386
pose of verifying eligibility, transmitting data on claims,
and assisting pharmacists and other authorized persons
in applying for and receiving payment under the State
plan.’’.
(8) Section 1927(i) (42 U.S.C. 1396r–8(i)) is amend-
ed to read as follows:
‘‘(i) ANNUAL REPORT ON REBATE PROGRAM.—Not
later than May 1 of each year, the Secretary shall submit
to the Committee on Finance of the Senate, the Commit-
tee on Energy and Commerce of the House of Representa-
tives, and the Committee on Aging of the Senate a report
on the operation of the rebate agreements required for
covered outpatient drugs under this section in the preced-
ing fiscal year, and shall include in the report such infor-
mation in addition to the information required to be re-
ported under section 601(d) of the Veterans Health Care
Act of 1992 as the Secretary considers appropriate.’’.
(9) Section 1927(j) (42 U.S.C. 1396r–8(j)) is amend-
ed to read as follows:
‘‘(j) EXEMPTION FROM CERTAIN REQUIREMENTS
FOR CERTAIN HEALTH MAINTENANCE ORGANIZATIONS
AND HOSPITALS.—
‘‘(1) CERTAIN HEALTH MAINTENANCE ORGANI-
ZATIONS
AND
PHARMACIES.—The requirements of
387
subsections (g) and (h) shall not apply with respect
to covered outpatient drugs dispensed by—
‘‘(A) an entity which receives payment
under a prepaid capitation basis or under any
other risk basis in accordance with section
1903(m)(2)(A) for services provided under the
State plan; or
‘‘(B) a pharmacy that is owned or operated
by a qualified health maintenance organization
(as defined in section 1310(d) of the Public
Health Service Act) that operates its own pro-
spective drug use review program.
‘‘(2) HOSPITALS
WITH
INDEPENDENT
FOR-
MULARY SYSTEMS.—
‘‘(A) IN GENERAL.—The requirements of
subsections (g) and (h) shall not apply with re-
spect to covered outpatient drugs dispensed by
a hospital providing medical assistance under
the State plan that dispenses such drugs under
a drug formulary system.
‘‘(B) 
APPLICATION
OF
STATE
FOR-
MULARY.—Nothing in subparagraph (A) shall
be construed to permit payment to be made
under the State plan for a covered outpatient
drug that is included in a drug formulary but
388
that is not included in the State formulary
under subsection (d)(5).
‘‘(3) CONSTRUCTION
IN
DETERMINING
BEST
PRICE.—Nothing in this subsection shall be con-
strued to exclude any covered outpatient drugs sub-
ject to the provisions of this subsection from the de-
termination of the best price (as defined in sub-
section (c)(1)(C)) for such drugs.’’.
(10) Section 1927(k) (42 U.S.C. 1396r–8(k)) is
amended—
(A) in paragraph (1), by striking ‘‘calendar
quarter’’ and inserting ‘‘rebate period’’;
(B) in paragraph (2)—
(i) in the matter before clause (i) of sub-
paragraph (A), by striking ‘‘paragraph (5)’’ and
inserting ‘‘subparagraph (D)’’,
(ii) by striking ‘‘, and’’ at the end of sub-
paragraph (A),
(iii) by striking the period at the end of
subparagraph (C) and inserting ‘‘; and’’, and
(iv) by adding at the end the following new
subparagraph:
‘‘(D) a drug which may be sold without a
prescription (commonly referred to as an ‘over-
the-counter drug’), if the drug is prescribed by
389
a physician (or other person authorized to pre-
scribe under State law).’’;
(C) in paragraph (3)—
(i) in subparagraph (E), by striking ‘‘****
emergency room visits’’,
(ii) in subparagraph (F), by striking
‘‘sevices’’ and inserting ‘‘services’’, and
(iii) in subparagraph (H), by inserting
‘‘services’’ after ‘‘dialysis’’;
(D) by striking paragraph (4);
(E) by amending paragraph (5) to read as fol-
lows:
‘‘(5) MANUFACTURER.—The term ‘manufac-
turer’ means, with respect to a covered outpatient
drug,—
‘‘(A) the entity (if any) that both manufac-
tures and distributes the drug, or
‘‘(B) if no such entity exists, the entity
that distributes the drug.
Such term does not include a wholesale distributor
of the drug that does not hold a National Drug Code
number for the drug or a retail pharmacy licensed
under State law.’’;
(F) in paragraph (6), by striking ‘‘, which ap-
pears’’ and all that follows and inserting ‘‘which is
390
accepted by any of the compendia described in sub-
section (g)(2)(C)(ii).’’;
(G) in paragraph (7)—
(i) in subparagraph (A)(i), by striking
‘‘calendar quarter’’ and inserting ‘‘rebate pe-
riod’’,
(ii) in subparagraph (A)(i), by striking
‘‘paragraph (5)’’ and inserting ‘‘paragraph
(2)(D)’’,
(iii) in subparagraph (A)(ii), by inserting
‘‘or product licensing application’’ after ‘‘appli-
cation’’,
(iv) in subparagraph (C)(i), by striking
‘‘pharmaceuutically’’ and inserting ‘‘pharma-
ceutically’’, and
(v) in subparagraph (C)(iii), by striking ‘‘,
provided that’’ and inserting ‘‘and’’; and
(H) by redesignating paragraph (8) as para-
graph (9) and by inserting after paragraph (7) the
following new paragraph:
‘‘(8) REBATE PERIOD.—The term ‘rebate pe-
riod’ means, with respect to an agreement under
subsection (a), a calendar quarter or other period
specified with respect to the agreement under sub-
section (b)(1)(A) for the payment of rebates.’’.