completing the survey. Retail community phar-
macies shall retain such records for one year, 
and the Secretary shall not commence an in-
spection of records related to a survey response 
more than one year after the survey response 
was submitted by a retail community pharmacy. 
‘‘(H) PENALTY FOR FAILURE TO COOPER-
ATE IN AUDIT FOR PROVISION OF FALSE INFOR-
MATION.—The Secretary may impose a civil 
monetary penalty on a retail community phar-
macy, if the pharmacy refuses a request by the 
Secretary for information in connection with an 
audit under subparagraph (G) or knowingly 
provides false information in such an audit or 
in a survey under this paragraph. The amount 
of such penalty shall not exceed $10,000 in the 
case of such a refusal or $10,000 for each item 
of false information provided. The provisions of 
section 1128A (other than subsections (a) and 
(b)) shall apply to a civil money penalty under 
this subparagraph in the same manner as such 
provisions apply to a penalty or proceeding 
under section 1128A(a).’’. 
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SEC. 3. ENCOURAGING GENERIC UTILIZATION AND OTHER 
EVIDENCE-BASED 
COST 
CONTROL 
PRO-
GRAMS UNDER THE MEDICAID PROGRAM. 
Section 1927 of the Social Security Act (42 U.S.C. 
1396r–8) is further amended by adding at the end the 
following new subsection: 
‘‘(l) ESTABLISHMENT
OF EVIDENCE-BASED PRE-
SCRIPTION DRUG PROGRAM.— 
‘‘(1) IN GENERAL.—In order to control costs 
without reducing the quality of care when providing 
payment for covered outpatient drugs. under the 
State plan under this title, each State agency shall 
establish and implement (beginning with the second 
calendar quarter that begins after the date of the 
enactment of this subsection), an evidence-based 
prescription drug program in accordance with para-
graph (3). Each such program shall be designed in 
a manner so as to result in a generic dispensing rate 
for a fiscal year (or, in the case of implementation 
after the beginning of a fiscal year for the remainder 
of such fiscal year) that is at least the target generic 
dispensing rate specified in paragraph (2) for the 
State and fiscal year (or portion thereof) involved. 
The Secretary is authorized to reduce the Federal fi-
nancial participation under this title for quarters in 
the fiscal year with respect to covered outpatient 
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drugs to such amount as would reflect the State’s 
achievement of such a target generic dispensing rate 
for such quarters and drugs. 
‘‘(2) TARGET
GENERIC
DISPENSING
RATE.— 
The target generic dispensing rate for a State for a 
fiscal year (or portion thereof) is the lesser of— 
‘‘(A) 65 percent; or 
‘‘(B) in the case of— 
‘‘(i) a State with a generic dispensing 
rate for the previous fiscal year that is 
below the national average of such rate for 
such fiscal year, 3 percentage points above 
rate for the State in the previous fiscal 
year; or 
‘‘(ii) any other State, at least 1 per-
cent point above such rate for the State in 
the previous fiscal year. 
‘‘(3) REQUIREMENTS.—Each such program 
shall— 
‘‘(A) prohibit reimbursement for covered 
outpatient drugs that are determined to be inef-
fective by the Commissioner of Food and 
Drugs; 
‘‘(B) adopt rules in order to ensure that 
less expensive generic drugs will be used in as 
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many cases as possible with approval of the 
physician; 
‘‘(C) consider the use of drugs with lower 
abuse potential in substitution for drugs with 
significant abuse potential; and 
‘‘(D) establish an independent pharmacy 
and therapeutics committee to evaluate the ef-
fectiveness of covered outpatient drugs in the 
development of such program. 
‘‘(4) GENERIC
DISPENSING
RATE.—For pur-
poses of this subsection, the term ‘generic dispensing 
rate’ means, with respect to a multiple source drug, 
the proportion of the total volume of such drugs dis-
pensed, that are generic drugs.’’. 
SEC. 4. CHANGES TO DEFINITION OF MULTIPLE SOURCE 
DRUG AND APPLICATION TO UPPER PAY-
MENT LIMITS. 
(a) IN GENERAL.—Section 1927 of the Social Secu-
rity Act (42 U.S.C. 1396r–8) is further amended— 
(1) in subsection (e)(4)— 
(A) by striking ‘‘each multiple source 
drug’’ and inserting ‘‘each widely available mul-
tiple source drug’’; and 
(B) by striking ‘‘(or effective January 1, 
2007, two or more)’’; and 
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(2) in subsection (k)(7)(A)(i)— 
(A) in the matter before subclause (I), by 
striking ‘‘1 other drug product’’ and inserting 
‘‘2 other drug products’’; and 
(B) in each of subclauses (I), (II), and 
(III), by striking ‘‘is’’ and inserting ‘‘are’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on the first day of the second 
calendar quarter beginning after the date of the enactment 
of this Act. 
SEC. 5. GAO STUDY OF COMMUNITY PHARMACY DIS-
PENSING COSTS. 
(a) STUDY.—The Comptroller General of the United 
States shall conduct a study on the costs of community 
retail pharmacies to dispense prescription drugs. 
(b) REPORT.—Not later than one year after the date 
of the enactment of this Act, the Comptroller General shall 
submit a report to Congress on the study conducted under 
subsection (a). 
Æ 
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