FEDERAL UPPER PAYMENT LIMIT FOR MULTIPLE SOURCE DRUGS AND OTHER DRUG PAYMENT PROVISIONS.

SEC. 6001. FEDERAL UPPER PAYMENT LIMIT FOR MULTIPLE SOURCE DRUGS AND OTHER DRUG PAYMENT PROVISIONS.(a) Modification of Federal Upper Payment Limit for Multiple Source Drugs; Definition of Multiple Source Drugs.—Section 1927 of the Social Security Act (42 U.S.C. 1396r–8) is amended—(1) in subsection (e)(4)—(A) by striking “The Secretary” and inserting “Subject to paragraph (5), the Secretary”; and(B) by inserting “(or, effective January 1, 2007, two or more)” after “three or more”;120 STAT. 55(2) by adding at the end of subsection (e) the following new paragraph:“(5) Use of amp in upper payment limits.—Effective January 1, 2007, in applying the Federal upper reimbursement limit under paragraph (4) and section 447.332(b) of title 42 of the Code of Federal Regulations, the Secretary shall substitute 250 percent of the average manufacturer price (as computed without regard to customary prompt pay discounts extended to wholesalers) for 150 percent of the published price.”;(3) in subsection (k)(7)(A)(i), in the matter preceding subclause (I), by striking “are 2 or more drug products” and inserting “at least 1 other drug product”; and(4) in subclauses (I), (II), and (III) of subsection (k)(7)(A)(i), by striking “are” and inserting “is” each place it appears.(b) Disclosure of Price Information to States and the Public.—Subsection (b)(3) of such section is amended—(1) in subparagraph (A)—(A) in clause (i), by inserting “month of a” after “last day of each”; and(B) by adding at the end the following: “Beginning July 1, 2006, the Secretary shall provide on a monthly basis to States under subparagraph (D)(iv) the most recently reported average manufacturer prices for single source drugs and for multiple source drugs and shall, on at least a quarterly basis, update the information posted on the website under subparagraph (D)(v).”; and(2) in subparagraph (D)—(A) by striking “and” at the end of clause (ii);(B) by striking the period at the end of clause (iii) and inserting a comma; and(C) by inserting after clause (iii) the following new clauses:“(iv) to States to carry out this title, and“(v) to the Secretary to disclose (through a website accessible to the public) average manufacturer prices.”.(c) Definition of Average Manufacturer Price.—(1) Exclusion of customary prompt pay discounts extended to wholesalers.—Subsection (k)(1) of such section is amended—(A) by striking “The term” and inserting the following:“(A) In general.—Subject to subparagraph (B), the term”; (B) by striking “, after deducting customary prompt pay discounts”; and(C) by adding at the end the following:“(B) Exclusion of customary prompt pay discounts extended to wholesalers.—The average manufacturer price for a covered outpatient drug shall be determined without regard to customary prompt pay discounts extended to wholesalers.”.(2) Manufacturer reporting of prompt pay discounts.—Subsection (b)(3)(A)(i) of such section is amended by inserting “, customary prompt pay discounts extended to wholesalers,” after “(k)(1))”.(3) Requirement to promulgate regulation.—120 STAT. 56 (A) Inspector general recommendations.—Not later than June 1, 2006, the Inspector General of the Department of Health and Human Services shall—(i) review the requirements for, and manner in which, average manufacturer prices are determined under section 1927 of the Social Security Act, as amended by this section; and(ii) shall submit to the Secretary of Health and Human Services and Congress such recommendations for changes in such requirements or manner as the Inspector General determines to be appropriate.(B) Deadline for promulgation.—Not later than July 1, 2007, the Secretary of Health and Human Services shall promulgate a regulation that clarifies the requirements for, and manner in which, average manufacturer prices are determined under section 1927 of the Social Security Act, taking into consideration the recommendations submitted to the Secretary in accordance with subparagraph (A)(ii).(d) Exclusion of Sales at a Nominal Price From Determination of Best Price.—(1) Manufacturer reporting of sales.—Subsection (b)(3)(A)(iii) of such section is amended by inserting before the period at the end the following: “, and, for calendar quarters beginning on or after January 1, 2007 and only with respect to the information described in subclause (III), for covered outpatient drugs”.(2) Limitation on sales at a nominal price.—Subsection (c)(1) of such section is amended by adding at the end the following new subparagraph:“(D) Limitation on sales at a nominal price.—“(i) In general.—For purposes of subparagraph (C)(ii)(III) and subsection (b)(3)(A)(iii)(III), only sales by a manufacturer of covered outpatient drugs at nominal prices to the following shall be considered to be sales at a nominal price or merely nominal in amount:“(I) A covered entity described in section 340B(a)(4) of the Public Health Service Act.“(II) An intermediate care facility for the mentally retarded.“(III) A State-owned or operated nursing facility.“(IV) Any other facility or entity that the Secretary determines is a safety net provider to which sales of such drugs at a nominal price would be appropriate based on the factors described in clause (ii).“(ii) Factors.—The factors described in this clause with respect to a facility or entity are the following:“(I) The type of facility or entity.“(II) The services provided by the facility or entity.“(III) The patient population served by the facility or entity.120 STAT. 57“(IV) The number of other facilities or entities eligible to purchase at nominal prices in the same service area.“(iii) Nonapplication.—Clause (i) shall not apply with respect to sales by a manufacturer at a nominal price of covered outpatient drugs pursuant to a master agreement under section 8126 of title 38, United States Code.”.(e) Retail Survey Prices; State Payment and Utilization Rates; and Performance Rankings.—Such section is further amended by inserting after subsection (e) the following new subsection:“(f) Survey of Retail Prices; State Payment and Utilization Rates; and Performance Rankings.—“(1) Survey of retail prices.—“(A) Use of vendor.—The Secretary may contract services for—“(i) the determination on a monthly basis of retail survey prices for covered outpatient drugs that represent a nationwide average of consumer purchase prices for such drugs, net of all discounts and rebates (to the extent any information with respect to such discounts and rebates is available); and“(ii) the notification of the Secretary when a drug product that is therapeutically and pharmaceutically equivalent and bioequivalent becomes generally available.“(B) Secretary response to notification of availability of multiple source products.—If contractor notifies the Secretary under subparagraph (A)(ii) that a drug product described in such subparagraph has become generally available, the Secretary shall make a determination, within 7 days after receiving such notification, as to whether the product is now described in subsection (e)(4).“(C) Use of competitive bidding.—In contracting for such services, the Secretary shall competitively bid for an outside vendor that has a demonstrated history in—“(i) surveying and determining, on a representative nationwide basis, retail prices for ingredient costs of prescription drugs;“(ii) working with retail pharmacies, commercial payers, and States in obtaining and disseminating such price information; and“(iii) collecting and reporting such price information on at least a monthly basis.In contracting for such services, the Secretary may waive such provisions of the Federal Acquisition Regulation as are necessary for the efficient implementation of this subsection, other than provisions relating to confidentiality of information and such other provisions as the Secretary determines appropriate.“(D) Additional provisions.—A contract with a vendor under this paragraph shall include such terms and conditions as the Secretary shall specify, including the following:120 STAT. 58“(i) The vendor must monitor the marketplace and report to the Secretary each time there is a new covered outpatient drug generally available.“(ii) The vendor must update the Secretary no less often than monthly on the retail survey prices for covered outpatient drugs.“(iii) The contract shall be effective for a term of 2 years.“(E) Availability of information to states.—Information on retail survey prices obtained under this paragraph, including applicable information on single source drugs, shall be provided to States on at least a monthly basis. The Secretary shall devise and implement a means for providing access to each State agency designated under section 1902(a)(5) with responsibility for the administration or supervision of the administration of the State plan under this title of the retail survey price determined under this paragraph.“(2) Annual state report.—Each State shall annually report to the Secretary information on—“(A) the payment rates under the State plan under this title for covered outpatient drugs;“(B) the dispensing fees paid under such plan for such drugs; and“(C) utilization rates for noninnovator multiple source drugs under such plan.“(3) Annual state performance rankings.—“(A) Comparative analysis.—The Secretary annually shall compare, for the 50 most widely prescribed drugs identified by the Secretary, the national retail sales price data (collected under paragraph (1)) for such drugs with data on prices under this title for each such drug for each State.“(B) Availability of information.—The Secretary shall submit to Congress and the States full information regarding the annual rankings made under subparagraph (A).“(4) Appropriation.—Out of any funds in the Treasury not otherwise appropriated, there is appropriated to the Secretary of Health and Human Services $5,000,000 for each of fiscal years 2006 through 2010 to carry out this subsection.”.(f) Miscellaneous Amendments.—(1) In general.—Sections 1927(g)(1)(B)(i)(II) and 1861(t)(2)(B)(ii)(I) of such Act are each amended by inserting “(or its successor publications)” after “United States Pharmacopoeia-Drug Information”.(2) Paperwork reduction.—The last sentence of section 1927(g)(2)(A)(ii) of such Act (42 U.S.C. 1396r–8(g)(2)(A)(ii)) is amended by inserting before the period at the end the following: “, or to require verification of the offer to provide consultation or a refusal of such offer”.(3) Effective date.—The amendments made by this subsection shall take effect on the date of the enactment of this Act.(g) Effective Date.—Except as otherwise provided, the amendments made by this section shall take effect on January 1, 2007, 120 STAT. 59 without regard to whether or not final regulations to carry out such amendments have been promulgated by such date.