated by section 2(b), by inserting ‘‘after 
audit as described in subparagraph (D) and’’ after 
‘‘finds,’’. 
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SEC. 5. OTHER IMPROVEMENTS IN 340B PROGRAM. 
Section 340B of the Public Health Service Act (42 
U.S.C. 256b), as amended by section 4(a), is further 
amended by adding at the end the following new sub-
sections: 
‘‘(f) USE
OF MULTIPLE CONTRACT PHARMACIES 
PERMITTED.—Nothing in this section shall be construed 
as prohibiting a covered entity from entering into con-
tracts with more than one pharmacy for the provision of 
covered drugs, including such a contract that supplements 
the use of an in-house pharmacy arrangement or as re-
quiring the approval of the Secretary for entering into 
such a contract. 
‘‘(g) INTRA-AGENCY COORDINATION.—The Secretary 
shall establish specific measures, policies, and procedures 
to ensure effective communication and coordination be-
tween the Centers for Medicare & Medicaid Services and 
the Health Resources and Services Administration with 
respect to all agency actions and all aspects of policy and 
administration affecting or pertaining to the drug discount 
program under this section and in which the functions and 
responsibilities of those agency components are inter-
related or interdependent, including by establishment of 
a permanent working group, composed of representatives 
of both the Health Resources and Services Administration 
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and the Centers for Medicare & Medicaid Services, to iden-
tify and oversee matters requiring such coordination.’’. 
SEC. 6. EFFECTIVE DATES. 
(a) IN GENERAL.—The amendments made by this 
Act shall take effect on January 1, 2008, and shall apply 
to drugs purchased on or after January 1, 2008. 
(b) GENERAL CONFORMING REFERENCE.—Section 
340B(d) of the Public Health Service Act (42 U.S.C. 
256b(d)) is amended by striking ‘‘Veterans Health Care 
Act of 1992’’ and inserting ‘‘the effective date of the 340B 
Program Improvement and Integrity Act of 2007’’. 
(c) EFFECTIVENESS.—The amendments made by 
this Act shall be effective, and shall be taken into account 
in determining whether a manufacturer is deemed to meet 
the requirements of section 340B(a) of the Public Health 
Service Act (42 U.S.C. 256b(a)) and of section 1927(a)(5) 
of the Social Security Act (42 U.S.C. 1396r–8(a)(5)), not-
withstanding any other provision of law. 
Æ 
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