‘‘(4) RECOVERY OF UNPAID REBATE AMOUNTS 
DUE
TO
MISCLASSIFICATION
OF
COVERED
OUT-
PATIENT DRUGS.— 
‘‘(A) IN GENERAL.—If the Secretary deter-
mines that a manufacturer with an agreement 
under this section paid a lower per-unit rebate 
amount to a State for a rebate period as a re-
sult of the misclassification by the manufac-
turer of a covered outpatient drug (without re-
gard to whether the manufacturer knowingly 
made the misclassification or should have 
known that the misclassification would be 
made) than the per-unit rebate amount that the 
manufacturer would have paid to the State if 
the drug had been correctly classified, the man-
ufacturer shall pay to the State an amount 
equal to the product of— 
‘‘(i) the difference between— 
‘‘(I) the per-unit rebate amount 
paid to the State for the period; and 
‘‘(II) the per-unit rebate amount 
that the manufacturer would have 
paid to the State for the period, as 
determined by the Secretary, if the 
drug had been correctly classified; and
‘‘(ii) the total units of the drug paid 
for under the State plan in the period. 
‘‘(B) 
AUTHORITY
TO
CORRECT 
MISCLASSIFICATIONS.— 
‘‘(i) IN
GENERAL.—If the Secretary 
determines that a manufacturer with an 
agreement 
under 
this 
section 
has 
misclassified a covered outpatient drug 
(without regard to whether the manufac-
turer knowingly made the misclassification 
or 
should 
have 
known 
that 
the 
misclassification would be made), the Sec-
retary shall notify the manufacturer of the 
misclassification and require the manufac-
turer to correct the misclassification in a 
timely manner. 
‘‘(ii) ENFORCEMENT.—If, after receiv-
ing notice of a misclassification from the 
Secretary under clause (i), a manufacturer 
fails to correct the misclassification by 
such time as the Secretary shall require, 
until the manufacturer makes such correc-
tion, the Secretary may do any or all of 
the following:
‘‘(I) Correct the misclassification, 
using drug product information pro-
vided by the manufacturer, on behalf 
of the manufacturer. 
‘‘(II) Suspend the misclassified 
drug and the drug’s status as a cov-
ered outpatient drug under the manu-
facturer’s national rebate agreement, 
and exclude the misclassified drug 
from Federal financial participation in 
accordance 
with 
section 
1903(i)(10)(E). 
‘‘(III) Impose a civil money pen-
alty (which shall be in addition to any 
other recovery or penalty which may 
be available under this section or any 
other provision of law) for each rebate 
period during which the drug is 
misclassified not to exceed an amount 
equal to the product of— 
‘‘(aa) the total number of 
units of each dosage form and 
strength of such misclassified 
drug paid for under any State
plan during such a rebate period; 
and 
‘‘(bb) 23.1 percent of the av-
erage manufacturer price for the 
dosage form and strength of such 
misclassified drug. 
‘‘(C) REPORTING AND TRANSPARENCY.— 
‘‘(i) IN
GENERAL.—The Secretary 
shall submit a report to Congress on at 
least an annual basis that includes infor-
mation on the covered outpatient drugs 
that have been identified as misclassified, 
any steps taken to reclassify such drugs, 
the actions the Secretary has taken to en-
sure the payment of any rebate amounts 
which were unpaid as a result of such 
misclassification, and a disclosure of ex-
penditures from the fund created in sub-
section (b)(3)(C)(iv), including an account-
ing of how such funds have been allocated 
and spent in accordance with such sub-
section. 
‘‘(ii) PUBLIC ACCESS.—The Secretary 
shall make the information contained in
the report required under clause (i) avail-
able to the public on a timely basis. 
‘‘(D) OTHER PENALTIES AND ACTIONS.— 
Actions taken and penalties imposed under this 
clause shall be in addition to other remedies 
available to the Secretary including terminating 
the manufacturer’s rebate agreement for non-
compliance with the terms of such agreement 
and shall not exempt a manufacturer from, or 
preclude the Secretary from pursuing, any civil 
money penalty under this title or title XI, or 
any other penalty or action as may be pre-
scribed by law.’’. 
(2) OFFSET OF RECOVERED AMOUNTS AGAINST 
MEDICAL
ASSISTANCE.—Section 1927(b)(1)(B) of 
the 
Social 
Security 
Act 
(42 
U.S.C. 
1396r– 
8(b)(1)(B)) is amended by inserting ‘‘, including 
amounts received by a State under subsection 
(c)(4),’’ after ‘‘in any quarter’’. 
(c) CLARIFYING DEFINITIONS.—Section 1927(k) of 
the Social Security Act (42 U.S.C. 1396r–8(k)) is amend-
ed— 
(1) in paragraph (2)(A), by striking ‘‘paragraph 
(5)’’ and inserting ‘‘paragraph (4)’’; and 
(2) in paragraph (7)(A)—