S.Amdt. 4317

SA 4317. Mr. BINGAMAN submitted an amendment intended to be proposed
to amendment SA 4301 proposed by Mr. Baucus to the bill H.R. 4213, to
amend the Internal Revenue Code of 1986 to extend certain expiring
provisions, and for other purposes; which was ordered to lie on the
table; as follows:

Beginning on page 255, strike line 14 and all that follows
through line 2 on page 275 and insert the following:
``(i) In general.--A covered entity shall not request
payment under title XIX of the Social Security Act for
medical assistance described in section 1905(a)(12) of such
Act with respect to a covered inpatient drug that is subject
to an agreement under this section if the drug is subject to
the payment of a rebate to the State under section 1927 of
such Act.
``(ii) Establishment of mechanism.--The Secretary shall
establish a mechanism to ensure that covered entities comply
with clause (i). If the Secretary does not establish a
mechanism under the previous sentence within 12 months of the
enactment of this section, the requirements of section
1927(a)(5)(C) of the Social Security Act shall apply.
``(iii) Prohibiting disclosure to group purchasing
organizations.--In the event that a covered entity is a
member of a group purchasing organization, such entity shall
not disclose the price or any other information pertaining to
any purchases under this section directly or indirectly to
such group purchasing organization.
``(B) Prohibiting resale, dispensing, or administration of
drugs except to certain patients.--With respect to any
covered inpatient drug that is subject to an agreement under
this subsection, a covered entity shall not dispense,
administer, resell, or otherwise transfer the covered
inpatient drug to a person unless--
``(i) such person is an inpatient of the entity; and
``(ii) such person does not have health plan coverage (as
defined in subsection (c)(3)) that provides prescription drug
coverage in the inpatient setting with respect to such
covered inpatient drug.

For purposes of clause (ii), a person shall be treated as
having health plan coverage (as defined in subsection (c)(3))
with respect to a covered inpatient drug if benefits are not
payable under such coverage with respect to such drug for
reasons such as the application of a deductible or cost
sharing or the use of utilization management.
``(C) Auditing.--A covered entity shall permit the
Secretary and the manufacturer of a covered inpatient drug
that is subject to an agreement under this subsection with
the entity (acting in accordance with procedures established
by the Secretary relating to the number, duration, and scope
of audits) to audit at the Secretary's or the manufacturer's
expense the records of the entity that directly pertain to
the entity's compliance with the requirements described in
subparagraph (A) or (B) with respect to drugs of the
manufacturer. The use or disclosure of information for
performance of such an audit shall be treated as a use or
disclosure required by law for purposes of section 164.512(a)
of title 45, Code of Federal Regulations.
``(D) Additional sanction for noncompliance.--If the
Secretary finds, after notice and hearing, that a covered
entity is in violation of a requirement described in
subparagraph (A) or (B), the covered entity shall be liable
to the manufacturer of the covered inpatient drug that is the
subject of the violation in an amount equal to the reduction
in the price of the drug (as described in subparagraph (A))
provided under the agreement between the Secretary and the
manufacturer under this subsection.
``(E) Maintenance of records.--
``(i) In general.--A covered entity shall establish and
maintain an effective recordkeeping system to comply with
this section and shall certify to the Secretary that such
entity is in compliance with subparagraphs (A) and (B). The
Secretary shall require that hospitals that purchase covered
inpatient drugs for inpatient dispensing or administration
under this subsection appropriately segregate inventory of
such covered inpatient drugs, either physically or
electronically, from drugs for outpatient use, as well as
from drugs for inpatient dispensing or administration to
individuals who have (for purposes of subparagraph (B))
health plan coverage described in clause (ii) of such
subparagraph.
``(ii) Certification of no third-party payer.--A covered
entity shall maintain records that contain certification by
the covered entity that no third party payment was received
for any covered inpatient drug that is subject to an
agreement under this subsection and that was dispensed to an
inpatient.
``(5) Treatment of distinct units of hospitals.--In the
case of a covered entity that is a distinct part of a
hospital, the distinct part of the hospital shall not be
considered a covered entity under this subsection unless the
hospital is otherwise a covered entity under this subsection.
``(6) Notice to manufacturers.--The Secretary shall notify
manufacturers of covered inpatient drugs and single State
agencies under section 1902(a)(5) of the Social Security Act
of the identities of covered entities under this subsection,
and of entities that no longer meet the requirements of
paragraph (4), by means of timely updates of the Internet
website supported by the Department of Health and Human
Services relating to this section.
``(7) No prohibition on larger discount.--Nothing in this
subsection shall prohibit a manufacturer from charging a
price for a drug that is lower than the maximum price that
may be charged under paragraph (1).
``(b) Covered Entity Defined.--In this section, the term
`covered entity' means an entity that meets the requirements
described in subsection (a)(4) that has applied for and
enrolled in the program described under this section and is
one of the following:
``(1) A subsection (d) hospital (as defined in section
1886(d)(1)(B) of the Social Security Act) that--
``(A) is owned or operated by a unit of State or local
government, is a public or private non-profit corporation
which is formally granted governmental powers by a unit of
State or local government, or is a private nonprofit hospital
which has a contract with a State or local government to
provide health care services 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; and
``(B) for the most recent cost reporting period that ended
before the calendar quarter involved, had a disproportionate
share adjustment percentage (as determined using the
methodology under section 1886(d)(5)(F) of the Social
Security Act as in effect on the date of enactment of this
section) greater than 11.75 percent or was described in
section 1886(d)(5)(F)(i)(II) of such Act (as so in effect on
the date of enactment of this section).
``(2) A children's hospital excluded from the Medicare
prospective payment system pursuant to section
1886(d)(1)(B)(iii) of the Social Security Act that would meet
the requirements of paragraph (1), including the

[[Page S4705]]

disproportionate share adjustment percentage requirement
under subparagraph (B) of such paragraph, if the hospital
were a subsection (d) hospital as defined by section
1886(d)(1)(B) of the Social Security Act.
``(3) A free-standing cancer hospital excluded from the
Medicare prospective payment system pursuant to section
1886(d)(1)(B)(v) of the Social Security Act that would meet
the requirements of paragraph (1), including the
disproportionate share adjustment percentage requirement
under subparagraph (B) of such paragraph, if the hospital
were a subsection (d) hospital as defined by section
1886(d)(1)(B) of the Social Security Act.
``(4) An entity that is a critical access hospital (as
determined under section 1820(c)(2) of the Social Security
Act), and that meets the requirements of paragraph (1)(A).
``(5) An entity that is a rural referral center, as defined
by section 1886(d)(5)(C)(i) of the Social Security Act, or a
sole community hospital, as defined by section
1886(d)(5)(C)(iii) of such Act, and that both meets the
requirements of paragraph (1)(A) and has a disproportionate
share adjustment percentage equal to or greater than 8
percent.
``(c) Other Definitions.--In this section:
``(1) Average manufacturer price.--
``(A) In general.--The term `average manufacturer price'--
``(i) has the meaning given such term in section 1927(k) of
the Social Security Act, except that such term shall be
applied under this section with respect to covered inpatient
drugs in the same manner (as applicable) as such term is
applied under such section 1927(k) with respect to covered
outpatient drugs (as defined in such section); and
``(ii) with respect to a covered inpatient drug for which
there is no average manufacturer price (as defined in clause
(i)), shall be the amount determined under regulations
promulgated by the Secretary under subparagraph (B).
``(B) Rulemaking.--The Secretary shall by regulation, in
consultation with the Administrator of the Centers for
Medicare & Medicaid Services, establish a method for
determining the average manufacturer price for covered
inpatient drugs for which there is no average manufacturer
price (as defined in subparagraph (A)(i)). Regulations
promulgated with respect to covered inpatient drugs under the
preceding sentence shall provide for the application of
methods for determining the average manufacturer price that
are the same as the methods used to determine such price in
calculating rebates required for such drugs under an
agreement between a manufacturer and a State that satisfies
the requirements of section 1927(b) of the Social Security
Act, as applicable.
``(2) Covered inpatient drug.--The term `covered inpatient
drug' means a drug--
``(A) that is described in section 1927(k)(2) of the Social
Security Act;
``(B) that, notwithstanding paragraph (3)(A) of section
1927(k) of such Act, is used in connection with an inpatient
service provided by a covered entity that is enrolled to
participate in the drug discount program under this section;
and
``(C) that is not purchased by the covered entity through
or under contract with a group purchasing organization.
``(3) Health plan coverage.--The term `health plan
coverage' means--
``(A) health insurance coverage (as defined in section
2791, and including coverage under a State health benefits
risk pool);
``(B) coverage under a group health plan (as defined in
such section, and including coverage under a church plan, a
governmental plan, or a collectively bargained plan);
``(C) coverage under a Federal health care program (as
defined by section 1128B(f) of the Social Security Act); or
``(D) such other health benefits coverage as the Secretary
recognizes for purposes of this section.
``(4) Manufacturer.--The term `manufacturer' has the
meaning given such term in section 1927(k) of the Social
Security Act.
``(d) Program Integrity.--
``(1) Manufacturer compliance.--
``(A) In general.--From amounts appropriated under
subsection (f), the Secretary shall provide for improvements
in compliance by manufacturers with the requirements of this
section in order to prevent overcharges and other violations
of the discounted pricing requirements specified in this
section.
``(B) Improvements.--The improvements described in
subparagraph (A) shall include the following:
``(i) The establishment of a process to enable the
Secretary to verify the accuracy of ceiling prices calculated
by manufacturers under subsection (a)(1) and charged to
covered entities, which shall include the following:

``(I) Developing and publishing through an appropriate
policy or regulatory issuance, precisely defined standards
and methodology for the calculation of ceiling prices under
such subsection.
``(II) Comparing regularly the ceiling prices calculated by
the Secretary with the quarterly pricing data that is
reported by manufacturers to the Secretary.
``(III) Conducting periodic monitoring of sales
transactions by covered entities.
``(IV) Inquiring into any discrepancies between ceiling
prices and manufacturer pricing data that may be identified
and taking, or requiring manufacturers to take, corrective
action in response to such discrepancies, including the
issuance of refunds pursuant to the procedures set forth in
clause (ii).

``(ii) The establishment of procedures for manufacturers to
issue refunds to covered entities in the event that there is
an overcharge by the manufacturers, including the following:

``(I) Providing the Secretary with an explanation of why
and how the overcharge occurred, how the refunds will be
calculated, and to whom the refunds will be issued.
``(II) Oversight by the Secretary to ensure that the
refunds are issued accurately and within a reasonable period
of time.

``(iii) The provision of access through the Internet
website supported by the Department of Health and Human
Services to the applicable ceiling prices for covered
inpatient drugs as calculated and verified by the Secretary
in accordance with this section, in a manner (such as through
the use of password protection) that limits such access to
covered entities and adequately assures security and
protection of privileged pricing data from unauthorized re-
disclosure.
``(iv) The development of a mechanism by which--

``(I) rebates, discounts, or other price concessions
provided by manufacturers to other purchasers subsequent to
the sale of covered inpatient drugs to covered entities are
reported to the Secretary; and
``(II) appropriate credits and refunds are issued to
covered entities if such discounts, rebates, or other price
concessions have the effect of lowering the applicable
ceiling price for the relevant quarter for the drugs
involved.

``(v) Selective auditing of manufacturers and wholesalers
to ensure the integrity of the drug discount program under
this section.
``(vi) The establishment of a requirement that
manufacturers and wholesalers use the identification system
developed by the Secretary for purposes of facilitating the
ordering, purchasing, and delivery of covered inpatient drugs
under this section, including the processing of chargebacks
for such drugs.
``(vii) The imposition of sanctions in the form of civil
monetary penalties, which--

``(I) shall be assessed according to standards and
procedures established in regulations to be promulgated by
the Secretary not later than January 1, 2011;
``(II) shall not exceed $10,000 per single dosage form of a
covered inpatient drug purchased by a covered entity where a
manufacturer knowingly charges such covered entity a price
for such drug that exceeds the ceiling price under subsection
(a)(1); and
``(III) shall not exceed $100,000 for each instance where a
manufacturer withholds or provides materially false
information to the Secretary or to covered entities under
this section or knowingly violates any provision of this
section (other than subsection (a)(1)).

``(2) Covered entity compliance.--
``(A) In general.--From amounts appropriated under
subsection (f), the Secretary shall provide for improvements
in compliance by covered entities with the requirements of
this section in order to prevent diversion and violations of
the duplicate discount provision and other requirements
specified under subsection (a)(4).
``(B) Improvements.--The improvements described in
subparagraph (A) shall include the following:
``(i) The development of procedures to enable and require
covered entities to update at least annually the information
on the Internet website supported by the Department of Health
and Human Services relating to this section.
``(ii) The development of procedures for the Secretary to
verify the accuracy of information regarding covered entities
that is listed on the website described in clause (i).
``(iii) The development of more detailed guidance
describing methodologies and options available to covered
entities for billing covered inpatient drugs to State
Medicaid agencies in a manner that avoids duplicate discounts
pursuant to subsection (a)(4)(A).
``(iv) The establishment of a single, universal, and
standardized identification system by which each covered
entity site and each covered entity's purchasing status under
sections 340B and this section can be identified by
manufacturers, distributors, covered entities, and the
Secretary for purposes of facilitating the ordering,
purchasing, and delivery of covered inpatient drugs under
this section, including the processing of chargebacks for
such drugs.
``(v) The imposition of sanctions in the form of civil
monetary penalties, which--

``(I) shall be assessed according to standards and
procedures established in regulations promulgated by the
Secretary; and
``(II) shall not exceed $10,000 for each instance where a
covered entity knowingly violates subsection (a)(4)(B) or
knowingly violates any other provision of this section.

``(vi) The termination of a covered entity's participation
in the program under this section, for a period of time to be
determined by the Secretary, in cases in which the Secretary
determines, in accordance with standards and procedures
established by regulation, that--

``(I) the violation by a covered entity of a requirement of
this section was repeated and knowing; and
``(II) imposition of a monetary penalty would be
insufficient to reasonably ensure compliance with the
requirements of this section.

[[Page S4706]]

``(vii) The referral of matters, as appropriate, to the
Food and Drug Administration, the Office of the Inspector
General of the Department of Health and Human Services, or
other Federal or State agencies.
``(3) Administrative dispute resolution process.--From
amounts appropriated under subsection (f), the Secretary may
establish and implement an administrative process for the
resolution of the following:
``(A) Claims by covered entities that manufacturers have
violated the terms of their agreement with the Secretary
under subsection (a)(1).
``(B) Claims by manufacturers that covered entities have
violated subsection (a)(4)(A) or (a)(4)(B).
``(e) Audit and Sanctions.--
``(1) Audit.--From amounts appropriated under subsection
(f), the Inspector General of the Department of Health and
Human Services (referred to in this subsection as the
`Inspector General') shall audit covered entities under this
section to verify compliance with criteria for eligibility
and participation under this section, including the
antidiversion prohibitions under subsection (a)(4)(B), and
take enforcement action or provide information to the
Secretary who shall take action to ensure program compliance,
as appropriate. A covered entity shall provide to the
Inspector General, upon request, records relevant to such
audits.
``(2) Report.--For each audit conducted under paragraph
(1), the Inspector General shall prepare and publish in a
timely manner a report which shall include findings and
recommendations regarding--
``(A) the appropriateness of covered entity eligibility
determinations and, as applicable, certifications;
``(B) the effectiveness of antidiversion prohibitions; and
``(C) the effectiveness of restrictions on inpatient
dispensing and administration.
``(f) Authorization of Appropriations.--There are
authorized to be appropriated to carry out this section such
sums as may be necessary for fiscal year 2011 and each
succeeding fiscal year.
``(g) Effect of Section.--Nothing in this section shall be
construed to apply to section 340B.''.

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