TREATMENT OF PRESCRIPTION DRUGS PROCURED BY DEPARTMENT OF VETERANS AFFAIRS OR PURCHASED BY CERTAIN CLINICS AND HOSPITALS.

SEC. 601. TREATMENT OF PRESCRIPTION DRUGS PROCURED BY DEPARTMENT OF VETERANS AFFAIRS OR PURCHASED BY CERTAIN CLINICS AND HOSPITALS. (a) Exclusion Of Prices From Calculation Of Best Prices For Medicaid Rebate Agreements.— Section 1927(c)(1)(C) of the Social Security Act (42 U.S.C. 1396r-8(c)(1)(C)) is amended by striking “(excluding” and inserting “(excluding any prices charged on or after October 1, 1992, to the Indian Health Service, the Department of Veterans Affairs, a State home receiving funds under section 1741 of title 38, United States Code, the Department of Defense, the Public Health Service, or a covered entity described in subsection (a)(5)(B), any prices charged under the Federal Supply Schedule of the (General Services Administration, or any prices used under a State pharmaceutical assistance program, and excluding”. (b) Agreements Required To Receive Payment.— (1) In General.— The first sentence of section 1927(a)(1) of such Act (42 U.S.C. 1396r-8(a)(1)) is amended by striking “manufacturer).” and inserting “manufacturer), and must meet the requirements of paragraph (5) (with respect to drugs purchased by a covered entity on or after the first day of the first month that begins after the date of the enactment of title VI of the Veterans Health Care Act of 1992) and paragraph (6).”. (2) Agreements Described.— Section 1927(a) of such Act (42 U.S.C. 1396r-8(a)) is amended by adding at the end the following new paragraphs: “(5) Limitation On Prices Of Drugs Purchased By Covered Entities.— “(A) Agreement With Secretary.— A manufacturer meets the requirements of this paragraph if the manufacturer has entered into an agreement with the Secretary that meets the requirements of section 340B of the Public Health Service Act with respect to covered outpatient drugs purchased by a covered entity on or after the first day of the first month that begins after the date of the enactment of this paragraph. “(B) Covered Entity Defined.— In this subsection, the term ‘covered entity* means an entity described in section 340B(a)(4) of the Public Health Service Act. “(C) Establishment Of Alternative Mechanism To Ensure Against Duplicate Discounts Or Rebates.— If the Secretary does not establish a mechanism under section 340B(a)(5)(A) of the Public Health Service Act within 12 months of the date of the enactment of such section, the following requirements shall apply: 106 STAT. 4963 “(i) Entities.— Each covered entity shall inform the single State agency under section 1902(a)(5) when it is seeking reimbursement from the State plan for medical assistance described in section 1905(a)(12) with respect to a unit of any covered outpatient drug which is subject to an agreement under section 340B(a) of such Act. “(ii) State Agency.— Each such single State agency shall provide a means by which a covered entity shall indicate on any drug reimbursement claims form (or format, where electronic claims management is used) that a unit of the drug that is the subject of the form is subject to an agreement under section 340B of such Act, and not submit to any manufacturer a cl€dm for a rebate payment under subsection (b) with respect to such a drug. “(D) Effect Of Subsequent Amendments.— In determining whether an agreement under subparagraph (A) meets the requirements of section 340B of the public Health Service Act, the Secretary shall not take into account any amendments to such section that are enacted after the enactment of title VI of the Veterans Health Care Act of 1992. “(E) Determination Of Compliance.— A manufacturer is deemed to meet the requirements of this paragraph if the manufacturer establishes to the satisfaction of the Secretary that the manufacturer would comply (and has offered to comply) with the provisions of section 340B of the Public Health Service Act (as in effect immidiately after the enactment of this paragraph) and would have entered into an agreement under such section (as such section was in effect at such time), but for a legislative change in such section after the date of the enactment of this paragraph. “(6) Requirements Relating To Master Agreements For Drugs Procured By Department Of Veterans Affairs And Certain Other Federal Agencies.— “(A) “(A) In General.— A manufacturer meets the requirements of this paragraph if the manufacturer complies with the provisions of section 8126 of title 38, United States Code, including the requirement of entering into a master agreement with the Secretary of Veterans Affairs under such section. “(B) Effect Of Subsequent Amendments.— In determining whether a master agreement described in subparagraph (A) meets the requirements of section 8126 of title 38, United States Code, the Secretary shall not take into account any amendments to such section that are enacted after the enactment of title VI of the Veterans Health Care Act of 1992. “(C) Determination Of Compliance.— A manufacturer is deemed to meet the requirements of this paragraph if the manufacturer establishes to the satisfaction of the Secretary that the manufacturer would comply (and has offered to comply) with the provisions of section 8126 of title 38, United States Code (as in effect immediately after the enactment of this paragraph) and would have entered 106 STAT. 4964 into an agreement under such section (as such section was in effect at such time), but for a legislative change in such section after the date of the enactment of this paragraph.”. (3) Confidentiality Of Information.— Section 1927(b)(3)(D) of such Act (42 U.S.C. 1396r-8(b)(3)(D)) is amended— (A) by striking “this paragraph” and inserting “this paragraph or under an agreement with the Secretary of Veterans Affairs described in subsection (a)(6)(A)(ii)”; (B) by striking “Secretary” each place it appears and inserting “Secretary or the Secretary of Veterans Affairs”; and (C) by striking “except” and all that follows through the period and inserting: “except— ”(i) as the Secretary determines to be necessary carry out this section, “(ii) to permit the Comptroller General to review the information provided, and “(iii) to permit the Director of the Congressional Budget Office to review the information provided.”. (4) Termination Of Rebate Agreements.— Section 1927(b)(4)(B) of such Act (42 U.S.C. 1396r-8(b)(4)(B)) is amended— (i) in clause (ii), by striking “such period” and inserting “the calendar quarter beginning at least 60 days”, (ii) in clause (ii), by striking “of the notice” and all through “the agreement).” and inserting “the manufacturer provides notice to the Secretary.”, and (iii) by adding at the end the following new clauses: “(iv) Notice To States.— In the case of a termination under this subparagraph, the Secretary shall provide notice of such termination to the States within not less than 30 days before the effective date of such termination. “(v) Application To Terminations Of Other Agreements.— The provisions of this subparagraph shall apply to the terminations of agreements described in section 340B(a)(1) of the Public Health Service Act £md master agreements described in section 8126(a) of title 38, United States Code.”. (c) Budget Neutrality Adjustment.— Section 1927(c)(1)(B) of the Social Security Act (42 U.S.C. 1396r-8(c)(1)(B)) is amended— (1) by striking “January 1, 1993,” and inserting “October 1,1992,”; (2) by striking “and” at the end of clause (i); and (3) by striking clause (ii) and inserting the following: “(ii) for quarters (or other periods) beginning after September 30, 1992, and before January 1, 1994, the greater of— “(I) 15.7 percent of the average manufacturer price for the drug, or “(II) the difference between the average manufacturer price for the drug and the best price (as defined in subparagraph (O) for such quarter (or period) for such drug; 106 STAT. 4965 “(iii) for quarters (or other periods) beginning after December 31,1993, and before January 1,1995, the greater of— “(I) 15.4 percent of the average manufacturer price for the drug, or “(II) the difference between the average manufacturer price for the drug and the best price (as defined in subparagraph (C)) for such quarter (or period) for such drug; “(iv) for quarters (or other periods) beginning after December 31,1994, and before January 1,1996, the greater of— “(I) 15.2 percent of the average manufacturer price for the drug, or “(II) the difference between the average manufacturer price for the drug and the best price (as defined in subparagraph (C)) for such quarter (or period) for such drug; and “(v) for quarters (or other periods) beginning after December 31,1995, the greater of— “(I) 15.1 percent of the average manufacturer price for the drug, or “(II) the difference between the average manufacturer price for the drug and the best price (as defined in subparagraph (O) for such quarter (or period) for such drug.”. (d) Reports On Best Price Changes And Payment Of Rebates.— (1) In General.— Not later than 90 days after the expiration of each calendar quarter that begins on or after October 1,1992, and ends on or before December 31,1995, the Secretary of Health and Human Services shall submit a report to Congress that contains the following information relating to prescription drugs dispensed in the quarter (subject to paragraph (2)): (A) With respect to single source drugs and innovator multiple source drugs (as such terms are defined in section 1927(k)(7) of the Social Security Act)— (i) the percentage of such drugs whose best price (as reported to the Secretary under section 1927(b) of the Social Security Act) increased compared to the best price during the previous calendar quarter, and the amount of expenditures under State plans under title XIX of such Act attributable to such drugs; (ii) the percentage of such drugs whose best price (as so reported) decreased compared to the best price during the previous calendar quarter, and the amount of expenditures under State plans under title XIX of such Act attributable to such drugs; (iii) the percentage of such drugs whose best price (as so reported) was the same as the best price during the previous calendar quarter, and the amount of expenditures under State plans under title XIX of such Act attributable to such drugs; (iv) the median and mean percentage increase (or decrease) in the best price of such single source drugs (as so reported) compared to the best price during 106 STAT. 4966 the previous calendar quarter, unweighted and weighted (in the case of the mean percentage increase or decrease) by the dollar volume of drugs dispensed; (v) the median and mean percentage increase (or decrease) in the best price of such innovator multiple source drugs (as so reported) compared to the best price during the previous calendar quarter, unweighted and weighted (in the case of the mean percentage increase or decrease) by the dollar volume of drugs dispensed; and (vi) the median and mean percentage increase (or decrease) in the best price of all such drugs (as so reported) compared to the best price during the previous calendar quarter, unweighted and weighted (in the case of the mean percentage increase or decrease) by the dollar volume of drugs dispensed. (B) With respect to all drugs for which manufacturers are required to pay rebates under section 1927(c) of the Social Security Act, the Secretary’s estimate, on a State by-State and a national aggregate basis, of— (i) the total amount of all rebates paid under such section during the quarter, broken down by the portions of such total amount attributable to rebates described in paragraphs (1), (2), and (3) of such section; (ii) the percentages of such total amount attributable to rebates described in paragraphs (1), (2), and (3) of such section; and (iii) the amount of the portion of such total amount attributable to the rebate described in paragraph (1) of such section that is solely attributable to the application of subclause (II) of clause (i), (ii), (iii), (iv), or (v) of such paragraph. (2) Limitation On Drugs Subject To Report.— NO report submitted under paragraph (1) shall include any information relating to any prescription drug unless the Secretary finds that expenditures for the drug are significant expenditures under the medicard program. In the previous sentence, expenditures for a drug are “significant” if the drug was one of the 1,000 drugs for which the greatest amount of the Federal financial assistance attributable to prescription drugs was paid under section 1903(a) of the Social Security Act during calendar year 1991. (3) Special Rule For Initial Report.— For purposes of the first report required to be submitted under paragraph (1)— (A) the Secretary shall submit the report not later than May 1,1993; and (B) the information contained in the report shall include information on prescription drugs dispensed during each calendar quarter that began on or after January 1, 1991, and ended on or before December 31,1992. (e) Effective Date.— The amendments made by this section shall apply with respect to payments to State plans under title XIX of the Social Security Act for calendar quarters (or periods) beginning on or after January 1, 1993 (without regard to whether or not regulations to carry out such amendments have been promulgated by such date). 106 STAT. 4967