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United States Code (Last Updated: May 24, 2014) |
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Title 42. THE PUBLIC HEALTH AND WELFARE |
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Chapter 6A. PUBLIC HEALTH SERVICE |
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SubChapter II. GENERAL POWERS AND DUTIES |
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Part D. Primary Health Care |
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SubPart vii. drug pricing agreements |
§ 256b. Limitation on prices of drugs purchased by covered entities
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(a) Requirements for agreement with Secretary (1) In general The Secretary shall enter into an agreement with each manufacturer of covered outpatient drugs under which the amount required to be paid (taking into account any rebate or discount, as provided by the Secretary) to the manufacturer for covered outpatient drugs (other than drugs described in paragraph (3)) purchased by a covered entity on or after the first day of the first month that begins after
November 4, 1992 , does not exceed an amount equal to the average manufacturer price for the drug under title XIX of the Social Security Act [42 U.S.C. 1396 et seq.] in the preceding calendar quarter, reduced by the rebate percentage described in paragraph (2). Each such agreement shall require that the manufacturer furnish the Secretary with reports, on a quarterly basis, of the price for each covered outpatient drug subject to the agreement that, according to the manufacturer, represents the maximum price that covered entities may permissibly be required to pay for the drug (referred to in this section as the “ceiling price”), and shall require that the manufacturer offer each covered entity covered outpatient drugs for purchase at or below the applicable ceiling price if such drug is made available to any other purchaser at any price.(2) “Rebate percentage” defined (A) In general For a covered outpatient drug purchased in a calendar quarter, the “rebate percentage” is the amount (expressed as a percentage) equal to— (i) the average total rebate required under section 1927(c) of the Social Security Act [42 U.S.C. 1396r–8(c)] with respect to the drug (for a unit of the dosage form and strength involved) during the preceding calendar quarter; divided by (ii) the average manufacturer price for such a unit of the drug during such quarter. (B) Over the counter drugs (i) In general For purposes of subparagraph (A), in the case of over the counter drugs, the “rebate percentage” shall be determined as if the rebate required under section 1927(c) of the Social Security Act [42 U.S.C. 1396r–8(c)] is based on the applicable percentage provided under section 1927(c)(3) of such Act.
(ii) “Over the counter drug” defined The term “over the counter drug” means a drug that may be sold without a prescription and which is prescribed by a physician (or other persons authorized to prescribe such drug under State law).
(3) Drugs provided under State medicaid plans Drugs described in this paragraph are drugs purchased by the entity for which payment is made by the State under the State plan for medical assistance under title XIX of the Social Security Act [42 U.S.C. 1396 et seq.].
(4) “Covered entity” defined In this section, the term “covered entity” means an entity that meets the requirements described in paragraph (5) and is one of the following: (A) A Federally-qualified health center (as defined in section 1905(l)(2)(B) of the Social Security Act [42 U.S.C. 1396d(l)(2)(B)]). (B) An entity receiving a grant under section 256a (a)(5)(A) or (a)(5)(B), including appropriate procedures for the provision of remedies and enforcement of determinations made pursuant to such process through mechanisms and sanctions described in paragraphs (1)(B) and (2)(B). (B) Deadlines and procedures Regulations promulgated by the Secretary under subparagraph (A) shall— (i) designate or establish a decision-making official or decision-making body within the Department of Health and Human Services to be responsible for reviewing and finally resolving claims by covered entities that they have been charged prices for covered outpatient drugs in excess of the ceiling price described in subsection (a)(1), and claims by manufacturers that violations of subsection (a)(5)(A) or (a)(5)(B) have occurred; (ii) establish such deadlines and procedures as may be necessary to ensure that claims shall be resolved fairly, efficiently, and expeditiously; (iii) establish procedures by which a covered entity may discover and obtain such information and documents from manufacturers and third parties as may be relevant to demonstrate the merits of a claim that charges for a manufacturer’s product have exceeded the applicable ceiling price under this section, and may submit such documents and information to the administrative official or body responsible for adjudicating such claim; (iv) require that a manufacturer conduct an audit of a covered entity pursuant to subsection (a)(5)(C) as a prerequisite to initiating administrative dispute resolution proceedings against a covered entity; (v) permit the official or body designated under clause (i), at the request of a manufacturer or manufacturers, to consolidate claims brought by more than one manufacturer against the same covered entity where, in the judgment of such official or body, consolidation is appropriate and consistent with the goals of fairness and economy of resources; and (vi) include provisions and procedures to permit multiple covered entities to jointly assert claims of overcharges by the same manufacturer for the same drug or drugs in one administrative proceeding, and permit such claims to be asserted on behalf of covered entities by associations or organizations representing the interests of such covered entities and of which the covered entities are members. (C) Finality of administrative resolution The administrative resolution of a claim or claims under the regulations promulgated under subparagraph (A) shall be a final agency decision and shall be binding upon the parties involved, unless invalidated by an order of a court of competent jurisdiction.
(4) Authorization of appropriations There are authorized to be appropriated to carry out this subsection, such sums as may be necessary for fiscal year 2010 and each succeeding fiscal year.
(e) Exclusion of orphan drugs for certain covered entities For covered entities described in subparagraph (M) (other than a children’s hospital described in subparagraph (M)), (N), or (O) of subsection (a)(4), the term “covered outpatient drug” shall not include a drug designated by the Secretary under section 360bb of title 21 for a rare disease or condition.
References In Text
The Social Security Act, referred to in subsec. (a)(1), (3), (4)(L)(i), (5)(A)(i), is act Aug. 14, 1935, ch. 531, 49 Stat. 620, which is classified generally to chapter 7 (§ 301 et seq.) of this title. Titles XVIII and XIX of the Act are classified generally to subchapters XVIII (§ 1395 et seq.) and XIX (§ 1396 et seq.) of chapter 7 of this title, respectively. For complete classification of this Act to the Code, see section 1305 of this title and Tables.
Section 256a of this title, referred to in subsec. (a)(4)(B), was in the original a reference to section 340A of act
Subpart II of part C of subchapter XXIV of this chapter, referred to in subsec. (a)(4)(D), was redesignated subpart I of part C of subchapter XXIV of this chapter by Pub. L. 106–345, title III, § 301(b)(1),
The Native Hawaiian Health Care Act of 1988, referred to in subsec. (a)(4)(H), was Pub. L. 100–579,
The Indian Health Care Improvement Act, referred to in subsec. (a)(4)(I), is Pub. L. 94–437,
Section 247b(j)(2) of this title, referred to in subsec. (a)(4)(K), was repealed and section 247b(j)(1)(B) was redesignated section 247b(j)(2) by Pub. L. 103–183, title III, § 301(b)(1)(A), (C),
The Prescription Drug Marketing Act, referred to in subsec. (d)(2)(B)(v)(III), probably means the Prescription Drug Marketing Act of 1987, Pub. L. 100–293,
Codification
Another section 340B of act
Amendments
2010—Subsec. (a)(1). Pub. L. 111–152, § 2302(1)(A), substituted “covered outpatient drug” for “covered drug” and “covered outpatient drugs” for “covered drugs” wherever appearing.
Pub. L. 111–148, § 7102(b)(1), inserted at end “Each such agreement shall require that the manufacturer furnish the Secretary with reports, on a quarterly basis, of the price for each covered drug subject to the agreement that, according to the manufacturer, represents the maximum price that covered entities may permissibly be required to pay for the drug (referred to in this section as the ‘ceiling price’), and shall require that the manufacturer offer each covered entity covered drugs for purchase at or below the applicable ceiling price if such drug is made available to any other purchaser at any price.”
Subsec. (a)(2)(A). Pub. L. 111–152, § 2302(1)(A), substituted “covered outpatient drug” for “covered drug” in introductory provisions.
Pub. L. 111–148, § 7101(b)(1), substituted “covered drug” for “covered outpatient drug” in introductory provisions.
Subsec. (a)(2)(B)(i). Pub. L. 111–148, § 2501(f)(1)(A), substituted “1927(c)(3)” for “1927(c)(4)”.
Subsec. (a)(4)(L). Pub. L. 111–152, § 2302(1)(B), struck out “and” at end of cl. (i), substituted “; and” for period at end of cl. (ii), and added cl. (iii).
Pub. L. 111–148, § 7101(c)(1), in cl. (i), inserted “and” at end, in cl. (ii), substituted period for “; and” at end, and struck out cl. (iii) which read as follows: “does not obtain covered outpatient drugs through a group purchasing organization or other group purchasing arrangement.”
Subsec. (a)(4)(M) to (O). Pub. L. 111–148, § 7101(a), added subpars. (M) to (O).
Subsec. (a)(5)(B). Pub. L. 111–152, § 2302(1)(A), substituted “covered outpatient drug” for “covered drug”.
Pub. L. 111–148, § 7101(b)(1), substituted “covered drug” for “covered outpatient drug”.
Subsec. (a)(5)(C). Pub. L. 111–152, § 2302(1)(C)(i), (ii), redesignated subpar. (D) as (C) and struck out former subpar. (C). Prior to amendment, text of subpar. (C) read as follows:
“(i) In general.—A hospital described in subparagraph (L), (M), (N), or (O) of paragraph (4) shall not obtain covered outpatient drugs through a group purchasing organization or other group purchasing arrangement, except as permitted or provided for pursuant to clauses (ii) or (iii).
“(ii) Inpatient drugs.—Clause (i) shall not apply to drugs purchased for inpatient use.
“(iii) Exceptions.—The Secretary shall establish reasonable exceptions to clause (i)—
“(I) with respect to a covered outpatient drug that is unavailable to be purchased through the program under this section due to a drug shortage problem, manufacturer noncompliance, or any other circumstance beyond the hospital’s control;
“(II) to facilitate generic substitution when a generic covered outpatient drug is available at a lower price; or
“(III) to reduce in other ways the administrative burdens of managing both inventories of drugs subject to this section and inventories of drugs that are not subject to this section, so long as the exceptions do not create a duplicate discount problem in violation of subparagraph (A) or a diversion problem in violation of subparagraph (B).
“(iv) Purchasing arrangements for inpatient drugs.—The Secretary shall ensure that a hospital described in subparagraph (L), (M), (N), or (O) of subsection (a)(4) that is enrolled to participate in the drug discount program under this section shall have multiple options for purchasing covered outpatient drugs for inpatients, including by utilizing a group purchasing organization or other group purchasing arrangement, establishing and utilizing its own group purchasing program, purchasing directly from a manufacturer, and any other purchasing arrangements that the Secretary determines is appropriate to ensure access to drug discount pricing under this section for inpatient drugs taking into account the particular needs of small and rural hospitals.”
Pub. L. 111–148, § 7101(c)(2)(B), added subpar. (C). Former subpar. (C) redesignated (D).
Pub. L. 111–148, § 7101(b)(1), substituted “covered drug” for “covered outpatient drug”.
Subsec. (a)(5)(C)(iv). Pub. L. 111–152, § 2302(1)(A), substituted “covered outpatient drugs” for “covered drugs”.
Subsec. (a)(5)(D). Pub. L. 111–152, § 2302(1)(C)(ii), (iii), redesignated subpar. (E) as (D) and substituted “subparagraph (C)” for “subparagraph (D)”. Former subpar. (D) redesignated (C).
Pub. L. 111–152, § 2302(1)(A), substituted “covered outpatient drug” for “covered drug”.
Pub. L. 111–148, § 7101(c)(2)(A), redesignated subpar. (C) as (D). Former subpar. (D) redesignated (E).
Pub. L. 111–148, § 7101(b)(1), substituted “covered drug” for “covered outpatient drug”.
Subsec. (a)(5)(E). Pub. L. 111–152, § 2302(1)(C)(ii), redesignated subpar. (E) as (D).
Pub. L. 111–152, § 2302(1)(A), substituted “covered outpatient drug” for “covered drug”.
Pub. L. 111–148, §§ 7101(c)(2)(A), 7102(b)(2), redesignated subpar. (D) as (E) and inserted “after audit as described in subparagraph (D) and” after “finds,”.
Subsec. (a)(7). Pub. L. 111–152, § 2302(1)(A), substituted “covered outpatient drugs” for “covered drugs” wherever appearing.
Pub. L. 111–148, § 7101(b)(1), substituted “covered drugs” for “covered outpatient drugs” wherever appearing.
Subsec. (a)(9). Pub. L. 111–152, § 2302(1)(A), substituted “covered outpatient drugs” for “covered drugs”.
Pub. L. 111–148, § 7101(b)(1), substituted “covered drugs” for “covered outpatient drugs”.
Subsec. (b). Pub. L. 111–148, § 7101(b)(2)(A), which directed substitution of “Other definitions” for “Other definition” in subsec. heading, designation of existing provisions as par. (1), and insertion of par. (1) heading, was executed by reenacting subsec. heading without change, designating existing provisions as par. (1), and inserting par. (1) heading, to reflect the probable intent of Congress.
Subsec. (b)(2). Pub. L. 111–148, § 7101(b)(2)(B), added par. (2).
Subsec. (c). Pub. L. 111–152, § 2302(2), struck out subsec. (c). Text read as follows: “Not later than 90 days after the date of filing of the hospital’s most recently filed Medicare cost report, the hospital shall issue a credit as determined by the Secretary to the State Medicaid program for inpatient covered drugs provided to Medicaid recipients.”
Pub. L. 111–148, § 7101(d), added subsec. (c) and struck out former subsec. (c). Prior to amendment, text read as follows: “A manufacturer is deemed to meet the requirements of subsection (a) of this section if the manufacturer establishes to the satisfaction of the Secretary that the manufacturer would comply (and has offered to comply) with the provisions of this section (as in effect immediately after
Pub. L. 111–148, § 2501(f)(1)(B), (C), redesignated subsec. (d) as (c) and struck out former subsec. (c). Text of former subsec. (c) read as follows: “Any reference in this section to a provision of the Social Security Act shall be deemed to be a reference to the provision as in effect on
Subsec. (d). Pub. L. 111–152, § 2302(3), substituted “covered outpatient drugs” for “covered drugs” wherever appearing and substituted “(a)(5)(C)” for “(a)(5)(D)” and “(a)(5)(D)” for “(a)(5)(E)” in two places.
Pub. L. 111–148, § 7102(a), which directed general amendment of subsec. (d), was executed by adding subsec. (d) after subsec. (c) to reflect the probable intent of Congress, because no subsec. (d) appeared subsequent to amendment by Pub. L. 111–148, § 2501(f)(1)(C). See below.
Pub. L. 111–148, § 2501(f)(1)(C), redesignated subsec. (d) as (c).
Subsec. (e). Pub. L. 111–309 substituted “covered entities described in subparagraph (M) (other than a children’s hospital described in subparagraph (M))” for “covered entities described in subparagraph (M)”.
Pub. L. 111–152, § 2302(4), added subsec. (e).
1993—Pub. L. 103–43 made technical amendment to directory language of Pub. L. 102–585, § 602(a), which enacted this section.
Effective Date Of Amendment
Pub. L. 111–309, title II, § 204(a)(2),
Pub. L. 111–148, title II, § 2501(f)(2),
Pub. L. 111–148, title VII, § 7101(e),
Miscellaneous
Pub. L. 102–585, title VI, § 602(b),