Title: SERV Communities Act
Policy area: Health

Summary:
Stretching Entity Resources for Vulnerable Communities Act or the SERV Communities Act
This bill makes a series of changes to the 340B drug pricing program (i.e., a program that allows entities to receive covered outpatient drugs at reduced prices from manufacturers), including alterations relating to program integrity, discrimination against participating entities, and program eligibility.

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6071 Introduced in House (IH)]

<DOC>






115th CONGRESS
  2d Session
                                H. R. 6071

  To amend the Public Health Service Act to clarify the intent of the 
 340B program and provide for enhanced 340B program integrity, and for 
                            other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             June 12, 2018

  Ms. Matsui introduced the following bill; which was referred to the 
 Committee on Energy and Commerce, and in addition to the Committee on 
   Ways and Means, for a period to be subsequently determined by the 
  Speaker, in each case for consideration of such provisions as fall 
           within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
  To amend the Public Health Service Act to clarify the intent of the 
 340B program and provide for enhanced 340B program integrity, and for 
                            other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Stretching Entity Resources for 
Vulnerable Communities Act'' or the ``SERV Communities Act''.

SEC. 2. SENSE OF CONGRESS RELATED TO PURPOSE OF THE 340B PROGRAM.

    It is the sense of Congress that--
            (1) the program under section 340B of the Public Health 
        Service Act (42 U.S.C. 256b) (in this section referred to as 
        the ``340B program'') enables covered entities to stretch 
        scarce resources as far as possible, reaching more patients and 
        providing more comprehensive services than without such 
        program;
            (2) the 340B program provides health care settings that 
        serve a disproportionate share of underserved patient 
        populations (referred to as covered entities) a discount from 
        drug manufacturers on the covered outpatient drugs they 
        purchase to meet health care needs of the community;
            (3) covered entities that qualify for participation under 
        the 340B program meet rigorous eligibility criteria, proving 
        they are safety net health care providers for many underserved 
        patients;
            (4) such discounts are provided to such covered entities on 
        the basis of meeting eligibility criteria under the 340B 
        program, and not directly to individual patients;
            (5) the 340B Program enables covered entities to provide 
        comprehensive services to the communities they serve, which may 
        include providing free or discounted drugs to vulnerable 
        populations, but providing free or discounted drugs to patients 
        is not the sole purpose of the program;
            (6) the 340B Program is designed to help covered entities 
        promote health for underserved communities and patients, 
        regardless of a particular patient's insurance status or 
        inability to pay;
            (7) savings from the 340B program are used by covered 
        entities to reach more patients and provide more comprehensive 
        services, and covered entities are in the best position to 
        assess the use of their savings for community needs; and
            (8) drugs purchased under the 340B program account for a 
        small proportion of overall drug spending and the discounts 
        described in paragraph (2) provided through the 340B program 
        are not funded by taxpayers.

SEC. 3. CODIFYING DEFINITION OF PATIENT UNDER 340B PROGRAM.

    Section 340B(b) of the Public Health Service Act (42 U.S.C. 256b) 
is amended by adding at the end the following new paragraph:
            ``(3) Patient.--
                    ``(A) In general.--For purposes of carrying out 
                this section, the term `patient' shall have the 
                definition given to such term on pages 55156 through 
                55158 of title 61 of the Federal Register published on 
                October 24, 1996.
                    ``(B) Clarification.--For purposes of this section, 
                the Secretary shall not implement the definition under 
                subparagraph (A) more narrowly than the definition 
                specified in subparagraph (A), including by limiting 
                the application of the definition to particular 
                individuals based on their insurance status.''.

SEC. 4. NON-DISCRIMINATION WITH RESPECT TO COVERED ENTITIES.

    Section 340B of the Public Health Service Act (42 U.S.C. 256b) is 
amended by adding at the end the following new subsection:
    ``(f) Non-Discrimination With Respect to Covered Entities.--
            ``(1) Terms of agreement.--Subject to paragraph (3), no 
        entity that reimburses a covered entity or its contract 
        pharmacy for drugs that are subject to an agreement under this 
        section may discriminate against such covered entity with 
        respect to the terms of such reimbursement, including terms 
        relating to the level and amount of reimbursement, on the basis 
        that the covered entity participates in the program under this 
        section.
            ``(2) Patient's choice.--With respect to a patient eligible 
        to receive drugs that are subject to an agreement under this 
        section from a covered entity or its contract pharmacy, no 
        entity that makes payment for such drugs shall discriminate 
        against the covered entity or its contract pharmacy in a manner 
        that prevents or interferes with the patient's choice to 
        receive such drugs from the covered entity or contract 
        pharmacy.
            ``(3) Exception.--Paragraph (1) shall not apply to States 
        with respect to retail drugs that are reimbursed by the State 
        on a fee-for-service basis pursuant to a State plan approved 
        under title XIX of the Social Security Act.''.

SEC. 5. PROGRAM INTEGRITY.

    (a) Findings.--Congress finds the following:
            (1) In response to findings by the Office of the Inspector 
        General of the Department of Health and Human Services that 
        nearly 100 percent of covered entities were overcharged by 
        manufacturers for at least one of the drugs reviewed, Congress 
        directed the Secretary of Health and Human Services in 2010 to 
        publish the ceiling prices under section 340B of the Public 
        Health Service Act (42 U.S.C. 256b) (in this section referred 
        to as the ``340B ceiling price'') via Internet website so that 
        covered entities could verify they were being charged the 
        correct price, however this website has not yet been 
        established, leaving covered entities vulnerable to continuing 
        manufacturer overcharges.
            (2) In response to findings by the Office of the Inspector 
        General of the Department of Health and Human Services of 
        widespread overcharges by manufacturers and a lack of oversight 
        and authority by the Secretary of Health and Human Services to 
        ensure that covered entities paid no more than the 340B ceiling 
        price, Congress directed the Secretary to develop standards for 
        calculating 340B ceiling prices and civil monetary penalties to 
        apply to manufacturers that violate these rules, however those 
        standards and penalties have not yet been developed, 
        significantly limiting the Secretary's ability to oversee 
        manufacturer compliance with such section 340B of the Public 
        Health Service Act (42 U.S.C. 256b).
            (3) There is no public transparency on drug manufacturers' 
        average manufacturer price, best price in the marketplace, or 
        how much the average manufacturer price of a drug has increased 
        relative to the rate of inflation.
            (4) Information on the average manufacturer price and best 
        price are reported to the Centers for Medicare & Medicaid 
        Services, but rarely does the Federal Government audit the raw 
        data underlying those calculations.
            (5) Such data is not submitted and reviewed by the Health 
        Resources and Services Administration as part of a 340B program 
        audit.
            (6) Furthermore, the Office of Pharmacy Affairs has 
        conducted only 11 total audits of manufacturers.
    (b) Parity in Audits Between Manufacturer and Hospital Audits.--
Section 340B(d)(1)(B)(v) of the Public Health Service Act (42 U.S.C. 
256b(d)(1)(B)(v)) is amended to read as follows:
                            ``(v) Selective auditing of manufacturers 
                        and wholesalers to ensure the integrity of the 
                        drug discount program under this section, 
                        consistent with the following:
                                    ``(I) Such audits shall be 
                                conducted in a form and manner that, to 
                                the greatest extent practicable, 
                                results in parity between such audits 
                                and audits under subsection (a)(5)(C) 
                                of covered entities, as measured by 
                                comparing the percentage of total 
                                manufacturer audits under this clause 
                                to the percentage of total audits 
                                conducted under such subsection of 
                                covered entities described in 
                                subsection (a)(4)(L).
                                    ``(II) Such audits shall include 
                                review of average manufacturer price, 
                                best price, and the inflationary 
                                penalty to ensure that manufacturers 
                                are calculating the ceiling price 
                                accurately.''.
    (c) Deadline for Internet Website With Applicable Ceiling Prices 
for Covered Outpatient Drugs.--Section 340B(d)(1)(B)(iii) of the Public 
Health Service Act (42 U.S.C. 256b(d)(1)(B)(iii)) is amended by 
striking ``The provision'' and inserting ``Not later than 90 days after 
the date of the enactment of the Stretching Entity Resources for 
Vulnerable Community Act, the provision''.
    (d) Civil Monetary Penalty.--
            (1) In general.--Clause (vi)(II) of section 340B(d)(1)(B) 
        of the Public Health Service Act (42 U.S.C. 256b(d)(1)(B)) is 
        amended to read as follows:
                                    ``(II) shall not exceed, for each 
                                instance of overcharging a covered 
                                entity that may have occurred, the 
                                greater of--
                                            ``(aa) $5,000; or
                                            ``(bb) 200 percent of the 
                                        amount of such overcharge; 
                                        and''.
            (2) Clarifications.--Section 340B(d)(1) of the Public 
        Health Service Act (42 U.S.C. 256b(d)(1)) is amended by adding 
        at the end the following new subparagraph:
                    ``(C) Clarifications.--For purposes of subparagraph 
                (B)(vi)--
                            ``(i) an instance of overcharging described 
                        in subclause (II) of such subparagraph shall--
                                    ``(I) apply to each unit of a 
                                national drug code within an order, 
                                whether placed directly with a 
                                manufacturer or through a wholesaler, 
                                authorized distributor, or agent, and 
                                may not be offset by other discounts 
                                provided on any other National Drug 
                                Code or discounts provided on the same 
                                National Drug Code on other 
                                transactions, orders or purchases; and
                                    ``(II) include a manufacturer's 
                                failure, such as through a limited 
                                distribution network, to offer a 
                                covered outpatient drug to a covered 
                                entity at the 340B ceiling price to the 
                                same extent the manufacturer makes the 
                                drug available to non-340B providers, 
                                unless such action is taken to narrowly 
                                address an actual or imminent shortage 
                                and has been approved in advance by the 
                                Secretary pursuant to standards issued 
                                through an appropriate policy or 
                                regulatory issuance; and
                            ``(ii) in applying subclause (III) of such 
                        subparagraph--
                                    ``(I) the term `knowingly' shall 
                                have the meaning given the term `should 
                                know' in section 1003.101 of title 42 
                                of the Code of Federal Regulations (or 
                                any successor regulation); and
                                    ``(II) the term `intentionally' 
                                means, with respect to an overcharge, 
                                that such overcharge is not due to 
                                inadvertent error.''.
            (3) Non-application of 340b ceiling price and cmp 
        regulation.--The Secretary of Health and Human Services shall 
        not take any action to implement, administer, or enforce the 
        provision of the final regulation titled ``340B Drug Pricing 
        Program Ceiling Price and Manufacturer Civil Monetary Penalties 
        Regulation'' published on June 5, 2018 (83 Fed. Reg. 25943 et 
        seq.), that changes the effective date of the 340B Drug Pricing 
        Program Ceiling Price and Manufacturer Civil Monetary Penalties 
        Regulation from July 1, 2018 to July 1, 2019. The effective 
        date shall be determined as if such final regulation published 
        on June 5, 2018, did not apply.
            (4) Implementation.--The Secretary of Health and Human 
        Services shall implement the amendments made by paragraphs (1) 
        and (2) by program instruction or otherwise such that such 
        amendment applies to instances of overcharges occurring on or 
        after the date that is 60 days after the date of the enactment 
        of this Act.
            (5) GAO report.--Not later than one year after the date of 
        the enactment of this Act, the Comptroller General of the 
        United States shall submit to Congress a report evaluating the 
        extent to which the Secretary of Health and Human Services is 
        carrying out the provisions of clause (vi) of section 
        340B(d)(1)(B) of the Public Health Service Act (42 U.S.C. 
        256b(d)(1)(B)), as amended by this subsection.
    (e) Manufacturer Transparency.--Section 340B(d)(1)(B) of the Public 
Health Service Act (42 U.S.C. 256b(d)(1)(B)) is amended by adding at 
the end the following new clauses:
                            ``(vii) The requirement that the applicable 
                        ceiling price described in clause (iii) for a 
                        covered outpatient drug, with respect to a 
                        calendar quarter, shall be equal to the average 
                        manufacturer price under section 1927(k)(1) of 
                        the Social Security Act from the preceding 
                        calendar quarter for the smallest unit of 
                        measure minus the unit rebate amount and will 
                        be calculated using six decimal places and will 
                        be published by the Secretary rounded to two 
                        decimal places, in accordance with the 
                        following:
                                    ``(I) In the case that the ceiling 
                                price calculation results in an amount 
                                less than $0.01, the ceiling price will 
                                be $0.01.
                                    ``(II) For a new covered outpatient 
                                drug--
                                            ``(aa) manufacturers shall 
                                        estimate the ceiling price as 
                                        of the date the new drug is 
                                        first available for sale;
                                            ``(bb) the estimation shall 
                                        be calculated as wholesale 
                                        acquisition cost minus the 
                                        appropriate rebate percentage 
                                        until an average manufacturer 
                                        price is available, which shall 
                                        occur no later than the 4th 
                                        quarter that the drug is 
                                        available for sale; and
                                            ``(cc) manufacturers shall 
                                        calculate the actual ceiling 
                                        price and shall offer to refund 
                                        or credit the covered entity 
                                        the difference between the 
                                        estimated ceiling price and the 
                                        actual ceiling price within 120 
                                        days of the determination by 
                                        the manufacturer involved that 
                                        an overcharge occurred.
                            ``(viii) The prohibition against 
                        discriminatory distribution of drugs, 
                        consistent with the following:
                                    ``(I) A manufacturer shall make 
                                available each covered outpatient drug 
                                to covered entities on the same terms 
                                and conditions that the covered 
                                outpatient drug is offered to 
                                purchasers that are not covered 
                                entities except that the manufacturer 
                                will charge the covered entity for the 
                                covered outpatient drug at or below the 
                                ceiling price.
                                    ``(II) If the Secretary finds, 
                                after audit as described in 
                                subparagraph (B)(v) and after notice 
                                and hearing, that a manufacturer is in 
                                violation of the requirement described 
                                in subclause (I), the manufacturer 
                                shall be liable to the covered entity 
                                that was not able to purchase the 
                                covered outpatient drug involved at a 
                                discounted price in an amount equal to 
                                the reduction in the price of the drug 
                                provided under the agreement between 
                                the entity and the manufacturer under 
                                this section.''.

SEC. 6. INCLUDING PROGRAMS FUNDED UNDER THE COMMUNITY MENTAL HEALTH 
              SERVICES BLOCK GRANT OR THE SUBSTANCE ABUSE PREVENTION 
              AND TREATMENT BLOCK GRANT AS COVERED ENTITIES.

    (a) In General.--Section 340B(a)(4) of the Public Health Service 
Act (42 U.S.C. 256b(a)(4)) is amended by adding at the end the 
following new subparagraph:
                    ``(P) A program carried out through funds received 
                under a grant under the Community Mental Health 
                Services Block Grant or the Substance Abuse Prevention 
                and Treatment Block Grant under part B of title XIX.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply beginning on the date of the enactment of this Act.

SEC. 7. PREVENTING MEDICARE HOSPITAL OUTPATIENT PAYMENT CUTS FOR 
              HOSPITALS THAT PURCHASE DRUGS UNDER 340B PROGRAM.

    (a) In General.--The Secretary of Health and Human Services shall 
not take any action to implement, administer, or enforce the provision 
of the final regulation titled the Medicare Program: Hospital 
Outpatient Prospective Payment and Ambulatory Surgical Center Payment 
Systems and Quality Reporting Programs published on November 13, 2017 
(82 Fed. Reg. 52356 et seq.), that changes the payment amount under the 
Prospective Payment System for Hospital Outpatient Department Services 
under section 1833(t) of the Social Security Act (42 U.S.C. 1395l(t)) 
for separately payable, nonpass-through drugs and biologicals purchased 
under the 340B drug pricing program under section 340B of the Public 
Health Service Act (42 U.S.C. 256b). The payment amount under such 
payment system under such section 1833(t) for such a drug or biological 
provided on or after January 1, 2018, shall be determined (or in the 
case of claims already processed, redetermined) through the same 
methodology as if such final regulation did not apply.
    (b) OPPS Budget Neutrality Adjustment.--The first sentence of 
section 1833(t)(9)(B) of the Social Security Act (42 U.S.C. 
1395l(t)(9)(B)) is amended by striking ``part'' each place such term 
appears and inserting ``subsection'' each such place.
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