‘‘(I) the Secretary shall promul-
gate final regulations that implement, 
to the extent practicable, the Comp-
troller General’s recommendations in-
cluded within such report not later 
than the date that is 180 days after 
such one-year date; and 
‘‘(II) for purposes of subpara-
graph (B), the effective date described 
in this subparagraph is the effective 
date of such final regulations. 
‘‘(3) OUTPATIENT
HOSPITAL
FACILITIES.—A 
facility or organization may participate in the drug 
discount program under this section as a child site 
of a covered entity described in subparagraph (L) or 
(M) of subsection (a)(4) only if such facility or orga-
nization— 
‘‘(A) is wholly owned by a covered entity 
described in subparagraph (L) or (M) of sub-
section (a)(4); 
‘‘(B) except in the case in which the parent 
covered entity is a children’s hospital described 
in subparagraph (M) of subsection (a)(4) which 
does not file a Medicare cost report, is listed on 
the Medicare cost report most recently filed by 
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the parent covered entity on a line that is reim-
bursable under this title, if such cost report 
demonstrates that the services provided at the 
facility or organization have associated out-
patient costs and charges under this title, and 
if the parent covered entity has provided a copy 
of such cost report to the Office of Pharmacy 
Affairs of the Health Resources and Services 
Administration; 
‘‘(C) in the case that the parent covered 
entity is a children’s hospital described in sub-
paragraph (M) of subsection (a)(4) which does 
not file a Medicare cost report, would be cor-
rectly included on a reimbursable line with as-
sociated outpatient costs and charges under 
title XVIII on a Medicare cost report of the 
parent covered entity, if filed, and the parent 
covered entity authorizing official has submitted 
a signed statement to the Secretary which cer-
tifies the foregoing and that the requested out-
patient facility is an integral part of the chil-
dren’s hospital and is providing health care 
services to patients of such hospital; 
‘‘(D) meets the provider-based status re-
quirements under section 413.65 of title 42, 
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Code of Federal Regulations or under any suc-
cessor to such section; 
‘‘(E) provides outpatient health care serv-
ices and is not limited to providing only drugs 
or drug administration; 
‘‘(F) provides a level of free or discounted 
health care services to individuals who meet the 
parent covered entity’s criteria for financial as-
sistance and are unable to pay for all or a por-
tion of the services, as reported at cost to the 
Internal 
Revenue 
Service 
under 
section 
501(r)(4) of the Internal Revenue Code for the 
calendar year, that is similar to that of the par-
ent covered entity; and 
‘‘(G) adheres to the parent covered entity’s 
sliding scale fee schedule for providing covered 
outpatient drugs that are subject to an agree-
ment under this section to patients who are (i) 
low-income individuals; and (ii) not covered 
under minimum essential coverage, as defined 
in section 5000A(f) of the Internal Revenue 
Code. Such sliding fee schedules must be made 
publicly available in a similar manner to a 
501(c)(3) hospital’s financial assistance policy 
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as required under section 501(r) of the Internal 
Revenue Code of 1986. 
‘‘(4) CERTIFICATION AND AUDITING.— 
‘‘(A) A covered entity described in sub-
clause (III) of subsection (a)(4)(L)(i) shall— 
‘‘(i) not less than annually, provide to 
the Secretary a certification executed by 
the hospital’s 340B Program authorizing 
official and an appropriate government of-
ficial (such as the governor, county execu-
tive, mayor, or an individual authorized to 
represent and bind the governmental enti-
ty), certifying that— 
‘‘(I) a contract is currently in 
force between such covered entity and 
the State or local government to pro-
vide health care services, to include 
direct medical care and the ordering 
or prescribing of covered outpatient 
drugs that are subject to an agree-
ment under this section, to low-income 
individuals who are not entitled to 
benefits under title XVIII of the So-
cial Security Act or eligible for assist-
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ance under the State plan under title 
XIX of such Act; 
‘‘(II) such contract creates en-
forceable expectations for such cov-
ered entity for the provision of the 
health care services described in sub-
clause (I) to the individuals described 
in such subclause; and 
‘‘(III) the health care services de-
scribed in subclause (I) represent a 
significant portion of the hospital’s 
operating revenues, and are not for 
services the covered entity is otherwise 
obligated to provide under State or 
Federal law; 
‘‘(ii) make available the contract de-
scribed in subclause (III) of subsection 
(a)(4)(L)(i) to the Secretary for publica-
tion on the public internet website of the 
Department of Health and Human Serv-
ices relating to this section; and 
‘‘(iii) permit the Secretary to audit 
the records of the covered entity that per-
tain to its compliance with the require-
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ments described in subclause (III) of sub-
section (a)(4)(L)(i) and this subparagraph. 
‘‘(B) A facility or organization that partici-
pates in the drug discount program under this 
section pursuant to paragraph (3) shall permit 
the Secretary to audit the records of such facil-
ity or organization that pertain to its compli-
ance with the requirements described in such 
paragraph. 
‘‘(C) The Secretary shall issue guidelines 
to implement the requirements described in this 
paragraph, which shall, at a minimum, define 
the term ‘low-income individuals’ for purposes 
of subclause (I) of subparagraph (A)(i), and 
identify the applicable methodology and thresh-
old for determining that the health care services 
described in such subclause represent a signifi-
cant portion of the hospital’s operating reve-
nues.’’. 
(f) REPORTING REQUIREMENTS.—Section 340B of 
the Public Health Service Act (42 U.S.C. 256b) is amend-
ed by adding at the end the following new subsections: 
‘‘(f) REPORTING REQUIREMENTS FOR COVERED EN-
TITIES.— 
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‘‘(1) IN GENERAL.—A covered entity described 
in subparagraph (L) or (M) of subsection (a)(4) 
shall annually submit to the Secretary an electronic 
and searchable data report in a machine-readable 
format. Such report shall contain, with respect to 
the year covered by the report, information on— 
‘‘(A) the number and percentage of pa-
tients of the covered entity, disaggregated by 
insurance status (including at least the Medi-
care program under title XVIII of the Social 
Security Act, the Medicaid program under title 
XIX of such Act, the Children’s Health Insur-
ance Program under title XXI of such Act, the 
TRICARE program under chapter 55 of title 
10, United States Code, health insurance cov-
erage or a group health plan, and uninsured), 
and by the type of site of the dispensing of the 
covered outpatient drug subject to an agree-
ment under this section (parent covered entity, 
facility or organization described in subsection 
(c)(3), contracted entity described in subsection 
(a)(11)); 
‘‘(B) the aggregate amount of gross reim-
bursement received by the covered entity (cal-
culated before subtracting any administrative or 
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other fees using a methodology provided by the 
Secretary) for covered outpatient drugs subject 
to an agreement under this section, including 
reimbursement received through facilities or or-
ganizations described in subsection (c)(3) or 
pursuant to contractual arrangements described 
in subsection (a)(11); 
‘‘(C) the aggregate acquisition cost for cov-
ered outpatient drugs subject to an agreement 
under this section dispensed during the year; 
‘‘(D) the aggregate amount paid by the 
covered entity, or any agent of the covered enti-
ty, to contracted entities described in subsection 
(a)(11) for dispensing covered outpatient drugs 
subject to an agreement under this section or 
for any other service related to the drug dis-
count program under this section; 
‘‘(E) how the entity prevents duplicate dis-
counts under subparagraph (A) of subsection 
(a)(5) and drug diversion under subparagraph 
(B) of such subsection; 
‘‘(F) the volume of covered outpatient 
drugs subject to an agreement under this sec-
tion dispensed by the covered entity and, in the 
case of a covered entity that has entered into 
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a contractual arrangement pursuant to which a 
third party dispenses covered outpatient drugs 
subject to an agreement under this section to 
patients of the covered entity, by each such con-
tracted entity; 
‘‘(G) quantitative data in terms of the 
amount and percentage of charitable care, as 
such term is defined for purposes of Medicare 
cost reporting or other reporting requirements 
identified by the Secretary, provided to patients 
of the covered entity by the covered entity in 
the form of covered outpatient drugs subject to 
an agreement under this section; 
‘‘(H) the name of any third-party vendor 
or other similar entity (if any) that the covered 
entity retains to administer the covered entity’s 
inventory management system or contract phar-
macy arrangement; and 
‘‘(I) other reporting requirements as the 
Secretary determines is necessary or appro-
priate for effective management and oversight 
of the drug discount program under this sec-
tion. 
‘‘(2) TIMING OF FIRST REPORT.—The first re-
port submitted under paragraph (1) shall be sub-
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mitted not later than 18 months after the date of 
enactment of this subsection. 
‘‘(3) ATTESTATION.—Each report submitted 
under paragraph (1) shall be accompanied by an at-
testation, in a form and manner specified by the 
Secretary, that the information submitted in such 
report is complete and accurate. Such attestation 
shall be subject to section 1001 of title 18, United 
States Code. 
‘‘(4) SANCTIONS.—If the Secretary finds that a 
covered entity is in violation of the requirement 
under paragraph (1) and the Secretary determines 
that such violation was knowing and intentional, the 
Secretary shall remove the entity from the drug dis-
count program under this section and disqualify the 
entity from re-entry into such program for a reason-
able period of time to be determined by the Sec-
retary. 
‘‘(5) REGULATIONS.—Not later than 180 days 
after the date of enactment of this subsection, the 
Secretary shall promulgate final regulations through 
notice-and-comment rulemaking to implement the re-
quirements under paragraphs (1) through (4). 
‘‘(6) PUBLIC DATABASE.—The Secretary shall 
make the data reported by covered entities under 
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this subsection available to the public on the website 
of the Department of Health and Human Services in 
an electronic and searchable format, which shall 
make each category of data reported available both 
in the aggregate and broken down by parent covered 
entities, child sites, and contract pharmacies, but 
shall not identify specific parent covered entities, 
child sites, or contract pharmacies. 
‘‘(g) REPORTS TO CONGRESS.— 
‘‘(1) REPORT BY THE SECRETARY.—Not later 
than two years after the date of the enactment of 
this subsection, the Secretary shall submit to the 
Committee on Energy and Commerce of the House 
of Representatives and the Committee on Health, 
Education, Labor, and Pensions of the Senate a re-
port, which shall contain— 
‘‘(A) with respect to covered entities de-
scribed in subparagraph (L) or (M) of sub-
section (a)(4), the information contained in the 
first report submitted by such entities to the 
Secretary under subsection (f); and 
‘‘(B) a description of the audits conducted 
by the Secretary pursuant to subparagraph (C) 
of subsection (a)(5), including the methodology 
used for conducting such audits, the results of 
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such audits, and actions taken by the Secretary 
in response to such audits, as well as actions 
taken by the Secretary in response to audits 
conducted by manufacturers pursuant to such 
subparagraph. 
‘‘(2) REPORT
BY
THE
COMPTROLLER
GEN-
ERAL.—Not later than one year after the date of the 
enactment of this subsection, the Comptroller Gen-
eral of the United States shall submit to the Com-
mittee on Energy and Commerce of the House of 
Representatives and the Committee on Health, Edu-
cation, Labor, and Pensions of the Senate a report 
on the use by covered entities of contractual ar-
rangements pursuant to which a third party dis-
penses covered outpatient drugs subject to an agree-
ment under this section to patients of the covered 
entity, disaggregated by covered entity types and the 
physical distance of the contracted entity’s location 
from the respective parent covered entity location. 
‘‘(3) ANNUAL
REPORTS
BY
THE
INSPECTOR 
GENERAL.—Not later than July 1 of each year (be-
ginning with 2018), the Inspector General of the 
Department of Health and Human Services shall 
submit to appropriate committees of Congress a re-
port on the contractual arrangements between cov-
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ered entities and third parties described in para-
graph (11) of subsection (a), including the methods 
and amounts of remuneration exchanged between 
such covered entities and such contracted entities, 
and the extent to which contract pharmacies are im-
proving access to medicines by patients of such cov-
ered entities. The first such annual report shall in-
clude recommendations, as the Inspector General de-
termines appropriate, that address safeguards to re-
duce duplicate discounting and diversion within con-
tract pharmacy arrangements and reforms to ensure 
these arrangements are targeted exclusively at im-
proving access to medicines for low-income or vul-
nerable patients of covered entities. Subsequent re-
ports under this paragraph should continue to mon-
itor such issues and be updated as changes are made 
to the drug discount program under this section.’’. 
(g) USER FEES UNDER THE 340B DRUG DISCOUNT 
PROGRAM.—Section 340B of the Public Health Service 
Act (42 U.S.C. 256b), as previously amended, is further 
amended by adding at the end the following new sub-
section: 
‘‘(h) USER FEES.— 
‘‘(1) IN GENERAL.—Subject to paragraph (6), 
the Secretary shall assess and collect a user fee from 
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covered entities described in subparagraph (L), (M), 
(N), or (O) of subsection (a)(4). In carrying out this 
subsection, the Secretary shall not require manufac-
turers to collect any user fee or to administer the 
user fee program established under this subsection. 
‘‘(2) PAYMENT.—A covered entity described in 
subparagraph (L), (M), (N), or (O) of subsection 
(a)(4) shall pay to the Secretary a fee assessed 
under paragraph (1) by such date that is the later 
of— 
‘‘(A) the date of the certification or recer-
tification of the covered entity, as applicable; or 
‘‘(B) the date that is 30 days after the 
date of the enactment of an appropriations Act 
providing for the collection and obligation of 
fees under this subsection for a fiscal year. 
‘‘(3) AMOUNT OF FEE.—The amount of a fee 
under paragraph (1) shall be equal to the amount 
determined by the Secretary under paragraph (4). 
‘‘(4) DETERMINATION OF AMOUNT OF FEE.— 
‘‘(A) IN GENERAL.—The Secretary shall, 
not later than 180 days before the start of each 
fiscal year that begins after September 30, 
2019, establish, for the next fiscal year, the 
amount of the fee payable under this subsection 
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by a covered entity using purchase data sub-
mitted by covered entities described in para-
graph (1), and using data submitted by manu-
facturers on sales to covered entities of covered 
outpatient drugs subject to an agreement under 
this section, pursuant to regulations to be 
issued by the Secretary. Such amount, with re-
spect to a covered entity and year, shall not ex-
ceed 0.1 percent of the total paid during the 
previous year by such covered entity to manu-
facturers for purchases of covered outpatient 
drugs subject to an agreement under this sec-
tion. 
‘‘(5) USE OF FEES.— 
‘‘(A) IN
GENERAL.—Any fee collected 
under paragraph (1) shall be used for purposes 
of administering this section, enhancing pro-
gram integrity and oversight activities under 
this section (including through audits under 
this section of covered entities and manufactur-
ers), and promoting access to clinical and cost- 
effective pharmacy services among safety net 
clinics and hospitals that participate under this 
section, such as through— 
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‘‘(i) the development of a multi-func-
tional web-based system to collect fees 
under paragraph (1); 
‘‘(ii) the improvement of the integrity, 
transparency, security, and reliability of 
the Office of Pharmacy Affairs Informa-
tion System, including to ensure that the 
database continues to meet the needs of 
external stakeholders; and 
‘‘(iii) improvements to the compliance 
tool of the Office of Pharmacy Affairs, 
used to integrate all information related to 
covered entities and manufacturers with 
agreements under this section. 
‘‘(B) SUPPLEMENT NOT SUPPLANT.—Any 
fee collected under paragraph (1) shall be used 
to supplement and not supplant the amount 
otherwise provided in appropriations Acts to 
carry out this section. 
‘‘(6) AVAILABILITY OF FEES.—Fees authorized 
under paragraph (1) shall be collected and available 
for obligation only to the extent and in the amount 
provided in advance in appropriations Acts. Such 
fees are authorized to remain available until ex-
pended. 
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‘‘(7) REGULATIONS.—Not later than 180 days 
after the date of enactment of this subsection, the 
Secretary shall promulgate final regulations through 
notice-and-comment rulemaking to implement the 
user fee collection pursuant to this subsection. 
‘‘(8) OVERSIGHT OF USER FEE PROGRAM.— 
‘‘(A) STUDY.—The Inspector General of 
the Department of Health and Human Services 
shall conduct an annual review of the user fee 
program established by this subsection. 
‘‘(B) REPORT.—Not later than July 1 of 
each year (beginning with 2019), the Inspector 
General of the Department of Health and 
Human Services shall submit to the appropriate 
committees of Congress a report on the study 
conducted under subparagraph (A), together 
with such recommendations as the Inspector 
General determines appropriate.’’. 
(h) DIRECT-HIRE AUTHORITY.—Section 340B(d) of 
the Public Health Service Act (42 U.S.C. 256b(d)) is 
amended by adding at the end the following new para-
graph: 
‘‘(5) 
DIRECT-HIRE
AUTHORITY.—Notwith-
standing section 3304(a)(3) of title 5, United States 
Code, and sections 3309 through 3318 of such title, 
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and section 337 of title 5 of the Code of Federal 
Regulations (or any successor regulations), the Sec-
retary may, beginning on the date of the enactment 
of this paragraph, exercise direct-hire authority to 
appoint a minimum of ten qualified candidates to 
permanent positions within the competitive service in 
order to carry out management and oversight activi-
ties under this section.’’. 
(i) APPLICABILITY.—Except as otherwise indicated, 
the provisions of, including amendments made by, this Act 
shall not apply to covered entities defined under subpara-
graphs (A) through (K), (N), or (O) of subsection (a)(4). 
Æ 
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