Title: 340B Protection and Accountability Act of 2019
Policy area: Health

Summary:
340B Protection and Accountability Act of 2019  This bill makes various changes to the 340B prescription drug pricing program, including requiring certain participants to pay annual user fees and requiring certain participants to establish sliding scales for the amounts they charge low-income individuals for outpatient drugs.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1559 Introduced in House (IH)]

<DOC>






116th CONGRESS
  1st Session
                                H. R. 1559

To amend the Public Health Service Act to strengthen program integrity 
   and enhance low-income patient benefits for safety net providers.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 6, 2019

   Mr. Collins of New York introduced the following bill; which was 
            referred to the Committee on Energy and Commerce

_______________________________________________________________________

                                 A BILL


 
To amend the Public Health Service Act to strengthen program integrity 
   and enhance low-income patient benefits for safety net providers.

    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 ``340B Protection and Accountability 
Act of 2019''.

SEC. 2. STRENGTHENING 340B PROGRAM INTEGRITY AND ENHANCING LOW-INCOME 
              PATIENT BENEFITS FOR SAFETY NET PROVIDERS.

    (a) Definition of Patient.--Section 340B(b) of the Public Health 
Service Act (42 U.S.C. 256b(b)) is amended by adding at the end the 
following new paragraph:
            ``(3) Patient.--
                    ``(A) In general.--In this section, the term 
                `patient' means, with respect to a covered entity 
                described in subparagraph (L) or (M) of subsection 
                (a)(4), an individual who, on a prescription-by-
                prescription or order-by-order basis--
                            ``(i) receives a health care service at a 
                        covered entity or an outpatient hospital 
                        facility described in subsection (c)(3) which 
                        is registered for the drug discount program 
                        under this section and listed on the public 
                        internet website of the Department of Health 
                        and Human Services relating to this section;
                            ``(ii) receives an outpatient in-person 
                        health care service from a health care provider 
                        employed by the covered entity or who is an 
                        independent contractor of the covered entity, 
                        such that the covered entity bills for services 
                        on behalf of the provider;
                            ``(iii) receives a drug that is ordered or 
                        prescribed by the covered entity provider, 
                        including any renewals of existing 
                        prescriptions, as a result of the service 
                        described in clause (ii);
                            ``(iv) in the case of a covered entity that 
                        has a contract with a State or local government 
                        described in subclause (III) of subsection 
                        (a)(4)(L)(i), receives a health care service or 
                        range of such services, to include the ordering 
                        or prescribing of a covered outpatient drug, 
                        from the covered entity pursuant to such 
                        contract;
                            ``(v) is classified as an outpatient when 
                        the drug is ordered or prescribed, as 
                        demonstrated by how the service was reimbursed 
                        by the applicable payer, or, where the covered 
                        entity does not seek such reimbursement, how 
                        the service would have been reimbursed under 
                        title XVIII of the Social Security Act; and
                            ``(vi) has a relationship with the covered 
                        entity such that the covered entity creates and 
                        maintains auditable health care records which 
                        demonstrate that--
                                    ``(I) the covered entity has a 
                                provider-to-patient relationship with 
                                the individual; and
                                    ``(II) responsibility for the 
                                individual's health care service that 
                                resulted in the prescription or order 
                                for the drug described in clause (iii) 
                                is with the covered entity.
                    ``(B) Exclusions.--For purposes of this section, an 
                individual shall not be considered a patient of a 
                covered entity described in subparagraph (L) or (M) of 
                subsection (a)(4) if--
                            ``(i) the individual is an inmate of a 
                        correctional facility;
                            ``(ii) the health care service described in 
                        clause (ii) of subparagraph (A) received by the 
                        individual from the covered entity consists 
                        only of the administration or infusion of a 
                        drug or drugs, or the dispensing of a drug or 
                        drugs for subsequent self-administration or 
                        administration in the home setting, without a 
                        covered entity provider-to-patient encounter;
                            ``(iii) the health care service described 
                        in clause (ii) of subparagraph (A) received by 
                        the individual from the covered entity is 
                        provided by a health care organization that has 
                        only an affiliation arrangement with the 
                        covered entity, even if the covered entity has 
                        access to the affiliated organization's 
                        records; or
                            ``(iv) the primary relationship between the 
                        individual and the covered entity is one of 
                        employment.
                    ``(C) Regulations.--Not later than 180 days after 
                the date of enactment of the 340B Protection and 
                Accountability Act of 2019, the Secretary shall 
                promulgate final regulations through notice-and-comment 
                rulemaking to define the term `patient' with respect to 
                covered entities described in subparagraph (L) or (M) 
                of subsection (a)(4) to reflect the requirements 
                described in subparagraphs (A) and (B) of this 
                paragraph.
                    ``(D) Definition relating to other covered 
                entities.--In this section, the term `patient', with 
                respect to a covered entity described in subparagraphs 
                (A) through (K) of subsection (a)(4), has the meaning 
                given such term in the October 24, 1996, HRSA Final 
                Notice Regarding Section 602 of the Veterans Health 
                Care Act of 1992 Patient and Entity Eligibility (61 Fed 
                Reg. 55156).
                    ``(E) Record retention.--A covered entity described 
                in subparagraph (L) or (M) of subsection (a)(4) shall 
                retain auditable health care records which demonstrate 
                the existence of a patient relationship in accordance 
                with this paragraph for each prescription or order for 
                a rolling period of not less than five years, or longer 
                to the extent required by State or Federal law.''.
    (b) Treatment of Contracted Services.--Subsection (a) of section 
340B of the Public Health Service Act (42 U.S.C. 256b) is amended by 
adding at the end the following new paragraphs:
            ``(11) Contracted services.--In the case of a covered 
        entity described in subparagraph (L) or (M) of subsection 
        (a)(4) that elects to enter into a contractual arrangement with 
        a third party for services related to the drug discount program 
        under this section, such as to dispense covered outpatient 
        drugs subject to an agreement under this section to patients of 
        the covered entity, to administer contracted pharmacy services, 
        or to provide any other service related to the drug discount 
        program under this section, the remuneration for which is based 
        in whole or in part on the volume of dispensed covered 
        outpatient drugs subject to an agreement under this section, 
        such covered entity shall--
                    ``(A) have a contractual agreement in place between 
                the covered entity and each contracted entity, 
                including with each location of a pharmacy contracted 
                to dispense covered outpatient drugs subject to an 
                agreement under this section to patients (as so 
                defined) of the covered entity, which shall specify 
                that the contracted entity shall adhere to all 
                requirements of the drug discount program under this 
                section, but that ultimate responsibility for program 
                compliance and oversight of compliance by each 
                contracted entity shall remain with the covered entity 
                and that all covered outpatient drugs subject to an 
                agreement under this section shall be purchased by the 
                covered entity;
                    ``(B) register each such agreement with the 
                Secretary, include in such registration such 
                information as shall be specified by the Secretary, and 
                make available such agreement upon request by the 
                Secretary;
                    ``(C) ensure the compliance of each such agreement 
                with the requirements of this section to prevent drug 
                diversion in violation of subparagraph (B) of paragraph 
                (5) and to prevent duplicate discounts in violation of 
                subparagraph (A) of such paragraph before utilizing the 
                services of the contracted entity, including by--
                            ``(i) developing and implementing, with 
                        each contracted entity subject to such an 
                        agreement, a system to verify eligibility of 
                        patients (as so defined) of the entity;
                            ``(ii) developing and implementing, with 
                        each such contracted entity, a mechanism for 
                        tracking the inventory of covered outpatient 
                        drugs that are subject to an agreement under 
                        this section that is suitable to prevent 
                        diversion in violation of subparagraph (B) of 
                        paragraph (5) and to prevent duplicate 
                        discounts in violation of subparagraph (A) of 
                        such paragraph, such as a separate inventory 
                        for such drugs; and
                            ``(iii) establishing a mechanism with each 
                        such contracted entity and each applicable 
                        State Medicaid agency that is suitable to 
                        prevent duplicate discounts for covered 
                        outpatient drugs that are subject to an 
                        agreement under this section, including such 
                        drugs dispensed to enrollees of Medicaid 
                        managed care organizations, and complies with 
                        regulations on methodologies to prevent 
                        duplicate discounts issued by the Secretary;
                    ``(D) make available, to the extent the covered 
                entity offers a charity care policy or has an 
                obligation under subsection (a)(5)(E) to have a sliding 
                fee scale, patient access to a covered entity's 
                prescription drug charity care benefit and its sliding 
                fee scale, and developing and implementing, with each 
                such contracted entity, a mechanism for documenting the 
                income and insurance status of each patient (as so 
                defined) of the covered entity and the amount each such 
                patient pays to receive covered outpatient drugs that 
                are subject to an agreement under this section;
                    ``(E) maintain, and ensure that each such 
                contracted entity maintains, auditable records that 
                pertain to the compliance of the covered entity and the 
                contracted entity with the requirements described in 
                this paragraph, for a rolling period of not less than 5 
                years;
                    ``(F) establish a process for, and conduct, 
                periodic comparisons of the covered entity's 
                prescribing records with the dispensing records of each 
                such contracted entity, as applicable, to detect 
                potential irregularities and to ensure that all drugs 
                dispensed by the contracted entity are for patients (as 
                so defined) of the covered entity;
                    ``(G) provide for annual on-site audits of each 
                such contracted entity to be conducted by an 
                independent outside auditor;
                    ``(H) maintain arrangements to dispense covered 
                outpatient drugs that are subject to an agreement under 
                this section to patients (as so defined) of the covered 
                entity with no more than 5 contract pharmacy locations 
                at any given time, all of which must be located within 
                (or, for mail-order pharmacies, serve patients residing 
                in) lower-income (using American Community Survey data 
                as determined by the Secretary) census tracts served by 
                the covered entity, except in the case that the covered 
                entity files a publicly available exception request 
                with the Secretary that seeks authorization to 
                establish a particular contract pharmacy arrangement in 
                a higher-income census tract and explains the reason in 
                that particular case such a contract pharmacy would 
                best meet the needs of low-income patients of the 
                covered entity, and the Secretary decides to grant the 
                request to establish one of the 5 contract pharmacies 
                in the census tract requested;
                    ``(I) ensure, as applicable, that patients (as so 
                defined) of the covered entity have access to the 
                covered entity's prescription drug charity care benefit 
                through each contract pharmacy location at the time of 
                purchase of each covered outpatient drug subject to an 
                agreement under this section to the same extent such 
                patients have access to the benefit with respect to 
                such drugs purchased directly through the covered 
                entity; and
                    ``(J) limit any amount paid by the covered entity, 
                or any agent of the covered entity, to the contracted 
                entity for dispensing covered outpatient drugs subject 
                to an agreement under this section or for any other 
                service related to the drug discount program under this 
                section to a reasonable amount, which shall not exceed 
                the fair market value of such drug dispensing or other 
                service.
        In the case the Secretary grants a request under subparagraph 
        (H) to establish a particular contract pharmacy arrangement in 
        a higher-income census tract, the Secretary shall make such 
        decision available on a public website.
            ``(12) Auditing.--A covered entity described in 
        subparagraph (L) or (M) of subsection (a)(4) and a contracted 
        entity that enter into a contractual arrangement described in 
        paragraph (11) shall permit--
                    ``(A) the Secretary to audit the records of the 
                covered entity and of the contracted entity that 
                pertain to the covered entity's and the contracted 
                entity's compliance with the requirements described in 
                such paragraph; and
                    ``(B) the manufacturer of a covered outpatient drug 
                that is subject to an agreement under this section (or 
                its designee) to audit such records of the covered 
                entity and of the contracted entity solely with respect 
                to such drugs of the manufacturer.
            ``(13) Regulations.--
                    ``(A) Not later than 180 days after the date of 
                enactment of this paragraph, the Secretary shall 
                promulgate final regulations through notice-and-comment 
                rulemaking to implement the requirements of paragraph 
                (11) and paragraph (12). Such regulations shall include 
                model terms for the contractual agreement described in 
                subparagraph (A) of paragraph (11).
                    ``(B) Not later than 180 days after the date of 
                enactment of this paragraph, the Secretary shall 
                promulgate final regulations through notice-and-comment 
                rulemaking to establish procedures, in the case in 
                which the Secretary determines that a violation of the 
                annual contract pharmacy independent on-site audit 
                requirement in subparagraph (F) of paragraph (11), with 
                respect to a contract pharmacy arrangement, was knowing 
                and intentional--
                            ``(i) for removing the contract pharmacy 
                        arrangement from a covered entity's contract 
                        pharmacy network and disqualifying the entity 
                        from adding any additional contract pharmacies 
                        for a reasonable period, to be determined by 
                        the Secretary, of not less than two years; and
                            ``(ii) for requiring that the entity pay a 
                        monetary penalty to a manufacturer or 
                        manufacturers in the form of interest on sums 
                        that are owed to the manufacturer due to 
                        violations of subparagraph (A) or (B) of 
                        subsection (a)(5) that occurred at one or more 
                        contract pharmacies and that were discovered 
                        later than such violations would have been if 
                        the entity had complied with its obligation to 
                        have annual independent audits of contract 
                        pharmacies conducted.
            ``(14) Mail order study and regulations.--
                    ``(A) Report.--Not later than 180 days after the 
                date of the enactment of this paragraph, the Secretary 
                shall conduct a study (and submit to Congress a report 
                containing the results of such study) regarding 
                compliance concerns associated with covered entities 
                described in subparagraph (L) or (M) of subsection 
                (a)(4) contracting with mail order pharmacies to 
                dispense covered outpatient drugs subject to an 
                agreement under this section, and any additional 
                safeguards or limitations necessary and appropriate to 
                reduce those compliance concerns.
                    ``(B) Regulations.--Not later than 180 days after 
                the submission of the report under subparagraph (A), 
                the Secretary shall promulgate final regulations 
                applicable to covered entities described in such 
                subparagraph, through notice-and-comment rulemaking, to 
                implement any additional safeguards or limitations 
                recommended by the study.
            ``(15) Contract pharmacy moratorium.--No covered entity 
        described in subparagraphs (L) or (M) of subsection (a)(4) 
        shall enter into a new or expanded contractual arrangement 
        pursuant to which a third party dispenses covered outpatient 
        drugs subject to an agreement under this section to patients 
        (as so defined) of the covered entity during the period 
        beginning on the date of the enactment of this paragraph and 
        ending on the latter of--
                    ``(A) the effective date of final regulations 
                described in paragraph (13);
                    ``(B) the effective date of final regulations 
                described in paragraph (14);
                    ``(C) the effective date of final regulations 
                issued through Secretarial notice-and-comment 
                rulemaking that take into consideration the findings 
                and recommendations in the report from the Inspector 
                General of the Department of Health and Human Services 
                required under subsection (g)(3).''.
    (c) Regulations To Reduce Duplicate Discount Risks.--Subsection 
(a)(5)(A) of section 340B of the Public Health Service Act (42 U.S.C. 
256b) is amended by adding at the end the following new clause:
                            ``(iii) Not later than one year after the 
                        date of the enactment of this clause, the 
                        Secretary shall promulgate final regulations 
                        through notice-and-comment rulemaking, 
                        describing methodologies for State Medicaid 
                        programs and all covered entities under 
                        subsection (a)(4) to identify and bill drugs 
                        subject to an agreement under this section in a 
                        manner that ensures compliance with 340B 
                        Program prohibitions regarding duplicate 
                        discounts, including the duplicate discount 
                        prohibition under section 1927(j)(1) of the 
                        Social Security Act, to include the application 
                        of such prohibitions to Medicaid managed care 
                        enrollees. Such methodologies shall include the 
                        use of 340B-specific claims identifiers, and 
                        the provision of claims-level data by covered 
                        entities to States as well as manufacturers of 
                        covered outpatient drugs sufficient to identify 
                        claims that include drugs subject to an 
                        agreement under this section and to prevent 
                        duplicate discounts.''.
    (d) Amount Charged to Low-Income Patients.--
            (1) In general.--Subsection (a)(5) of section 340B of the 
        Public Health Service Act (42 U.S.C. 256b) is amended by adding 
        at the end the following new subparagraphs:
                    ``(E) Amount charged to low-income patients.--As a 
                condition of certification or recertification under 
                subparagraph (E) of paragraph (7), each covered entity 
                described in subparagraph (L) or (M) of subsection 
                (a)(4) must establish a sliding scale fee schedule for 
                providing covered outpatient drugs that are subject to 
                an agreement under this section, directly or under a 
                contractual arrangement pursuant to which a third party 
                dispenses such drugs, to patients of the covered entity 
                who are--
                            ``(i) low-income individuals; and
                            ``(ii) not covered under minimum essential 
                        coverage, as defined in section 5000A(f) of the 
                        Internal Revenue Code.
                    ``(F) Regulations.--Not later than 180 days after 
                the date of enactment of this subparagraph, the 
                Secretary shall promulgate final regulations through 
                notice-and-comment rulemaking, to implement the 
                requirements under subparagraph (E). Such regulations 
                shall--
                            ``(i) define the term `low-income 
                        individual';
                            ``(ii) provide a methodology for 
                        establishing the sliding scale fee schedule, 
                        which shall apply, where otherwise applicable 
                        to a covered entity, regardless of whether the 
                        covered outpatient drug is dispensed by the 
                        covered entity directly or a child site of the 
                        covered entity or by a contracted entity 
                        described in paragraph (11); and
                            ``(iii) ensure the security and protection 
                        of privileged or otherwise confidential data 
                        from unauthorized disclosure or re-
                        disclosure.''.
    (e) Private Non-Profit DSH Hospitals and Outpatient Hospital 
Facilities.--
            (1) Definition.--Subparagraph (L) of section 340B(a)(4) of 
        the Public Health Service Act (42 U.S.C. 256b(a)(4)) is amended 
        to read as follows:
                    ``(L) A subsection (d) hospital (as defined in 
                section 1886(d)(1)(B) of the Social Security Act) 
                that--
                            ``(i) is--
                                    ``(I) owned or operated by a unit 
                                of State or local government;
                                    ``(II) a public or private non-
                                profit corporation which is formally 
                                granted governmental powers by a unit 
                                of State or local government; or
                                    ``(III) a private non-profit 
                                hospital which has a contract with a 
                                State or local government to provide 
                                health care services, which include the 
                                ordering or prescribing of covered 
                                outpatient drugs that are subject to an 
                                agreement under this section, to low-
                                income individuals who are not entitled 
                                to benefits under title XVIII of the 
                                Social Security Act or eligible for 
                                assistance under the State plan for 
                                medical assistance under title XIX of 
                                such Act;
                            ``(ii) for the most recent cost reporting 
                        period that ended before the calendar quarter 
                        involved, had a disproportionate share 
                        adjustment percentage (as determined under 
                        section 1886(d)(5)(F) of the Social Security 
                        Act) greater than 11.75 percent or was 
                        described in section 1886(d)(5)(F)(i)(II) of 
                        such Act; and
                            ``(iii) does not obtain covered outpatient 
                        drugs through a group purchasing organization 
                        or other group purchasing arrangement.
                If the Secretary determines that a hospital that is 
                eligible for participation in the 340B program under 
                this subparagraph obtained covered outpatient drugs 
                through a group purchasing organization or another 
                group purchasing arrangement while that hospital was 
                participating in the drug discount program under this 
                section, then the Secretary shall remove such hospital 
                from such program and the hospital shall not be 
                permitted to seek re-enrollment for a period of at 
                least 12 months after its removal from the program.''.
            (2) Study and report; moratorium; outpatient hospital 
        facilities; audits.--Subsection (c) of section 340B of the 
        Public Health Service Act (42 U.S.C. 256b) is amended to read 
        as follows:
    ``(c) Covered Entities That Are Private, Non-Profit DSH 
Hospitals.--
            ``(1) Study and report.--
                    ``(A) Study.--The Comptroller General of the United 
                States shall conduct a study on the relationship 
                between the disproportionate share adjustment 
                percentages of private covered entities described in 
                subclauses (II) and (III) of subsection (a)(4)(L)(i) 
                and the levels of charity care provided by such 
                entities to outpatients.
                    ``(B) Report.--Not later than 180 days after the 
                date of enactment of the 340B Protection and 
                Accountability Act of 2019, the Comptroller General 
                shall submit to the appropriate committees of Congress 
                a report on the results of the study conducted under 
                subparagraph (A), including recommendations on a metric 
                that, as applied to a private covered entity described 
                in such subparagraph, reflects a high level of charity 
                care provided to outpatients as a percentage of the 
                covered entity's overall expenses for outpatient care, 
                and could replace the metric described in subclause 
                (ii) of subsection (a)(4)(L). The Comptroller General 
                shall recommend the metric that best aligns with the 
                level of charity care provided to outpatients as a 
                percentage of overall hospital operating expenses on 
                outpatient care if no metric is identified that 
                provides a precise measure of such percentage.
            ``(2) Moratorium.--
                    ``(A) In general.--For the period described in 
                subparagraph (B)--
                            ``(i) a private covered entity described in 
                        subclauses (II) or (III) of subsection 
                        (a)(4)(L)(i) may participate in the drug 
                        discount program under this section as a 
                        covered entity only if it was properly enrolled 
                        as a covered entity in the drug discount 
                        program under this section as of the date of 
                        the enactment of the 340B Protection and 
                        Accountability Act of 2019 and continuously 
                        enrolled thereafter; and
                            ``(ii) with respect to a facility or 
                        organization described in paragraph (3) of this 
                        subsection that is wholly owned by a private 
                        covered entity described in subclause (II) or 
                        (III) of subsection (a)(4)(L)(i), only a 
                        facility or organization that was properly 
                        enrolled as a child site in the drug discount 
                        program under this section as of the date of 
                        the enactment of the 340B Protection and 
                        Accountability Act of 2019 and continuously 
                        enrolled thereafter may participate in the drug 
                        discount program under this section.
                    ``(B) Period described.--For purposes of 
                subparagraph (A), the period described in this 
                subparagraph is the period beginning on the date of 
                enactment of the 340B Protection and Accountability Act 
                of 2019 and ending on the effective date described in 
                subparagraph (C).
                    ``(C) Effective date of replacement metric.--
                            ``(i) In general.--For purposes of 
                        subparagraph (B), subject to clause (ii), the 
                        effective date described in this subparagraph 
                        is the effective date specified in legislation 
                        that, with respect to private covered entities 
                        described in subclauses (II) and (III) of 
                        subsection (a)(4)(L)(i)--
                                    ``(I) replaces the metric described 
                                in clause (ii) of subsection (a)(4)(L) 
                                with a metric that more accurately 
                                reflects the levels of outpatient 
                                charity care as a percentage of overall 
                                expenses for outpatient care provided 
                                by such entities; and
                                    ``(II) takes into account the 
                                report submitted under paragraph (1), 
                                including by addressing the Comptroller 
                                General's recommendations included in 
                                such report.
                            ``(ii) Exception.--If legislation described 
                        in clause (i) is not enacted by the date that 
                        is one year after the date of submission of the 
                        report under paragraph (1)--
                                    ``(I) the Secretary shall 
                                promulgate final regulations that 
                                implement, to the extent practicable, 
                                the Comptroller General's 
                                recommendations included within such 
                                report not later than the date that is 
                                180 days after such one-year date; and
                                    ``(II) for purposes of subparagraph 
                                (B), the effective date described in 
                                this subparagraph is the effective date 
                                of such final regulations.
            ``(3) Outpatient hospital facilities.--A facility or 
        organization may participate in the drug discount program under 
        this section as a child site of a covered entity described in 
        subparagraph (L) or (M) of subsection (a)(4) only if such 
        facility or organization--
                    ``(A) is wholly owned by a covered entity described 
                in subparagraph (L) or (M) of subsection (a)(4);
                    ``(B) except in the case in which the parent 
                covered entity is a children's hospital described in 
                subparagraph (M) of subsection (a)(4) which does not 
                file a Medicare cost report, is listed on the Medicare 
                cost report most recently filed by the parent covered 
                entity on a line that is reimbursable under this title, 
                if such cost report demonstrates that the services 
                provided at the facility or organization have 
                associated outpatient costs and charges under this 
                title, and if the parent covered entity has provided a 
                copy of such cost report to the Office of Pharmacy 
                Affairs of the Health Resources and Services 
                Administration;
                    ``(C) in the case that the parent covered entity is 
                a children's hospital described in subparagraph (M) of 
                subsection (a)(4) which does not file a Medicare cost 
                report, would be correctly included on a reimbursable 
                line with associated outpatient costs and charges under 
                title XVIII on a Medicare cost report of the parent 
                covered entity, if filed, and the parent covered entity 
                authorizing official has submitted a signed statement 
                to the Secretary which certifies the foregoing and that 
                the requested outpatient facility is an integral part 
                of the children's hospital and is providing health care 
                services to patients of such hospital;
                    ``(D) meets the provider-based status requirements 
                under section 413.65 of title 42, Code of Federal 
                Regulations or under any successor to such section;
                    ``(E) provides outpatient health care services and 
                is not limited to providing only drugs or drug 
                administration;
                    ``(F) provides a level of free or discounted health 
                care services to individuals who meet the parent 
                covered entity's criteria for financial assistance and 
                are unable to pay for all or a portion of the services, 
                as reported at cost to the Internal Revenue Service 
                under section 501(r)(4) of the Internal Revenue Code 
                for the calendar year, that is similar to that of the 
                parent covered entity; and
                    ``(G) adheres to the parent covered entity's 
                sliding scale fee schedule for providing covered 
                outpatient drugs that are subject to an agreement under 
                this section to patients who are (i) low-income 
                individuals; and (ii) not covered under minimum 
                essential coverage, as defined in section 5000A(f) of 
                the Internal Revenue Code. Such sliding fee schedules 
                must be made publicly available in a similar manner to 
                a 501(c)(3) hospital's financial assistance policy as 
                required under section 501(r) of the Internal Revenue 
                Code of 1986.
            ``(4) Certification and auditing.--
                    ``(A) A covered entity described in subclause (III) 
                of subsection (a)(4)(L)(i) shall--
                            ``(i) not less than annually, provide to 
                        the Secretary a certification executed by the 
                        hospital's 340B Program authorizing official 
                        and an appropriate government official (such as 
                        the governor, county executive, mayor, or an 
                        individual authorized to represent and bind the 
                        governmental entity), certifying that--
                                    ``(I) a contract is currently in 
                                force between such covered entity and 
                                the State or local government to 
                                provide health care services, to 
                                include direct medical care and the 
                                ordering or prescribing of covered 
                                outpatient drugs that are subject to an 
                                agreement under this section, to low-
                                income individuals who are not entitled 
                                to benefits under title XVIII of the 
                                Social Security Act or eligible for 
                                assistance under the State plan under 
                                title XIX of such Act;
                                    ``(II) such contract creates 
                                enforceable expectations for such 
                                covered entity for the provision of the 
                                health care services described in 
                                subclause (I) to the individuals 
                                described in such subclause; and
                                    ``(III) the health care services 
                                described in subclause (I) represent a 
                                significant portion of the hospital's 
                                operating revenues, and are not for 
                                services the covered entity is 
                                otherwise obligated to provide under 
                                State or Federal law;
                            ``(ii) make available the contract 
                        described in subclause (III) of subsection 
                        (a)(4)(L)(i) to the Secretary for publication 
                        on the public internet website of the 
                        Department of Health and Human Services 
                        relating to this section; and
                            ``(iii) permit the Secretary to audit the 
                        records of the covered entity that pertain to 
                        its compliance with the requirements described 
                        in subclause (III) of subsection (a)(4)(L)(i) 
                        and this subparagraph.
                    ``(B) A facility or organization that participates 
                in the drug discount program under this section 
                pursuant to paragraph (3) shall permit the Secretary to 
                audit the records of such facility or organization that 
                pertain to its compliance with the requirements 
                described in such paragraph.
                    ``(C) The Secretary shall issue guidelines to 
                implement the requirements described in this paragraph, 
                which shall, at a minimum, define the term `low-income 
                individuals' for purposes of subclause (I) of 
                subparagraph (A)(i), and identify the applicable 
                methodology and threshold for determining that the 
                health care services described in such subclause 
                represent a significant portion of the hospital's 
                operating revenues.''.
    (f) Reporting Requirements.--Section 340B of the Public Health 
Service Act (42 U.S.C. 256b) is amended by adding at the end the 
following new subsections:
    ``(f) Reporting Requirements for Covered Entities.--
            ``(1) In general.--A covered entity described in 
        subparagraph (L) or (M) of subsection (a)(4) shall annually 
        submit to the Secretary an electronic and searchable data 
        report in a machine-readable format. Such report shall contain, 
        with respect to the year covered by the report, information 
        on--
                    ``(A) the number and percentage of patients of the 
                covered entity, disaggregated by insurance status 
                (including at least the Medicare program under title 
                XVIII of the Social Security Act, the Medicaid program 
                under title XIX of such Act, the Children's Health 
                Insurance Program under title XXI of such Act, the 
                TRICARE program under chapter 55 of title 10, United 
                States Code, health insurance coverage or a group 
                health plan, and uninsured), and by the type of site of 
                the dispensing of the covered outpatient drug subject 
                to an agreement under this section (parent covered 
                entity, facility or organization described in 
                subsection (c)(3), contracted entity described in 
                subsection (a)(11));
                    ``(B) the aggregate amount of gross reimbursement 
                received by the covered entity (calculated before 
                subtracting any administrative or other fees using a 
                methodology provided by the Secretary) for covered 
                outpatient drugs subject to an agreement under this 
                section, including reimbursement received through 
                facilities or organizations described in subsection 
                (c)(3) or pursuant to contractual arrangements 
                described in subsection (a)(11);
                    ``(C) the aggregate acquisition cost for covered 
                outpatient drugs subject to an agreement under this 
                section dispensed during the year;
                    ``(D) the aggregate amount paid by the covered 
                entity, or any agent of the covered entity, to 
                contracted entities described in subsection (a)(11) for 
                dispensing covered outpatient drugs subject to an 
                agreement under this section or for any other service 
                related to the drug discount program under this 
                section;
                    ``(E) how the entity prevents duplicate discounts 
                under subparagraph (A) of subsection (a)(5) and drug 
                diversion under subparagraph (B) of such subsection;
                    ``(F) the volume of covered outpatient drugs 
                subject to an agreement under this section dispensed by 
                the covered entity and, in the case of a covered entity 
                that has entered into a contractual arrangement 
                pursuant to which a third party dispenses covered 
                outpatient drugs subject to an agreement under this 
                section to patients of the covered entity, by each such 
                contracted entity;
                    ``(G) quantitative data in terms of the amount and 
                percentage of charitable care, as such term is defined 
                for purposes of Medicare cost reporting or other 
                reporting requirements identified by the Secretary, 
                provided to patients of the covered entity by the 
                covered entity in the form of covered outpatient drugs 
                subject to an agreement under this section;
                    ``(H) the name of any third-party vendor or other 
                similar entity (if any) that the covered entity retains 
                to administer the covered entity's inventory management 
                system or contract pharmacy arrangement; and
                    ``(I) other reporting requirements as the Secretary 
                determines is necessary or appropriate for effective 
                management and oversight of the drug discount program 
                under this section.
            ``(2) Timing of first report.--The first report submitted 
        under paragraph (1) shall be submitted not later than 18 months 
        after the date of enactment of this subsection.
            ``(3) Attestation.--Each report submitted under paragraph 
        (1) shall be accompanied by an attestation, in a form and 
        manner specified by the Secretary, that the information 
        submitted in such report is complete and accurate. Such 
        attestation shall be subject to section 1001 of title 18, 
        United States Code.
            ``(4) Sanctions.--If the Secretary finds that a covered 
        entity is in violation of the requirement under paragraph (1) 
        and the Secretary determines that such violation was knowing 
        and intentional, the Secretary shall remove the entity from the 
        drug discount program under this section and disqualify the 
        entity from re-entry into such program for a reasonable period 
        of time to be determined by the Secretary.
            ``(5) Regulations.--Not later than 180 days after the date 
        of enactment of this subsection, the Secretary shall promulgate 
        final regulations through notice-and-comment rulemaking to 
        implement the requirements under paragraphs (1) through (4).
            ``(6) Public database.--The Secretary shall make the data 
        reported by covered entities under this subsection available to 
        the public on the website of the Department of Health and Human 
        Services in an electronic and searchable format, which shall 
        make each category of data reported available both in the 
        aggregate and broken down by parent covered entities, child 
        sites, and contract pharmacies, but shall not identify specific 
        parent covered entities, child sites, or contract pharmacies.
    ``(g) Reports to Congress.--
            ``(1) Report by the secretary.--Not later than two years 
        after the date of the enactment of this subsection, the 
        Secretary shall submit to the Committee on Energy and Commerce 
        of the House of Representatives and the Committee on Health, 
        Education, Labor, and Pensions of the Senate a report, which 
        shall contain--
                    ``(A) with respect to covered entities described in 
                subparagraph (L) or (M) of subsection (a)(4), the 
                information contained in the first report submitted by 
                such entities to the Secretary under subsection (f); 
                and
                    ``(B) a description of the audits conducted by the 
                Secretary pursuant to subparagraph (C) of subsection 
                (a)(5), including the methodology used for conducting 
                such audits, the results of such audits, and actions 
                taken by the Secretary in response to such audits, as 
                well as actions taken by the Secretary in response to 
                audits conducted by manufacturers pursuant to such 
                subparagraph.
            ``(2) Report by the comptroller general.--Not later than 
        one year after the date of the enactment of this subsection, 
        the Comptroller General of the United States shall submit to 
        the Committee on Energy and Commerce of the House of 
        Representatives and the Committee on Health, Education, Labor, 
        and Pensions of the Senate a report on the use by covered 
        entities of contractual arrangements pursuant to which a third 
        party dispenses covered outpatient drugs subject to an 
        agreement under this section to patients of the covered entity, 
        disaggregated by covered entity types and the physical distance 
        of the contracted entity's location from the respective parent 
        covered entity location.
            ``(3) Annual reports by the inspector general.--Not later 
        than July 1 of each year (beginning with 2018), the Inspector 
        General of the Department of Health and Human Services shall 
        submit to appropriate committees of Congress a report on the 
        contractual arrangements between covered entities and third 
        parties described in paragraph (11) of subsection (a), 
        including the methods and amounts of remuneration exchanged 
        between such covered entities and such contracted entities, and 
        the extent to which contract pharmacies are improving access to 
        medicines by patients of such covered entities. The first such 
        annual report shall include recommendations, as the Inspector 
        General determines appropriate, that address safeguards to 
        reduce duplicate discounting and diversion within contract 
        pharmacy arrangements and reforms to ensure these arrangements 
        are targeted exclusively at improving access to medicines for 
        low-income or vulnerable patients of covered entities. 
        Subsequent reports under this paragraph should continue to 
        monitor such issues and be updated as changes are made to the 
        drug discount program under this section.''.
    (g) User Fees Under the 340B Drug Discount Program.--Section 340B 
of the Public Health Service Act (42 U.S.C. 256b), as previously 
amended, is further amended by adding at the end the following new 
subsection:
    ``(h) User Fees.--
            ``(1) In general.--Subject to paragraph (6), the Secretary 
        shall assess and collect a user fee from covered entities 
        described in subparagraph (L), (M), (N), or (O) of subsection 
        (a)(4). In carrying out this subsection, the Secretary shall 
        not require manufacturers to collect any user fee or to 
        administer the user fee program established under this 
        subsection.
            ``(2) Payment.--A covered entity described in subparagraph 
        (L), (M), (N), or (O) of subsection (a)(4) shall pay to the 
        Secretary a fee assessed under paragraph (1) by such date that 
        is the later of--
                    ``(A) the date of the certification or 
                recertification of the covered entity, as applicable; 
                or
                    ``(B) the date that is 30 days after the date of 
                the enactment of an appropriations Act providing for 
                the collection and obligation of fees under this 
                subsection for a fiscal year.
            ``(3) Amount of fee.--The amount of a fee under paragraph 
        (1) shall be equal to the amount determined by the Secretary 
        under paragraph (4).
            ``(4) Determination of amount of fee.--
                    ``(A) In general.--The Secretary shall, not later 
                than 180 days before the start of each fiscal year that 
                begins after September 30, 2019, establish, for the 
                next fiscal year, the amount of the fee payable under 
                this subsection by a covered entity using purchase data 
                submitted by covered entities described in paragraph 
                (1), and using data submitted by manufacturers on sales 
                to covered entities of covered outpatient drugs subject 
                to an agreement under this section, pursuant to 
                regulations to be issued by the Secretary. Such amount, 
                with respect to a covered entity and year, shall not 
                exceed 0.1 percent of the total paid during the 
                previous year by such covered entity to manufacturers 
                for purchases of covered outpatient drugs subject to an 
                agreement under this section.
            ``(5) Use of fees.--
                    ``(A) In general.--Any fee collected under 
                paragraph (1) shall be used for purposes of 
                administering this section, enhancing program integrity 
                and oversight activities under this section (including 
                through audits under this section of covered entities 
                and manufacturers), and promoting access to clinical 
                and cost-effective pharmacy services among safety net 
                clinics and hospitals that participate under this 
                section, such as through--
                            ``(i) the development of a multi-functional 
                        web-based system to collect fees under 
                        paragraph (1);
                            ``(ii) the improvement of the integrity, 
                        transparency, security, and reliability of the 
                        Office of Pharmacy Affairs Information System, 
                        including to ensure that the database continues 
                        to meet the needs of external stakeholders; and
                            ``(iii) improvements to the compliance tool 
                        of the Office of Pharmacy Affairs, used to 
                        integrate all information related to covered 
                        entities and manufacturers with agreements 
                        under this section.
                    ``(B) Supplement not supplant.--Any fee collected 
                under paragraph (1) shall be used to supplement and not 
                supplant the amount otherwise provided in 
                appropriations Acts to carry out this section.
            ``(6) Availability of fees.--Fees authorized under 
        paragraph (1) shall be collected and available for obligation 
        only to the extent and in the amount provided in advance in 
        appropriations Acts. Such fees are authorized to remain 
        available until expended.
            ``(7) Regulations.--Not later than 180 days after the date 
        of enactment of this subsection, the Secretary shall promulgate 
        final regulations through notice-and-comment rulemaking to 
        implement the user fee collection pursuant to this subsection.
            ``(8) Oversight of user fee program.--
                    ``(A) Study.--The Inspector General of the 
                Department of Health and Human Services shall conduct 
                an annual review of the user fee program established by 
                this subsection.
                    ``(B) Report.--Not later than July 1 of each year 
                (beginning with 2019), the Inspector General of the 
                Department of Health and Human Services shall submit to 
                the appropriate committees of Congress a report on the 
                study conducted under subparagraph (A), together with 
                such recommendations as the Inspector General 
                determines appropriate.''.
    (h) Direct-Hire Authority.--Section 340B(d) of the Public Health 
Service Act (42 U.S.C. 256b(d)) is amended by adding at the end the 
following new paragraph:
            ``(5) Direct-hire authority.--Notwithstanding section 
        3304(a)(3) of title 5, United States Code, and sections 3309 
        through 3318 of such title, and section 337 of title 5 of the 
        Code of Federal Regulations (or any successor regulations), the 
        Secretary may, beginning on the date of the enactment of this 
        paragraph, exercise direct-hire authority to appoint a minimum 
        of ten qualified candidates to permanent positions within the 
        competitive service in order to carry out management and 
        oversight activities under this section.''.
    (i) Applicability.--Except as otherwise indicated, the provisions 
of, including amendments made by, this Act shall not apply to covered 
entities defined under subparagraphs (A) through (K), (N), or (O) of 
subsection (a)(4).
                                 <all>