237 
‘‘(C) with respect to any amount expended for 
the ingredient cost of a covered outpatient drug that 
exceeds the Federal upper limit for that drug estab-
lished and applied under section 1927(e); or’’; and 
(D) in paragraph (21), as inserted by sec-
tion 104(b) of Public Law 109–91, by inserting 
before the period at the end the following: ‘‘or 
described in subparagraph (B) or (C) of section 
1927(d)(2)’’. 
(c) EFFECTIVE DATE.—Except as otherwise pro-
vided, the amendments made by this section take effect 
with respect to a State on the later of— 
(1) January 1, 2007; or 
(2) the date that is 6 months after the close of 
the first regular session of the State legislature that 
begins after the date of the enactment of this Act. 
(d) GAO STUDY ON DISPENSING FEES.—The Comp-
troller General of the United States shall conduct a study 
on the appropriateness in payment levels to pharmacies 
for dispensing fees under the medicaid program, including 
payment to specialty pharmacies. Not later than 9 months 
after the date of the enactment of this Act, the Comp-
troller General shall submit to Congress a report on such 
study.
238 
(e) IG REPORT ON USE OF RAMP AND RETAIL SUR-
VEY PRICES.—Not later than 2 years after the date of 
the enactment of this Act, the Inspector General of the 
Department of Health and Human Services shall submit 
to Congress a report on the appropriateness of using 
RAMPs and retail survey prices, rather than the average 
manufacturer prices or other price measures, as the basis 
for establishing a Federal upper limit for reimbursement 
for covered outpatient drugs under the medicaid program. 
SEC. 3102. COLLECTION AND SUBMISSION OF UTILIZATION 
DATA FOR CERTAIN PHYSICIAN ADMINIS-
TERED DRUGS. 
(a) IN GENERAL.—Section 1927(a) of the Social Se-
curity Act (42 U.S.C. 1396r–8(a)) is amended by adding 
at the end the following new paragraph: 
‘‘(7) REQUIREMENT FOR SUBMISSION OF UTILI-
ZATION
DATA
FOR
CERTAIN
PHYSICIAN
ADMINIS-
TERED DRUGS.— 
‘‘(A) SINGLE
SOURCE
DRUGS.—In order 
for payment to be available under section 
1903(a) for a covered outpatient drug that is a 
single source drug that is physician adminis-
tered (as determined by the Secretary), and 
that is administered on or after January 1, 
2006, the State shall provide for the submission
239 
of such utilization data and coding (such as J- 
codes and National Drug Code numbers) for 
each such drug as the Secretary may specify as 
necessary to identify the manufacturer of the 
drug in order to secure rebates under this sec-
tion for drugs administered for which payment 
is made under this title. 
‘‘(B) MULTIPLE SOURCE DRUGS.— 
‘‘(i) IN
GENERAL.—Not later than 
January 1, 2007, the information shall be 
submitted under subparagraph (A) using 
National Drug Code codes unless the Sec-
retary specifies that an alternative coding 
system should be used. 
‘‘(ii) IDENTIFICATION OF MOST FRE-
QUENTLY PHYSICIAN ADMINISTERED MUL-
TIPLE
SOURCE
DRUGS.—Not later than 
January 1, 2007, the Secretary shall pub-
lish a list of the 20 physician administered 
multiple source drugs that the Secretary 
determines have the highest dollar volume 
of physician administered drugs dispensed 
under this title. The Secretary may modify 
such list from year to year to reflect 
changes in such volume.
240 
‘‘(iii) REQUIREMENT.—In order for 
payment to be available under section 
1903(a) for a covered outpatient drug that 
is a multiple source drug that is physician 
administered (as determined by the Sec-
retary), that is on the list published under 
clause (ii), and that is administered on or 
after January 1, 2008, the State shall pro-
vide for the submission of such utilization 
data and coding (such as J-codes and Na-
tional Drug Code numbers) for each such 
drug as the Secretary may specify as nec-
essary to identify the manufacturer of the 
drug in order to secure rebates under this 
section. 
‘‘(C) HARDSHIP WAIVER.—The Secretary may 
delay the application of subparagraph (A) or (B), or 
both, in the case of a State to prevent hardship to 
States which require additional time to implement 
the reporting system required under the respective 
subparagraph.’’. 
(b) LIMITATION ON PAYMENT.—Section 1903(i)(10) 
of such Act (42 U.S.C. 1396b(i)(10)), as amended by sec-
tion 3101(b)(3), is amended—
241 
(1) by striking ‘‘and’’ at the end of subpara-
graph (B); 
(2) by striking ‘‘or’’ at the end of subparagraph 
(C) and inserting ‘‘and’’; and 
(3) by adding at the end the following new sub-
paragraph: 
‘‘(D) with respect to covered outpatient drugs 
described in section 1927(a)(7), unless information 
respecting utilization data and coding on such drugs 
that is required to be submitted under such section 
is submitted in accordance with such section; or’’. 
SEC. 3103. IMPROVED REGULATION OF DRUGS SOLD 
UNDER 
A 
NEW 
DRUG 
APPLICATION 
AP-
PROVED UNDER SECTION 505(c) OF THE FED-
ERAL FOOD, DRUG, AND COSMETIC ACT. 
(a) INCLUSION WITH OTHER REPORTED AVERAGE 
MANUFACTURER
AND
BEST
PRICES.—Section 
1927(b)(3)(A) of the Social Security Act (42 U.S.C. 
1396r–8(b)(3)(A)) is amended— 
(1) by striking clause (i) and inserting the fol-
lowing: 
‘‘(i) not later than 30 days after the 
last day of each rebate period under the 
agreement—
242 
‘‘(I) on the average manufacturer 
price (as defined in subsection (k)(1)) 
for covered outpatient drugs for the 
rebate period under the agreement 
(including for all such drugs that are 
sold under a new drug application ap-
proved under section 505(c) of the 
Federal Food, Drug, and Cosmetic 
Act); and 
‘‘(II) for single source drugs and 
innovator multiple source drugs (in-
cluding all such drugs that are sold 
under a new drug application ap-
proved under section 505(c) of the 
Federal Food, Drug, and Cosmetic 
Act), on the manufacturer’s best price 
(as defined in subsection (c)(1)(C)) 
for such drugs for the rebate period 
under the agreement;’’; and 
(2) in clause (ii), by inserting ‘‘(including for 
such drugs that are sold under a new drug applica-
tion approved under section 505(c) of the Federal 
Food, Drug, and Cosmetic Act)’’ after ‘‘drugs’’. 
(b) CONFORMING AMENDMENTS.—Section 1927 of 
such Act (42 U.S.C. 1396r–8) is amended—
243 
(1) in subsection (c)(1)(C)— 
(A) in clause (i), in the matter preceding 
subclause (I), by inserting after ‘‘or innovator 
multiple source drug of a manufacturer’’ the 
following: ‘‘(including any other such drug of a 
manufacturer that is sold under a new drug ap-
plication approved under section 505(c) of the 
Federal Food, Drug, and Cosmetic Act)’’; and 
(B) in clause (ii)— 
(i) in subclause (II), by striking 
‘‘and’’ at the end; 
(ii) in subclause (III), by striking the 
period at the end and inserting ‘‘; and’’; 
and 
(iii) by adding at the end the fol-
lowing: 
‘‘(IV) in the case of a manufac-
turer that approves, allows, or other-
wise permits any other drug of the 
manufacturer to be sold under a new 
drug application approved under sec-
tion 505(c) of the Federal Food, 
Drug, and Cosmetic Act, shall be in-
clusive of the lowest price for such au-
thorized drug available from the man-
244 
ufacturer during the rebate period to 
any 
wholesaler, 
retailer, 
provider, 
health maintenance organization, non-
profit entity, or governmental entity 
within the United States, excluding 
those prices described in subclauses 
(I) through (IV) of clause (i).’’; and 
(2) in subsection (k)— 
(A) in paragraph (1)— 
(i) by striking ‘‘The term’’ and insert-
ing the following: 
‘‘(A) IN GENERAL.—The term’’; and 
(ii) by adding at the end the fol-
lowing: 
‘‘(B) INCLUSION
OF
SECTION
505(c) 
DRUGS.—In the case of a manufacturer that 
approves, allows, or otherwise permits any drug 
of the manufacturer to be sold under a new 
drug application approved under section 505(c) 
of the Federal Food, Drug, and Cosmetic Act, 
such term shall be inclusive of the average price 
paid for such authorized drug by wholesalers 
for drugs distributed to the retail pharmacy 
class of trade, after deducting customary 
prompt pay discounts.’’.
245 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on the date of the enactment 
of this Act. 
SEC. 3104. CHILDREN’S HOSPITAL PARTICIPATION IN SEC-
TION 340B DRUG DISCOUNT PROGRAM. 
(a) IN GENERAL.—Section 1927(a)(5)(B) of the So-
cial Security Act (42 U.S.C. 1396r–8(a)(5)(B)) is amend-
ed by inserting before the period at the end the following: 
‘‘and 
a 
children’s 
hospital 
described 
in 
section 
1886(d)(1)(B)(iii) which meets the requirements of 
clauses (i) and (iii) of section 340B(b)(4)(L) of the Public 
Health Service Act and which would meet the require-
ments of clause (ii) of such section if that clause were ap-
plied by taking into account the percentage of care pro-
vided by the hospital to patients eligible for medical assist-
ance under a State plan under this title’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to drugs purchased on or after 
the date of the enactment of this Act. 
SEC. 3105. IMPROVING PATIENT OUTCOMES THROUGH 
GREATER RELIANCE ON SCIENCE AND BEST 
PRACTICES. 
(a) IN GENERAL.—Section 1927 of Social Security 
Act (42 U.S.C. 1396r–8) is amended— 
(1) in subsection (d)(5)—
246 
(A) in the matter before subparagraph (A), 
by striking ‘‘providing for such approval—’’ and 
inserting ‘‘providing for such approval meets 
the following requirements:’’; 
(B) in subparagraph (A)— 
(i) by inserting ‘‘The system’’ before 
‘‘provides’’; and 
(ii) by striking ‘‘; and’’ and inserting 
a period; 
(C) in subparagraph (B)— 
(i) by striking ‘‘except’’ and inserting 
‘‘Except’’; and 
(ii) by inserting ‘‘the system’’ before 
‘‘provides’’; and 
(D) by adding at the end the following new 
subparagraphs: 
‘‘(C) The system provides that an atypical 
antipsychotic or antidepressant single source 
drug may be placed on a list of drugs subject 
to prior authorization only where a drug use re-
view board has determined, based on the 
strength of the scientific evidence and stand-
ards of practice, including assessing peer-re-
viewed medical literature, pharmacoeconomic 
studies, outcomes research data and such other
247 
information as the board determines to be ap-
propriate, that placing the drug on prior ap-
proval or otherwise imposing restrictions on its 
use is not likely to harm patients or increase 
overall medical costs. 
‘‘(D) The system provides that where a re-
sponse is not received to a request for author-
ization 
of 
an 
atypical 
antipsychotic 
or 
antidepressant drug prescribed within 24 hours 
after the prescription is transmitted, payment is 
made for a 30 day supply of a medication that 
the prescriber certifies is medically necessary.’’; 
and 
(2) in subsection (g)(3)(C), by inserting after 
clause (iii) the following new clause: 
‘‘(iv) The development and oversight 
of prior authorization programs described 
in subsection (d)(5).’’. 
(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall take effect on January 1, 2007.