I 
109TH CONGRESS 
1ST SESSION H. R. 3547 
To amend section 340B of the Public Health Service Act to increase the 
affordability of inpatient drugs for Medicaid and safety net hospitals. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 28, 2005 
Mrs. EMERSON (for herself, Mr. RUSH, Mr. BERRY, Mr. SIMPSON, Mr. 
STRICKLAND, and Mr. JONES of North Carolina) introduced the following 
bill; which was referred to the Committee on Energy and Commerce 
A BILL 
To amend section 340B of the Public Health Service Act 
to increase the affordability of inpatient drugs for Med-
icaid and safety net hospitals. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Safety Net Inpatient 
Drug Affordability Act’’. 
SEC. 2. EXTENSION OF DISCOUNTS TO INPATIENT DRUGS. 
(a) IN GENERAL.—Section 340B(b) of the Public 
Health Service Act (42 U.S.C. 256b(b)) is amended by 
inserting before the period the following: ‘‘, except that,
notwithstanding the limiting definition set forth in section 
1927(k)(3) of the Social Security Act, the terms ‘covered 
outpatient drug’ and ‘covered drug’ include any inpatient 
or outpatient drug purchased by a hospital described in 
subsection (a)(4)(L)’’. 
(b) PAYMENT OF MEDICAID REBATES ON INPATIENT 
DRUGS.—Section 340B(c) of such Act (42 U.S.C. 
256b(c)) is amended to read as follows: 
‘‘(c) PAYMENT OF MEDICAID REBATES ON INPA-
TIENT DRUGS.— 
‘‘(1) IN GENERAL.—For the cost reporting pe-
riod covered by the most recently filed Medicare cost 
report, a hospital described in subsection (a)(4)(L) 
shall provide to each State with an approved State 
plan under title XIX of such Act— 
‘‘(A) a rebate on the estimated annual 
costs of single source and innovator multiple 
source drugs provided to Medicaid recipients for 
inpatient use; and 
‘‘(B) a rebate on the estimated annual 
costs of noninnovator multiple source drugs 
provided to Medicaid recipients for inpatient 
use. 
‘‘(2) CALCULATIONS OF REBATES.—
‘‘(A) SINGLE
SOURCE
AND
INNOVATOR 
MULTIPLE
SOURCE
DRUGS.—For purposes of 
paragraph (1)(A)— 
‘‘(i) the rebate under such paragraph 
shall be calculated by multiplying the esti-
mated annual costs of single source and in-
novator multiple source drugs provided to 
Medicaid recipients for inpatient use by 
the minimum rebate percentage described 
in section 1927(c)(1)(B) of the Social Se-
curity Act; 
‘‘(ii) the estimated annual costs of 
single source drugs and innovator multiple 
source drugs provided to Medicaid recipi-
ents for inpatient use under clause (i) shall 
be equal to the product of— 
‘‘(I) the hospital’s actual acquisi-
tion costs of all drugs purchased dur-
ing the cost reporting period for inpa-
tient use; 
‘‘(II) the Medicaid inpatient drug 
charges as reported on the hospital’s 
most recently filed Medicare cost re-
port divided by total inpatient drug
charges reported on the cost report; 
and 
‘‘(III) the percent of the hos-
pital’s annual inpatient drug costs de-
scribed in subclause (I) arising out of 
the purchase of single source and in-
novator multiple source drugs; and 
‘‘(iii) the terms ‘single source drug’ 
and ‘innovator multiple source drug’ have 
the meanings given such terms in section 
1927(k)(7) of the Social Security Act. 
‘‘(B) NONINNOVATOR
MULTIPLE
SOURCE 
DRUGS.—For purposes of subparagraph (1) 
(B)— 
‘‘(i) the rebate under such paragraph 
shall be calculated by multiplying the esti-
mated annual costs of noninnovator mul-
tiple source drugs provided to Medicaid re-
cipients for inpatient use by the applicable 
percentage 
as 
defined 
in 
section 
1927(c)(3)(B) of the Social Security Act; 
‘‘(ii) the estimated annual costs of 
noninnovator multiple source drugs pro-
vided to Medicaid recipients for inpatient 
use shall be equal to the product of—
‘‘(I) the hospital’s actual acquisi-
tion cost of all drugs purchased dur-
ing the cost reporting period for inpa-
tient use; 
‘‘(II) the Medicaid inpatient drug 
charges as reported on the hospital’s 
most recently filed Medicare cost re-
port divided by total inpatient drug 
charges reported on the cost report; 
and 
‘‘(III) the percent of the hos-
pital’s annual inpatient drug costs de-
scribed in subclause (I) arising out of 
the purchase of noninnovator multiple 
source drugs; and 
‘‘(iii) the term ‘noninnovator multiple 
source drug’ has the meaning given such 
term in section 1927(k)(7) of the Social 
Security Act. 
‘‘(3) PAYMENT DEADLINE.—The rebates pro-
vided by a hospital under paragraph (1) shall be 
paid within 90 days of the filing of the hospital’s 
most recently filed Medicare cost report. 
‘‘(4) OFFSET AGAINST MEDICAL ASSISTANCE.— 
Amounts received by a State under this subsection
in any quarter shall be considered to be a reduction 
in the amount expended under the State plan in the 
quarter for medical assistance for purposes of sec-
tion 1903(a)(1) of the Social Security Act.’’. 
(c) CLARIFICATION THAT GROUP PURCHASING PRO-
HIBITION FOR CERTAIN HOSPITALS IS NOT APPLICABLE 
TO INPATIENT DRUGS.—Section 340B(a)(4)(L)(iii) of 
such Act (42 U.S.C. 256b(a)(4)(L)(iii)) is amended by in-
serting ‘‘(not including such drugs purchased for inpatient 
use)’’ after ‘‘covered outpatient drugs’’. 
SEC. 3. PROVIDING ACCESS TO DISCOUNTED DRUG PRICES 
FOR CRITICAL ACCESS HOSPITALS. 
(a) IN GENERAL.—Section 340B of the Public 
Health Service Act (42 U.S.C. 256b) is amended— 
(1) in subsection (a)(4), by adding at the end 
the following: 
‘‘(M) An entity that— 
‘‘(i) is a critical access hospital (as de-
termined under section 1820(c)(2) of the 
Social Security Act); and 
‘‘(ii) does not obtain covered out-
patient drugs though a group purchasing 
organization or other group purchasing ar-
rangement (not including such drugs pur-
chased for inpatient use).’’;
(2) in subsection (b), as amended by section 
2(a), by inserting ‘‘or subsection (a)(4)(M)’’ after 
‘‘subsection (a)(4)(L)’’; and 
(3) in subsection (c)(1), as added by inserting 
‘‘or 
subsection 
(a)(4)(M)’’ 
after 
‘‘subsection 
(a)(4)(L)’’. 
(b) EXCLUSION FROM MEDICAID BEST PRICE CAL-
CULATIONS.—Section 1927(c)(1)(C)(i)(I) of the Social Se-
curity Act (42 U.S.C. 1396r–8(c)(1)(C)(i)(I)) is amended 
by inserting ‘‘and to critical access hospitals described in 
section 340B(a)(4)(M) of such Act’’ after ‘‘Public Health 
Service Act’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to drugs purchased on or after 
January 1, 2006. 
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