(2) by striking the period at the end and insert-
ing ‘‘, and (IV) any formulary used by the entity for 
covered outpatient drugs dispensed to individuals eli-
gible for medical assistance who are enrolled with 
the entity is developed and reviewed by a pharmacy 
and therapeutics committee that meets the require-
ments 
of 
clauses 
(ii) 
and 
(iii) 
of 
section 
1927(d)(4)(A).’’; and 
(3) by moving the left margin 2 ems to the left. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on the date that is 1 year 
after the date of enactment of this Act. 
SEC. 202. GAO REPORT ON CONFLICTS OF INTEREST IN 
STATE MEDICAID PROGRAM DRUG USE RE-
VIEW BOARDS AND PHARMACY AND THERA-
PEUTICS (P&T) COMMITTEES. 
(a) INVESTIGATION.—The Comptroller General of the 
United States shall conduct an investigation of potential 
or existing conflicts of interest among members of State 
Medicaid program State drug use review boards (in this 
section referred to as ‘‘DUR Boards’’) and pharmacy and 
therapeutics committees (in this section referred to as 
‘‘P&T Committees’’). 
(b) REPORT.—Not later than 24 months after the 
date of enactment of this Act, the Comptroller General 
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shall submit to Congress a report on the investigation con-
ducted under subsection (a) that includes the following: 
(1) A description outlining how DUR Boards 
and P&T Committees operate in States, including 
details with respect to— 
(A) the structure and operation of DUR 
Boards and statewide P&T Committees; 
(B) States that operate separate P&T 
Committees for their fee-for-service Medicaid 
program and their Medicaid managed care or-
ganizations or other Medicaid managed care ar-
rangements (collectively referred to in this sec-
tion as ‘‘Medicaid MCOs)’’; and 
(C) States that allow Medicaid MCOs to 
have their own P&T Committees and the extent 
to which pharmacy benefit managers administer 
or participate in such P&T Committees. 
(2) A description outlining the differences be-
tween DUR Boards established in accordance with 
section 1927(g)(3) of the Social Security Act (42 
U.S.C. 1396r(g)(3)) and P&T Committees. 
(3) A description outlining the tools P&T Com-
mittees may use to determine Medicaid drug cov-
erage and utilization management policies. 
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(4) An analysis of whether and how States or 
P&T Committees establish participation and inde-
pendence requirements for DUR Boards and P&T 
Committees, including with respect to entities with 
connections with drug manufacturers, State Med-
icaid programs, managed care organizations, and 
other entities or individuals in the pharmaceutical 
industry. 
(5) A description outlining how States, DUR 
Boards, or P&T Committees define conflicts of inter-
est. 
(6) A description of how DUR Boards and P&T 
Committees address conflicts of interest, including 
who is responsible for implementing such policies. 
(7) A description of the tools, if any, States use 
to ensure that there are no conflicts of interest on 
DUR Boards and P&T Committees. 
(8) An analysis of the effectiveness of tools 
States use to ensure that there are no conflicts of 
interest on DUR Boards and P&T Committees and, 
if applicable, recommendations as to how such tools 
could be improved. 
(9) A review of strategies States may use to 
guard against conflicts of interest on DUR Boards 
and P&T Committees and to ensure compliance with 
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the requirements of titles XI and XIX of the Social 
Security Act (42 U.S.C. 1301 et seq., 1396 et seq.) 
and access to effective, clinically appropriate, and 
medically necessary drug treatments for Medicaid 
beneficiaries, including recommendations for such 
legislative and administrative actions as the Comp-
troller General determines appropriate. 
SEC. 203. ENSURING THE ACCURACY OF MANUFACTURER 
PRICE AND DRUG PRODUCT INFORMATION 
UNDER THE MEDICAID DRUG REBATE PRO-
GRAM. 
(a) AUDIT OF MANUFACTURER PRICE AND DRUG 
PRODUCT INFORMATION.— 
(1) IN GENERAL.—Subparagraph (B) of section 
1927(b)(3) of the Social Security Act (42 U.S.C. 
1396r–8(b)(3)) is amended to read as follows: 
‘‘(B) AUDITS AND SURVEYS OF MANUFAC-
TURER PRICE AND DRUG PRODUCT INFORMA-
TION.— 
‘‘(i) AUDITS.—The Secretary shall 
conduct ongoing audits of the price and 
drug product information reported by man-
ufacturers under subparagraph (A) for the 
most recently ended rebate period to en-
sure the accuracy and timeliness of such 
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information. In conducting such audits, the 
Secretary may employ evaluations, surveys, 
statistical sampling, predictive analytics 
and other relevant tools and methods. 
‘‘(ii) VERIFICATIONS SURVEYS OF AV-
ERAGE MANUFACTURER PRICE AND MANU-
FACTURER’S
AVERAGE
SALES
PRICE.—In 
addition to the audits required under 
clause (i), the Secretary may survey whole-
salers and manufacturers (including manu-
facturers that directly distribute their cov-
ered outpatient drugs (in this subpara-
graph referred to as ‘direct sellers’)), when 
necessary, to verify manufacturer prices 
and manufacturer’s average sales prices 
(including wholesale acquisition cost) to 
make payment reported under subpara-
graph (A). 
‘‘(iii) PENALTIES.—In addition to 
other penalties as may be prescribed by 
law, including under subparagraph (C) of 
this paragraph, the Secretary may impose 
a civil monetary penalty in an amount not 
to exceed $185,000 on an annual basis on 
a wholesaler, manufacturer, or direct sell-
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er, if the wholesaler, manufacturer, or di-
rect seller of a covered outpatient drug re-
fuses a request for information about 
charges or prices by the Secretary in con-
nection with an audit or survey under this 
subparagraph or knowingly provides false 
information. The provisions of section 
1128A (other than subsections (a) (with 
respect to amounts of penalties or addi-
tional assessments) and (b)) shall apply to 
a civil money penalty under this clause in 
the same manner as such provisions apply 
to a penalty or proceeding under section 
1128A(a). 
‘‘(iv) REPORTS.— 
‘‘(I) REPORT
TO
CONGRESS.— 
The Secretary shall, not later than 18 
months after date of enactment of 
this subparagraph, submit a report to 
the Committee on Energy and Com-
merce of the House of Representatives 
and the Committee on Finance of the 
Senate regarding additional regulatory 
or statutory changes that may be re-
quired in order to ensure accurate and 
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101 
timely reporting and oversight of 
manufacturer price and drug product 
information, 
including 
whether 
changes should be made to reasonable 
assumption requirements to ensure 
such assumptions are reasonable and 
accurate or whether another method-
ology for ensuring accurate and timely 
reporting of price and drug product 
information should be considered to 
ensure the integrity of the drug rebate 
program under this section. 
‘‘(II) ANNUAL
REPORTS.—The 
Secretary shall, on at least an annual 
basis, submit a report to the Com-
mittee on Energy and Commerce of 
the House of Representatives and the 
Committee on Finance of the Senate 
summarizing the results of the audits 
and surveys conducted under this sub-
paragraph during the period that is 
the subject of the report. 
‘‘(III) CONTENT.—Each report 
submitted under subclause (II) shall, 
with respect to the period that is the 
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102 
subject of the report, include sum-
maries of— 
‘‘(aa) error rates in the 
price, drug product, and other 
relevant information supplied by 
manufacturers under subpara-
graph (A); 
‘‘(bb) the timeliness with 
which 
manufacturers, 
whole-
salers, and direct sellers provide 
information required under sub-
paragraph (A) or under clause (i) 
or (ii) of this subparagraph; 
‘‘(cc) the number of manu-
facturers, wholesalers, and direct 
sellers and drug products audited 
under this subparagraph; 
‘‘(dd) the types of price and 
drug product information re-
viewed under the audits con-
ducted under this subparagraph; 
‘‘(ee) the tools and meth-
odologies employed in such au-
dits; 
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103 
‘‘(ff) the findings of such 
audits, including which manufac-
turers, if any, were penalized 
under this subparagraph; and 
‘‘(gg) such other relevant in-
formation as the Secretary shall 
deem appropriate. 
‘‘(IV) PROTECTION OF INFORMA-
TION.—In preparing a report required 
under subclause (II), the Secretary 
shall redact such proprietary informa-
tion as the Secretary determines ap-
propriate to prevent disclosure of, and 
to safeguard, such information. 
‘‘(v) APPROPRIATIONS.—Out of any 
funds in the Treasury not otherwise appro-
priated, there is appropriated to the Sec-
retary $2,000,000 for fiscal year 2022 and 
each fiscal year thereafter to carry out this 
subparagraph.’’. 
(2) EFFECTIVE DATE.—The amendments made 
by this subsection shall take effect on the first day 
of the first fiscal quarter that begins after the date 
of enactment of this Act. 
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104 
(b) INCREASED PENALTIES
FOR NONCOMPLIANCE 
WITH REPORTING REQUIREMENTS.— 
(1) INCREASED PENALTY FOR LATE REPORTING 
OF INFORMATION.—Section 1927(b)(3)(C)(i) of the 
Social Security Act (42 U.S.C. 1396r–8(b)(3)(C)(i)) 
is amended by striking ‘‘increased by $10,000 for 
each day in which such information has not been 
provided and such amount shall be paid to the 
Treasury’’ and inserting ‘‘, for each covered out-
patient drug with respect to which such information 
is not provided, $50,000 for the first day that such 
information is not provided on a timely basis and 
$19,000 for each subsequent day that such informa-
tion is not provided’’. 
(2) INCREASED PENALTY FOR KNOWINGLY RE-
PORTING
FALSE
INFORMATION.—Section 
1927(b)(3)(C)(ii) of the Social Security Act (42 
U.S.C. 1396r–8(b)(3)(C)(ii)) is amended by striking 
‘‘$100,000’’ and inserting ‘‘$500,000’’. 
(3) EFFECTIVE DATE.—The amendments made 
by this subsection shall take effect on the first day 
of the first fiscal quarter that begins after the date 
of enactment of this Act. 
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105 
SEC. 204. IMPROVING TRANSPARENCY AND PREVENTING 
THE USE OF ABUSIVE SPREAD PRICING AND 
RELATED PRACTICES IN MEDICAID. 
(a) PASS-THROUGH PRICING REQUIRED.— 
(1) IN GENERAL.—Section 1927(e) of the So-
cial Security Act (42 U.S.C. 1396r–8(e)) is amended 
by adding at the end the following: 
‘‘(6) PASS-THROUGH
PRICING
REQUIRED.—A 
contract between the State and a pharmacy benefit 
manager (referred to in this paragraph as a ‘PBM’), 
or a contract between the State and a managed care 
entity or other specified entity (as such terms are 
defined in section 1903(m)(9)(D)) that includes pro-
visions making the entity responsible for coverage of 
covered outpatient drugs dispensed to individuals en-
rolled with the entity, shall require that payment for 
such drugs and related administrative services (as 
applicable), including payments made by a PBM on 
behalf of the State or entity, is based on a pass- 
through pricing model under which— 
‘‘(A) any payment made by the entity of 
the PBM (as applicable) for such a drug— 
‘‘(i) is limited to— 
‘‘(I) ingredient cost; and 
‘‘(II) a professional dispensing 
fee that is not less than the profes-
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106 
sional dispensing fee that the State 
plan or waiver would pay if the plan 
or waiver was making the payment di-
rectly; 
‘‘(ii) is passed through in its entirety 
by the entity or PBM to the pharmacy 
that dispenses the drug; and 
‘‘(iii) is made in a manner that is con-
sistent with section 1902(a)(30)(A) and 
sections 447.512, 447.514, and 447.518 of 
title 42, Code of Federal Regulations (or 
any successor regulation), as if such re-
quirements applied directly to the entity or 
the PBM; 
‘‘(B) payment to the entity or the PBM 
(as applicable) for administrative services per-
formed by the entity or PBM is limited to a 
reasonable administrative fee that covers the 
reasonable cost of providing such services; 
‘‘(C) the entity or the PBM (as applicable) 
shall make available to the State, and the Sec-
retary upon request, all costs and payments re-
lated to covered outpatient drugs and accom-
panying administrative services incurred, re-
ceived, or made by the entity or the PBM, in-
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107 
cluding ingredient costs, professional dispensing 
fees, administrative fees, post-sale and post-in- 
voice fees. Discounts, or related adjustments 
such as direct and indirect remuneration fees, 
and any and all remuneration; and 
‘‘(D) any form of spread pricing whereby 
any amount charged or claimed by the entity or 
the PBM (as applicable) is in excess of the 
amount paid to the pharmacies on behalf of the 
entity, including any post-sale or post-invoice 
fees, discounts, or related adjustments such as 
direct and indirect remuneration fees or assess-
ments (after allowing for a reasonable adminis-
trative fee as described in subparagraph (B)) is 
not allowable for purposes of claiming Federal 
matching payments under this title.’’. 
(2) CONFORMING
AMENDMENT.—Clause (xiii) 
of section 1903(m)(2)(A) of such Act (42 U.S.C. 
1396b(m)(2)(A)), as amended by section 202, is fur-
ther amended— 
(A) by striking ‘‘and (IV)’’ and inserting 
‘‘(IV)’’; and 
(B) by inserting before the period at the 
end the following: ‘‘, and (V) pharmacy benefit 
management services provided by the entity, or 
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108 
provided by a pharmacy benefit manager on be-
half of the entity under a contract or other ar-
rangement between the entity and the phar-
macy benefit manager, shall comply with the re-
quirements of section 1927(e)(6)’’. 
(3) EFFECTIVE DATE.—The amendments made 
by this subsection apply to contracts between States 
and managed care entities, other specified entities, 
or pharmacy benefits managers that are entered into 
or renewed on or after the date that is 18 months 
after the date of enactment of this Act. 
(b) SURVEY OF RETAIL PRICES.— 
(1) IN GENERAL.—Section 1927(f) of the Social 
Security Act (42 U.S.C. 1396r–8(f)) is amended— 
(A) by striking ‘‘and’’ after the semicolon 
at the end of paragraph (1)(A)(i) and all that 
precedes it through ‘‘(1)’’ and inserting the fol-
lowing: 
‘‘(1) SURVEY
OF
RETAIL
PRICES.—The Sec-
retary shall conduct a survey of retail community 
drug prices, to include at least the national average 
drug acquisition cost, as follows: 
‘‘(A) USE
OF
VENDOR.—The Secretary 
may contract services for— 
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‘‘(i) with respect to retail community 
pharmacies, the determination on a month-
ly basis of retail survey prices of the na-
tional average drug acquisition cost for 
covered outpatient drugs for such phar-
macies, net of all discounts and rebates (to 
the extent any information with respect to 
such discounts and rebates is available), 
the average reimbursement received for 
such drugs by such pharmacies from all 
sources of payment, including third par-
ties, and, to the extent available, the usual 
and customary charges to consumers for 
such drugs; and’’; 
(B) by adding at the end of paragraph (1) 
the following: 
‘‘(F) SURVEY
REPORTING.—In order to 
meet the requirement of section 1902(a)(54), a 
State shall require that any retail community 
pharmacy in the State that receives any pay-
ment, administrative fee, discount, or rebate re-
lated to the dispensing of covered outpatient 
drugs to individuals receiving benefits under 
this title, regardless of whether such payment, 
fee, discount, or rebate is received from the 
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110 
State or a managed care entity directly or from 
a pharmacy benefit manager or another entity 
that has a contract with the State or a man-
aged care entity, shall respond to surveys of re-
tail prices conducted under this subsection. 
‘‘(G) SURVEY INFORMATION.—Information 
on retail community prices obtained under this 
paragraph shall be made publicly available and 
shall include at least the following: 
‘‘(i) The monthly response rate of the 
survey including a list of pharmacies not in 
compliance with subparagraph (F). 
‘‘(ii) The sampling frame and number 
of pharmacies sampled monthly. 
‘‘(iii) 
Characteristics 
of 
reporting 
pharmacies, including type (such as inde-
pendent or chain), geographic or regional 
location, and dispensing volume. 
‘‘(iv) Reporting of a separate national 
average drug acquisition cost for each drug 
for independent retail pharmacies and 
chain operated pharmacies. 
‘‘(v) Information on price concessions 
including on and off invoice discounts, re-
bates, and other price concessions. 
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111 
‘‘(vi) Information on average profes-
sional dispensing fees paid. 
‘‘(H) PENALTIES.— 
‘‘(i) FAILURE TO PROVIDE TIMELY IN-
FORMATION.—A retail community phar-
macy that fails to respond to a survey con-
ducted under this subsection on a timely 
basis may be subject to a civil monetary 
penalty in the amount of $10,000 for each 
day in which such information has not 
been provided. 
‘‘(ii) FALSE INFORMATION.—A retail 
community pharmacy that knowingly pro-
vides false information in response to a 
survey conducted under this subsection 
may be subject to a civil money penalty in 
an amount not to exceed $100,000 for 
each item of false information. 
‘‘(iii) OTHER
PENALTIES.—Any civil 
money penalties imposed under this sub-
paragraph shall be in addition to other 
penalties as may be prescribed by law. The 
provisions of section 1128A (other than 
subsections (a) and (b)) shall apply to a 
civil money penalty under this subpara-
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graph in the same manner as such provi-
sions apply to a penalty or proceedings 
under section 1128A(a). 
‘‘(I) 
REPORT
ON
SPECIALTY
PHAR-
MACIES.— 
‘‘(i) IN GENERAL.—Not later than 1 
year after the effective date of this sub-
paragraph, the Secretary shall submit a re-
port to Congress examining specialty drug 
coverage and reimbursement under this 
title. 
‘‘(ii) CONTENT OF REPORT.—Such re-
port shall include a description of how 
State Medicaid programs define specialty 
drugs, how much State Medicaid programs 
pay for specialty drugs, how States and 
managed care plans determine payment for 
specialty drugs, the settings in which spe-
cialty drugs are dispensed (such as retail 
community pharmacies or specialty phar-
macies), whether acquisition costs for spe-
cialty drugs are captured in the national 
average drug acquisition cost survey, and 
recommendations as to whether specialty 
pharmacies should be included in the sur-
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113 
vey of retail prices to ensure national aver-
age drug acquisition costs capture drugs 
sold at specialty pharmacies and how such 
specialty pharmacies should be defined.’’; 
(C) in paragraph (2)— 
(i) in subparagraph (A), by inserting 
‘‘, including payments rates under Med-
icaid managed care plans,’’ after ‘‘under 
this title’’; and 
(ii) in subparagraph (B), by inserting 
‘‘and the basis for such dispensing fees’’ 
before the semicolon; and 
(D) in paragraph (4), by inserting ‘‘, and 
$5,000,000 for fiscal year 2022 and each fiscal 
year thereafter,’’ after ‘‘2010’’. 
(2) EFFECTIVE DATE.—The amendments made 
by this subsection take effect on the 1st day of the 
1st quarter that begins on or after the date that is 
18 months after the date of enactment of this Act. 
(c) MANUFACTURER REPORTING
OF WHOLESALE 
ACQUISITION COST.—Section 1927(b)(3) of such Act (42 
U.S.C. 1396r–8(b)(3)), as amended by section 141, is fur-
ther amended— 
(1) in subparagraph (A)(i)— 
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114 
(A) in subclause (I), by striking ‘‘and’’ 
after the semicolon; 
(B) in subclause (II), by adding ‘‘and’’ 
after the semicolon; 
(C) by moving the left margins of sub-
clauses (I) and (II) 2 ems to the right; and 
(D) by adding at the end the following: 
‘‘(III) in the case of rebate peri-
ods that begin on or after the date of 
enactment of this subclause, on the 
wholesale acquisition cost (as defined 
in section 1847A(c)(6)(B)) for cov-
ered outpatient drugs for the rebate 
period under the agreement (including 
for all such drugs that are sold under 
a new drug application approved 
under section 505(c) of the Federal 
Food, Drug, and Cosmetic Act);’’; and 
(2) in subparagraph (D)— 
(A) in the matter preceding clause (i), by 
inserting ‘‘and clause (vii) of this subpara-
graph’’ after ‘‘1847A’’; 
(B) in clause (vi), by striking ‘‘and’’ after 
the comma; 
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(C) in clause (vii), by striking the period 
and inserting ‘‘, and’’; and 
(D) by inserting after clause (vii) the fol-
lowing: 
‘‘(viii) to the Secretary to disclose 
(through a website accessible to the public) 
the most recently reported wholesale acqui-
sition 
cost 
(as 
defined 
in 
section 
1847A(c)(6)(B)) for each covered out-
patient drug (including for all such drugs 
that are sold under a new drug application 
approved under section 505(c) of the Fed-
eral Food, Drug, and Cosmetic Act), as re-
ported under subparagraph (A)(i)(III).’’. 
SEC. 205. T–MSIS DRUG DATA ANALYTICS REPORTS. 
(a) IN GENERAL.—Not later than May 1 of each cal-
endar year beginning with calendar year 2023, the Sec-
retary of Health and Human Services (in this section re-
ferred to as the ‘‘Secretary’’) shall publish on a website 
of the Centers for Medicare & Medicaid Services that is 
accessible to the public a report of the most recently avail-
able data on provider prescribing patterns under the Med-
icaid program. 
(b) CONTENT OF REPORT.— 
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(1) REQUIRED
CONTENT.—Each report re-
quired under subsection (a) for a calendar year shall 
include the following information with respect to 
each State (and, to the extent available, with respect 
to Puerto Rico, the United States Virgin Islands, 
Guam, the Northern Mariana Islands, and American 
Samoa): 
(A) A comparison of covered outpatient 
drug (as defined in section 1927(k)(2) of the 
Social Security Act (42 U.S.C. 1396r–8(k)(2))) 
prescribing patterns under the State Medicaid 
plan or waiver of such plan (including drugs 
prescribed on a fee-for-service basis and drugs 
prescribed under managed care arrangements 
under such plan or waiver)— 
(i) across all forms or models of reim-
bursement used under the plan or waiver; 
(ii) within specialties and subspecial-
ties, as defined by the Secretary; 
(iii) by episodes of care for— 
(I) each chronic disease category, 
as defined by the Secretary, that is 
represented in the 10 conditions that 
accounted for the greatest share of 
total spending under the plan or waiv-
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er during the year that is the subject 
of the report; 
(II) procedural groupings; and 
(III) rare disease diagnosis codes; 
(iv) by patient demographic character-
istics, including race (to the extent that 
the Secretary determines that there is suf-
ficient data available with respect to such 
characteristic in a majority of States), gen-
der, and age; 
(v) by patient high-utilizer or risk sta-
tus; and 
(vi) by high and low resource settings 
by facility and place of service categories, 
as determined by the Secretary. 
(B) In the case of medical assistance for 
covered outpatient drugs (as so defined) pro-
vided under a State Medicaid plan or waiver of 
such plan in a managed care setting, an anal-
ysis of the differences in managed care pre-
scribing patterns when a covered outpatient 
drug is prescribed in a managed care setting as 
compared to when the drug is prescribed in a 
fee-for-service setting. 
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(2) ADDITIONAL CONTENT.—A report required 
under subsection (a) for a calendar year may include 
State-specific information about prescription utiliza-
tion management tools under State Medicaid plans 
or waivers of such plans, including— 
(A) a description of prescription utilization 
management tools under State programs to pro-
vide long-term services and supports under a 
State Medicaid plan or a waiver of such plan; 
(B) a comparison of prescription utilization 
management tools applicable to populations cov-
ered under a State Medicaid plan waiver under 
section 1115 of the Social Security Act (42 
U.S.C. 1315) and the models applicable to pop-
ulations that are not covered under the waiver; 
(C) a comparison of the prescription utili-
zation management tools employed by different 
Medicaid managed care organizations, phar-
macy benefit managers, and related entities 
within the State; 
(D) a comparison of the prescription utili-
zation management tools applicable to each en-
rollment category under a State Medicaid plan 
or waiver; and 
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(E) a comparison of the prescription utili-
zation management tools applicable under the 
State Medicaid plan or waiver by patient high- 
utilizer or risk status. 
(3) ADDITIONAL
ANALYSIS.—To the extent 
practicable, the Secretary shall include in each re-
port published under subsection (a)— 
(A) analyses of national, State, and local 
patterns of Medicaid population-based pre-
scribing behaviors; and 
(B) recommendations for administrative or 
legislative action to improve the effectiveness of, 
and reduce costs for, covered outpatient drugs 
under Medicaid while ensuring timely bene-
ficiary access to medically necessary covered 
outpatient drugs. 
(c) USE OF T–MSIS DATA.—Each report required 
under subsection (a) shall— 
(1) be prepared using data and definitions from 
the Transformed Medicaid Statistical Information 
System (T–MSIS) data set (or a successor data set) 
that is not more than 24 months old on the date 
that the report is published; and 
(2) as appropriate, include a description with 
respect to each State of the quality and complete-
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ness of the data, as well as any necessary caveats 
describing the limitations of the data reported to the 
Secretary by the State that are sufficient to commu-
nicate the appropriate uses for the information. 
(d) PREPARATION
OF REPORT.—Each report re-
quired under subsection (a) shall be prepared by the Ad-
ministrator for the Centers for Medicare & Medicaid Serv-
ices. 
(e) APPROPRIATION.—For fiscal year 2022 and each 
fiscal year thereafter, there is appropriated to the Sec-
retary $2,000,000 to carry out this section. 
SEC. 206. RISK-SHARING VALUE-BASED PAYMENT AGREE-
MENTS FOR COVERED OUTPATIENT DRUGS 
UNDER MEDICAID. 
(a) IN GENERAL.—Section 1927 of the Social Secu-
rity Act (42 U.S.C. 1396r–8) is amended by adding at 
the end the following new subsection: 
‘‘(l) STATE OPTION TO PAY FOR COVERED OUT-
PATIENT DRUGS THROUGH RISK-SHARING VALUE-BASED 
AGREEMENTS.— 
‘‘(1) IN
GENERAL.—Beginning January 1, 
2022, a State shall have the option to pay (whether 
on a fee-for-service or managed care basis) for cov-
ered outpatient drugs that are potentially curative 
treatments intended for one-time use that are ad-
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ministered to individuals under this title by entering 
into a risk-sharing value-based payment agreement 
with the manufacturer of the drug in accordance 
with the requirements of this subsection. 
‘‘(2) SECRETARIAL APPROVAL.— 
‘‘(A) IN GENERAL.—A State shall submit a 
request to the Secretary to enter into a risk- 
sharing value based payment agreement, and 
the Secretary shall not approve a proposed risk- 
sharing value-based payment agreement be-
tween a State and a manufacturer for payment 
for a covered outpatient drug of the manufac-
turer unless the following requirements are met: 
‘‘(i) MANUFACTURER IS PARTY TO RE-
BATE
AGREEMENT
AND
IN
COMPLIANCE 
WITH REQUIREMENTS.—The manufacturer 
has a rebate agreement in effect as re-
quired under subsections (a) and (b) of 
this section and is in compliance with all 
applicable requirements under this title. 
‘‘(ii) NO
INCREASE
TO
PROJECTED 
NET FEDERAL SPENDING.— 
‘‘(I) IN
GENERAL.—The Chief 
Actuary certifies that the projected 
payments for each covered outpatient 
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drug under such proposed agreement 
would not result in greater estimated 
Federal spending under this title than 
the net Federal spending that would 
result in the absence of the agree-
ment. 
‘‘(II) NET
FEDERAL
SPENDING 
DEFINED.—For purposes of this sub-
section, the term ‘net Federal spend-
ing’ means the amount of Federal 
payments the Chief Actuary estimates 
would be made under this title for ad-
ministering a covered outpatient drug 
to an individual eligible for medical 
assistance under a State plan or a 
waiver of such plan, reduced by the 
amount of all rebates the Chief Actu-
ary estimates would be paid with re-
spect to the administering of such 
drug, including all rebates under this 
title and any supplemental or other 
additional rebates, in the absence of 
such an agreement. 
‘‘(III) INFORMATION.—The Chief 
Actuary shall make the certifications 
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required under this clause based on 
the most recently available and reli-
able drug pricing and product infor-
mation. The State and manufacturer 
shall provide the Secretary and the 
Chief Actuary with all necessary infor-
mation required to make the estimates 
needed for such certifications. 
‘‘(iii) LAUNCH AND LIST PRICE JUS-
TIFICATIONS.—The manufacturer submits 
all relevant information and supporting 
documentation necessary for pricing deci-
sions as deemed appropriate by the Sec-
retary, which shall be truthful and non- 
misleading, including manufacturer infor-
mation and supporting documentation for 
launch price or list price increases, and 
any applicable justification required under 
section 1128L. 
‘‘(iv) CONFIDENTIALITY OF INFORMA-
TION; PENALTIES.—The provisions of sub-
paragraphs (C) and (D) of subsection 
(b)(3) shall apply to a manufacturer that 
fails to submit the information and docu-
mentation required under clauses (ii) and 
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(iii) on a timely basis, or that knowingly 
provides false or misleading information, in 
the same manner as such provisions apply 
to a manufacturer with a rebate agreement 
under this section. 
‘‘(B) CONSIDERATION OF STATE REQUEST 
FOR APPROVAL.— 
‘‘(i) IN
GENERAL.—The Secretary 
shall treat a State request for approval of 
a risk-sharing value-based payment agree-
ment in the same manner that the Sec-
retary treats a State plan amendment, and 
subpart B of part 430 of title 42, Code of 
Federal Regulations, including, subject to 
clause (ii), the timing requirements of sec-
tion 430.16 of such title (as in effect on 
the date of enactment of this subsection), 
shall apply to a request for approval of a 
risk-sharing value-based payment agree-
ment in the same manner as such subpart 
applies to a State plan amendment. 
‘‘(ii) TIMING.—The Secretary shall 
consult with the Commissioner of Food 
and Drugs as required under subpara-
graph (C) and make a determination on 
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whether to approve a request from a State 
for approval of a proposed risk-sharing 
value-based payment agreement (or request 
additional information necessary to allow 
the Secretary to make a determination 
with respect to such request for approval) 
within the time period, to the extent prac-
ticable, specified in section 430.16 of title 
42, Code of Federal Regulations (as in ef-
fect on the date of enactment of this sub-
section), but in no case shall the Secretary 
take more than 180 days after the receipt 
of such request for approval or response to 
such request for additional information to 
make such a determination (or request ad-
ditional information). 
‘‘(C) CONSULTATION WITH THE COMMIS-
SIONER OF FOOD AND DRUGS.—In considering 
whether to approve a risk-sharing value-based 
payment agreement, the Secretary, to the ex-
tent necessary, shall consult with the Commis-
sioner of Food and Drugs to determine whether 
the relevant clinical parameters specified in 
such agreement are appropriate. 
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‘‘(3) INSTALLMENT-BASED
PAYMENT
STRUC-
TURE.— 
‘‘(A) IN GENERAL.—A risk-sharing value- 
based payment agreement shall provide for a 
payment structure under which, for every in-
stallment year of the agreement (subject to sub-
paragraph (B)), the State shall pay the total in-
stallment year amount in equal installments to 
be paid at regular intervals over a period of 
time that shall be specified in the agreement. 
‘‘(B) REQUIREMENTS
FOR
INSTALLMENT 
PAYMENTS.— 
‘‘(i) TIMING
OF
FIRST
PAYMENT.— 
The State shall make the first of the in-
stallment payments described in subpara-
graph (A) for an installment year not later 
than 30 days after the end of such year. 
‘‘(ii) LENGTH OF INSTALLMENT PE-
RIOD.—The period of time over which the 
State shall make the installment payments 
described in subparagraph (A) for an in-
stallment year shall not be longer than 5 
years. 
‘‘(iii) NONPAYMENT
OR
REDUCED 
PAYMENT OF INSTALLMENTS FOLLOWING 
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A
FAILURE
TO
MEET
CLINICAL
PARAM-
ETER.—If, prior to the payment date (as 
specified in the agreement) of any install-
ment payment described in subparagraph 
(A) or any other alternative date or time 
frame (as otherwise specified in the agree-
ment), the covered outpatient drug which 
is subject to the agreement fails to meet a 
relevant clinical parameter of the agree-
ment, the agreement shall provide that— 
‘‘(I) the installment payment 
shall not be made; or 
‘‘(II) the installment payment 
shall be reduced by a percentage spec-
ified in the agreement that is based 
on the outcome achieved by the drug 
relative to the relevant clinical param-
eter. 
‘‘(4) NOTICE OF INTENT.— 
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), a manufacturer of a covered out-
patient drug shall not be eligible to enter into 
a risk-sharing value-based payment agreement 
under this subsection with respect to such drug 
unless the manufacturer notifies the Secretary 
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128 
that the manufacturer is interested in entering 
into such an agreement with respect to such 
drug. The decision to submit and timing of a 
request to enter into a proposed risk-sharing 
value-based payment agreement shall remain 
solely within the discretion of the State and 
shall only be effective upon Secretarial approval 
as required under this subsection. 
‘‘(B) TREATMENT OF SUBSEQUENTLY AP-
PROVED DRUGS.— 
‘‘(i) IN GENERAL.—In the case of a 
manufacturer of a covered outpatient drug 
approved under section 505 of the Federal 
Food, Drug, and Cosmetic Act or licensed 
under section 351 of the Public Health 
Service Act after the date of enactment of 
this subsection, not more than 90 days 
after meeting with the Food and Drug Ad-
ministration following phase II clinical 
trials for such drug (or, in the case of a 
drug described in clause (ii), not later than 
March 31, 2022), the manufacturer must 
notify the Secretary of the manufacturer’s 
intent to enter into a risk-sharing value- 
based payment agreement under this sub-
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section with respect to such drug. If no 
such meeting has occurred, the Secretary 
may use discretion as to whether a poten-
tially curative treatment intended for one- 
time use may qualify for a risk-sharing 
value-based payment agreement under this 
section. A manufacturer notification of in-
terest shall not have any influence on a de-
cision for approval by the Food and Drug 
Administration. 
‘‘(ii) APPLICATION TO CERTAIN SUB-
SEQUENTLY
APPROVED
DRUGS.—A drug 
described in this clause is a covered out-
patient drug of a manufacturer— 
‘‘(I) that is approved under sec-
tion 505 of the Federal Food, Drug, 
and Cosmetic Act or licensed under 
section 351 of the Public Health Serv-
ice Act after the date of enactment of 
this subsection; and 
‘‘(II) with respect to which, as of 
January 1, 2022, more than 90 days 
have passed after the manufacturer’s 
meeting with the Food and Drug Ad-
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ministration following phase II clinical 
trials for such drug. 
‘‘(iii) 
PARALLEL
APPROVAL.—The 
Secretary, in coordination with the Admin-
istrator of the Centers for Medicare & 
Medicaid Services and the Commissioner of 
Food and Drugs, shall, to the extent prac-
ticable, approve a State’s request to enter 
into a proposed risk-sharing value-based 
payment agreement that otherwise meets 
the requirements of this subsection at the 
time that such a drug is approved by the 
Food and Drug Administration to help 
provide that no State that wishes to enter 
into such an agreement is required to pay 
for the drug in full at one time if the State 
is seeking to pay over a period of time as 
outlined in the proposed agreement. 
‘‘(iv) RULE
OF
CONSTRUCTION.— 
Nothing in this paragraph shall be applied 
or construed to modify or affect the time-
frames or factors involved in the Sec-
retary’s determination of whether to ap-
prove or license a drug under section 505 
of the Federal Food, Drug, and Cosmetic 
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Act or section 351 of the Public Health 
Service Act. 
‘‘(5) SPECIAL PAYMENT RULES.— 
‘‘(A) IN GENERAL.—Except as otherwise 
provided in this paragraph, with respect to an 
individual who is administered a unit of a cov-
ered outpatient drug that is purchased under a 
State plan by a State Medicaid agency under a 
risk-sharing value-based payment agreement in 
an installment year, the State shall remain lia-
ble to the manufacturer of such drug for pay-
ment for such unit without regard to whether 
the individual remains enrolled in the State 
plan under this title (or a waiver of such plan) 
for each installment year for which the State is 
to make installment payments for covered out-
patient drugs purchased under the agreement 
in such year. 
‘‘(B) DEATH.—In the case of an individual 
described in subparagraph (A) who dies during 
the period described in such subparagraph, the 
State plan shall not be liable for any remaining 
payment for the unit of the covered outpatient 
drug administered to the individual which is 
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owed under the agreement described in such 
subparagraph. 
‘‘(C) WITHDRAWAL OF APPROVAL.—In the 
case of a covered outpatient drug that is the 
subject of a risk-sharing value-based agreement 
between a State and a manufacturer under this 
subsection, including a drug approved in ac-
cordance with section 506(c) of the Federal 
Food, Drug, and Cosmetic Act, and such drug 
is the subject of an application that has been 
withdrawn by the Secretary, the State plan 
shall not be liable for any remaining payment 
that is owed under the agreement. 
‘‘(D) ALTERNATIVE ARRANGEMENT UNDER 
AGREEMENT.—Subject to approval by the Sec-
retary, the terms of a proposed risk-sharing 
value-based payment agreement submitted for 
approval by a State may provide that subpara-
graph (A) shall not apply. 
‘‘(E) GUIDANCE.—Not later than January 
1, 2022, the Secretary shall issue guidance to 
States establishing a process for States to no-
tify the Secretary when an individual who is ad-
ministered a unit of a covered outpatient drug 
that is purchased by a State plan under a risk- 
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sharing value-based payment agreement ceases 
to be enrolled under the State plan under this 
title (or a waiver of such plan) or dies before 
the end of the installment period applicable to 
such unit under the agreement. 
‘‘(6) TREATMENT OF PAYMENTS UNDER RISK- 
SHARING
VALUE-BASED
AGREEMENTS
FOR
PUR-
POSES OF AVERAGE MANUFACTURER PRICE; BEST 
PRICE.—The Secretary shall treat any payments 
made to the manufacturer of a covered outpatient 
drug under a risk-sharing value-based payment 
agreement under this subsection during a rebate pe-
riod in the same manner that the Secretary treats 
payments made under a State supplemental rebate 
agreement 
under 
sections 
447.504(c)(19) 
and 
447.505(c)(7) of title 42, Code of Federal Regula-
tions (or any successor regulations), for purposes of 
determining average manufacturer price and best 
price under this section with respect to the covered 
outpatient drug and a rebate period and for pur-
poses of offsets required under subsection (b)(1)(B). 
‘‘(7) ASSESSMENTS
AND
REPORT
TO
CON-
GRESS.— 
‘‘(A) ASSESSMENTS.— 
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‘‘(i) IN
GENERAL.—Not later than 
180 days after the end of each assessment 
period of any risk-sharing value-based pay-
ment agreement for a State approved 
under this subsection, the Secretary shall 
conduct an evaluation of such agreement 
which shall include an evaluation by the 
Chief Actuary to determine whether pro-
gram spending under the risk-sharing 
value-based payment agreement aligned 
with the projections for the agreement 
made under paragraph (2)(A)(ii), including 
an assessment of whether actual Federal 
spending under this title under the agree-
ment was less or more than net Federal 
spending would have been in the absence 
of the agreement. 
‘‘(ii) ASSESSMENT PERIOD.—For pur-
poses of clause (i)— 
‘‘(I) the first assessment period 
for a risk-sharing value-based pay-
ment agreement shall be the period of 
time over which payments are sched-
uled to be made under the agreement 
for the first 10 individuals who are 
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135 
administered covered outpatient drugs 
under the agreement except that such 
period shall not exceed the 5-year pe-
riod after the date on which the Sec-
retary approves the agreement; and 
‘‘(II) each subsequent assessment 
period for a risk-sharing value-based 
payment agreement shall be the 5- 
year period following the end of the 
previous assessment period. 
‘‘(B) RESULTS OF ASSESSMENTS.— 
‘‘(i) TERMINATION
OPTION.—If the 
Secretary determines as a result of the as-
sessment by the Chief Actuary under sub-
paragraph (A) that the actual Federal 
spending under this title for any covered 
outpatient drug that was the subject of the 
State’s risk-sharing value-based payment 
agreement was greater than the net Fed-
eral spending that would have resulted in 
the absence of the agreement, the Sec-
retary may terminate approval of such 
agreement and shall immediately conduct 
an assessment under this paragraph of any 
other ongoing risk-sharing value-based 
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payment agreement to which the same 
manufacturer is a party. 
‘‘(ii) REPAYMENT REQUIRED.— 
‘‘(I) IN
GENERAL.—If the Sec-
retary determines as a result of the 
assessment by the Chief Actuary 
under subparagraph (A) that the Fed-
eral spending under the risk-sharing 
value-based agreement for a covered 
outpatient drug that was subject to 
such agreement was greater than the 
net Federal spending that would have 
resulted in the absence of the agree-
ment, the manufacturer shall repay 
the difference to the State and Fed-
eral governments in a timely manner 
as determined by the Secretary. 
‘‘(II) TERMINATION
FOR
FAIL-
URE TO PAY.—The failure of a manu-
facturer to make repayments required 
under subclause (I) in a timely man-
ner shall result in immediate termi-
nation of all risk-sharing value-based 
agreements to which the manufacturer 
is a party. 
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137 
‘‘(III) 
ADDITIONAL
PEN-
ALTIES.—In the case of a manufac-
turer that fails to make repayments 
required under subclause (I), the Sec-
retary may treat such manufacturer 
in the same manner as a manufac-
turer that fails to pay required re-
bates under this section, and the Sec-
retary may— 
‘‘(aa) suspend or terminate 
the manufacturer’s rebate agree-
ment under this section; and 
‘‘(bb) pursue any other rem-
edy that would be available if the 
manufacturer had failed to pay 
required rebates under this sec-
tion. 
‘‘(C) REPORT
TO
CONGRESS.—Not later 
than 5 years after the first risk-sharing value- 
based payment agreement is approved under 
this subsection, the Secretary shall submit to 
Congress and make available to the public a re-
port that includes— 
‘‘(i) an assessment of the impact of 
risk-sharing value-based payment agree-
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138 
ments on access for individuals who are eli-
gible for benefits under a State plan or 
waiver under this title to medically nec-
essary covered outpatient drugs and re-
lated treatments; 
‘‘(ii) an analysis of the impact of such 
agreements on overall State and Federal 
spending under this title; 
‘‘(iii) an assessment of the impact of 
such agreements on drug prices, including 
launch price and price increases; and 
‘‘(iv) such recommendations to Con-
gress as the Secretary deems appropriate. 
‘‘(8) GUIDANCE AND REGULATIONS.— 
‘‘(A) IN GENERAL.—Not later than Janu-
ary 1, 2022, the Secretary shall issue guidance 
to States seeking to enter into risk-sharing 
value-based payment agreements under this 
subsection that includes a model template for 
such agreements. The Secretary may issue any 
additional guidance or promulgate regulations 
as necessary to implement and enforce the pro-
visions of this subsection. 
‘‘(B) MODEL AGREEMENTS.— 
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‘‘(i) IN
GENERAL.—If a State ex-
presses an interest in pursuing a risk-shar-
ing value-based payment agreement under 
this subsection with a manufacturer for 
the purchase of a covered outpatient drug, 
the Secretary may share with such State 
any risk-sharing value-based agreement be-
tween a State and the manufacturer for 
the purchase of such drug that has been 
approved under this subsection. While such 
shared agreement may serve as a template 
for a State that wishes to propose, the use 
of a previously approved agreement shall 
not affect the submission and approval 
process for approval of a proposed risk- 
sharing value-based payment agreement 
under this subsection, including the re-
quirements under paragraph (2)(A). 
‘‘(ii) CONFIDENTIALITY.—In the case 
of a risk-sharing value-based payment 
agreement that is disclosed to a State by 
the Secretary under this subparagraph and 
that is only in effect with respect to a sin-
gle State, the confidentiality of information 
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provisions 
described 
in 
subsection 
(b)(3)(D) shall apply to such information. 
‘‘(C) OIG CONSULTATION.— 
‘‘(i) IN
GENERAL.—The Secretary 
shall consult with the Office of the Inspec-
tor General of the Department of Health 
and Human Services to determine whether 
there are potential program integrity con-
cerns with agreement approvals or tem-
plates and address accordingly. 
‘‘(ii) OIG POLICY UPDATES AS NEC-
ESSARY.—The Inspector General of the 
Department of Health and Human Serv-
ices shall review and update, as necessary, 
any policies or guidelines of the Office of 
the Inspector General of the Department 
of Human Services (including policies re-
lated to the enforcement of section 1128B) 
to accommodate the use of risk-sharing 
value-based payment agreements in accord-
ance with this section. 
‘‘(9) RULES OF CONSTRUCTION.— 
‘‘(A) MODIFICATIONS.—Nothing in this 
subsection or any regulations promulgated 
under this subsection shall prohibit a State 
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141 
from requesting a modification from the Sec-
retary to the terms of a risk-sharing value- 
based payment agreement. A modification that 
is expected to result in any increase to pro-
jected net State or Federal spending under the 
agreement shall be subject to recertification by 
the Chief Actuary as described in paragraph 
(2)(A)(ii) before the modification may be ap-
proved. 
‘‘(B) REBATE AGREEMENTS.—Nothing in 
this subsection shall be construed as requiring 
a State to enter into a risk-sharing value-based 
payment agreement or as limiting or super-
seding the ability of a State to enter into a sup-
plemental rebate agreement for a covered out-
patient drug. 
‘‘(C) FFP FOR PAYMENTS UNDER RISK- 
SHARING
VALUE-BASED
PAYMENT
AGREE-
MENTS.—Federal financial participation shall 
be available under this title for any payment 
made by a State to a manufacturer for a cov-
ered outpatient drug under a risk-sharing 
value-based payment agreement in accordance 
with this subsection, except that no Federal fi-
nancial participation shall be available for any 
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payment made by a State to a manufacturer 
under such an agreement on and after the ef-
fective date of a disapproval of such agreement 
by the Secretary. 
‘‘(D) CONTINUED APPLICATION OF OTHER 
PROVISIONS.—Except as expressly provided in 
this subsection, nothing in this subsection or in 
any regulations promulgated under this sub-
section shall affect the application of any other 
provision of this Act. 
‘‘(10) APPROPRIATIONS.—For fiscal year 2022 
and each fiscal year thereafter, there are appro-
priated to the Secretary $5,000,000 for the purpose 
of carrying out this subsection. 
‘‘(11) DEFINITIONS.—In this subsection: 
‘‘(A) CHIEF ACTUARY.—The term ‘Chief 
Actuary’ means the Chief Actuary of the Cen-
ters for Medicare & Medicaid Services. 
‘‘(B) INSTALLMENT YEAR.—The term ‘in-
stallment year’ means, with respect to a risk- 
sharing value-based payment agreement, a 12- 
month period during which a covered outpatient 
drug is administered under the agreement. 
‘‘(C) POTENTIALLY CURATIVE TREATMENT 
INTENDED FOR ONE-TIME USE.—The term ‘po-
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tentially curative treatment intended for one- 
time use’ means a treatment that consists of 
the administration of a covered outpatient drug 
that— 
‘‘(i) is a form of gene therapy for a 
rare disease, as defined by the Commis-
sioner of Food and Drugs, designated 
under section 526 of the Federal Food, 
Drug, and Cosmetics Act, and approved 
under section 505 of such Act or licensed 
under subsection (a) or (k) of section 351 
of the Public Health Service Act to treat 
a serious or life-threatening disease or con-
dition; 
‘‘(ii) if administered in accordance 
with the labeling of such drug, is expected 
to result in either— 
‘‘(I) the cure of such disease or 
condition; or 
‘‘(II) a reduction in the symp-
toms of such disease or condition to 
the extent that such disease or condi-
tion is not expected to lead to early 
mortality; and 
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144 
‘‘(iii) is expected to achieve a result 
described in clause (ii), which may be 
achieved over an extended period of time, 
after not more than 3 administrations. 
‘‘(D) RELEVANT CLINICAL PARAMETER.— 
The term ‘relevant clinical parameter’ means, 
with respect to a covered outpatient drug that 
is the subject of a risk-sharing value-based pay-
ment agreement— 
‘‘(i) a clinical endpoint specified in the 
drug’s labeling or supported by one or 
more of the compendia described in section 
1861(t)(2)(B)(ii)(I) that— 
‘‘(I) is able to be measured or 
evaluated on an annual basis for each 
year of the agreement on an inde-
pendent basis by a provider or other 
entity; and 
‘‘(II) is required to be achieved 
(based on observed metrics in patient 
populations) under the terms of the 
agreement; or 
‘‘(ii) a surrogate endpoint (as defined 
in section 507(e)(9) of the Federal Food, 
Drug, and Cosmetic Act), including those 
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developed by patient-focused drug develop-
ment tools, that— 
‘‘(I) is able to be measured or 
evaluated on an annual basis for each 
year of the agreement on an inde-
pendent basis by a provider or other 
entity; and 
‘‘(II) has been qualified by the 
Food and Drug Administration. 
‘‘(E) RISK-SHARING
VALUE-BASED
PAY-
MENT
AGREEMENT.—The term ‘risk-sharing 
value-based payment agreement’ means an 
agreement between a State plan and a manu-
facturer— 
‘‘(i) for the purchase of a covered out-
patient drug of the manufacturer that is a 
potentially curative treatment intended for 
one-time use; 
‘‘(ii) under which payment for such 
drug shall be made pursuant to an install-
ment-based payment structure that meets 
the requirements of paragraph (3); 
‘‘(iii) which conditions payment on the 
achievement of at least 2 relevant clinical 
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parameters (as defined in subparagraph 
(C)); 
‘‘(iv) which provides that— 
‘‘(I) the State plan will directly 
reimburse the manufacturer for the 
drug; or 
‘‘(II) a third party will reimburse 
the manufacture in a manner ap-
proved by the Secretary; and 
‘‘(v) is approved by the Secretary in 
accordance with paragraph (2). 
‘‘(F) 
TOTAL
INSTALLMENT
YEAR 
AMOUNT.—The term ‘total installment year 
amount’ means, with respect to a risk-sharing 
value-based payment agreement for the pur-
chase of a covered outpatient drug and an in-
stallment year, an amount equal to the product 
of— 
‘‘(i) the unit price of the drug charged 
under the agreement; and 
‘‘(ii) the number of units of such drug 
administered under the agreement during 
such installment year.’’. 
(b) CONFORMING AMENDMENTS.— 
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(1) Section 1903(i)(10)(A) of the Social Secu-
rity Act (42 U.S.C. 1396b(i)(10)(A)) is amended by 
striking ‘‘or unless section 1927(a)(3) applies’’ and 
inserting ‘‘, section 1927(a)(3) applies with respect 
to such drugs, or such drugs are the subject of a 
risk-sharing value-based payment agreement under 
section 1927(l)’’. 
(2) Section 1927(b) of the Social Security Act 
(42 U.S.C. 1396r–8(b)) is amended— 
(A) in paragraph (1)(A), by inserting ‘‘(ex-
cept for drugs for which payment is made by a 
State under a risk-sharing value-based payment 
agreement under subsection (l))’’ after ‘‘under 
the State plan for such period’’; and 
(B) in paragraph (3)— 
(i) in subparagraph (C)(i), by insert-
ing ‘‘or subsection (l)(2)(A)’’ after ‘‘sub-
paragraph (A)’’; and 
(ii) in subparagraph (D), in the mat-
ter preceding clause (i), by inserting ‘‘, 
under subsection (l)(2)(A),’’ after ‘‘under 
this paragraph’’. 
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SEC. 207. APPLYING MEDICAID DRUG REBATE REQUIRE-
MENT TO DRUGS PROVIDED AS PART OF OUT-
PATIENT HOSPITAL SERVICES. 
(a) IN GENERAL.—Section 1927(k)(3) of the Social 
Security Act (42 U.S.C. 1396r–8(k)(3)) is amended to 
read as follows: 
‘‘(3) LIMITING DEFINITION.— 
‘‘(A) IN
GENERAL.—The term ‘covered 
outpatient drug’ does not include any drug, bio-
logical product, or insulin provided as part of, 
or as incident to and in the same setting as, 
any of the following (and for which payment 
may be made under this title as part of pay-
ment for the following and not as direct reim-
bursement for the drug): 
‘‘(i) Inpatient hospital services. 
‘‘(ii) Hospice services. 
‘‘(iii) Dental services, except that 
drugs for which the State plan authorizes 
direct reimbursement to the dispensing 
dentist are covered outpatient drugs. 
‘‘(iv) Physicians’ services. 
‘‘(v) Outpatient hospital services. 
‘‘(vi) Nursing facility services and 
services provided by an intermediate care 
facility for the mentally retarded. 
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