Saving Our Community Pharmacies Act of 2007 - Amends title XIX (Medicaid) of the Social Security Act to provide for: (1) use of median retail acquisition cost as the basis for Medicaid reimbursement limits on generic drugs; and (2) establishment of an evidence-based prescription drug program.
Directs the Comptroller General to study and report to Congress on the costs of community retail pharmacies to dispense prescription drugs.
[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3140 Introduced in House (IH)]
110th CONGRESS
1st Session
H. R. 3140
To amend title XIX of the Social Security Act to ensure and foster
continued beneficiary access to generic drugs under the Medicaid
Program by setting pharmacy reimbursement based on retail acquisition
cost and to promote the use of generic drugs.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
July 24, 2007
Mrs. Boyda of Kansas (for herself, Mr. Weiner, Mrs. Emerson, Mr.
Aderholt, Mr. Alexander, Mr. Berry, Mr. Bonner, Mr. Boren, Mr. Boucher,
Mr. Boustany, Mr. Braley of Iowa, Mr. Carney, Mr. Cummings, Mr. David
Davis of Tennessee, Mr. Davis of Kentucky, Mr. Etheridge, Mr. Farr, Mr.
Gordon of Tennessee, Mr. Higgins, Mr. Jones of North Carolina, Mr.
LoBiondo, Mr. Loebsack, Mr. Moore of Kansas, Mr. Moran of Kansas, Mr.
Ortiz, Mr. Rogers of Alabama, Mr. Ross, Mr. Skelton, Mr. Tiahrt, and
Mr. Walz of Minnesota) introduced the following bill; which was
referred to the Committee on Energy and Commerce
_______________________________________________________________________
A BILL
To amend title XIX of the Social Security Act to ensure and foster
continued beneficiary access to generic drugs under the Medicaid
Program by setting pharmacy reimbursement based on retail acquisition
cost and to promote the use of generic drugs.
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 ``Saving Our Community Pharmacies Act
of 2007''.
SEC. 2. USING MEDIAN RETAIL ACQUISITION COST AS BASIS FOR MEDICAID
REIMBURSEMENT LIMITS ON GENERIC DRUGS.
(a) In General.--Subsection (e) of section 1927 of the Social
Security Act (42 U.S.C. 1396r-8) is amended by striking paragraph (5)
and inserting the following:
``(5) Application of federal upper payment limits.--
``(A) Continued use of awp.--Effective January 1,
2007, and until subparagraph (B) is in effect, 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
continue to apply the methodology in effect before the
date of the enactment of the Deficit Reduction Act of
2005.
``(B) Use of median retail acquisition cost.--
Effective on the first day of the second quarter that
begins after the date of the enactment of the Saving
Our Community Pharmacies Act of 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 (as in effect but for subparagraph
(A)), the Secretary shall substitute the median retail
acquisition cost (as computed under subparagraph (C))
for the published price.
``(C) Computation of median retail acquisition
cost.--
``(i) Smoothing and transitions.--Except as
otherwise provided in this subparagraph, the
Secretary shall calculate the median retail
acquisition cost for a multiple source drug
subject to a Federal upper limit for months in
a calendar quarter by computing the median of
the retail acquisition costs (as defined in
subsection (k)(10)) over the 4-calendar-quarter
period ending with the second preceding
calendar quarter.
``(ii) Limitation on sales to be counted.--
In computing the median retail acquisition cost
for a drug, the Secretary shall not take into
account sales other than sales to community
retail pharmacies and shall not include the
following:
``(I) Sales to mail order
facilities.
``(II) Prices paid under a State
supplemental program, State only
program, or a State Pharmacy Assistance
Programs (SPAP).
``(iii) Transition for first
implementation.--For the first 4 calendar
quarters in which subparagraph (B) is in
effect, subject to clause (iv), in calculating
the median retail acquisition cost for all
drugs the Secretary shall only use the retail
acquisition costs for those quarters beginning
with the last calendar quarter that began
before the date of the enactment of this
paragraph for which data are released.
``(iv) Transition for drugs newly
qualifying as multiple source.--In the case of
a drug product for the first four calendar
quarters in which it qualifies as a multiple
source drug, in calculating the median retail
acquisition cost for the drug the Secretary
shall only use the retail acquisition costs for
the drug beginning with the first such quarter
for which data are collected.''.
(b) Definition of Retail Acquisition Cost and Related
Definitions.--Subsection (k) of such section is amended by adding at
the end the following new paragraph:
``(10) Retail acquisition cost and related definitions.--
``(A) Retail acquisition cost.--The term `retail
acquisition cost' means, for a multiple source drug
furnished, the costs of community retail pharmacies (as
defined in subparagraph (D)) to obtain the drug, as
determined under subsection (f)(5).
``(B) Items not included in retail acquisition
cost.--In computing the retail acquisition costs for a
drug, the following shall not be taken into account:
``(i) Discounts, rebates, and price
concessions to pharmacy benefit managers.
``(ii) Non-contingent free goods.
``(iii) Patient assistance programs, such
as specialty services for cancer treatment.
``(iv) Administrative service agreements.
``(v) Inventory management fees.
``(vi) Fee-for-service agreements to
wholesalers.
``(vii) Adjustments that reduce the actual
price realized, except to the extent that they
are not reflective of purchasing costs of
retail pharmacies.
``(viii) Costs of other classes of trade
not reflective of retail pharmacy purchasing
costs.
``(ix) Prompt pay discounts extended to
retail community pharmacies.
``(C) Items taken into account in determining
retail acquisition cost.--In computing the retail
acquisition cost for a drug, the Secretary shall take
into account the following:
``(i) Volume (or comparable discounts)
discounts, chargebacks, and allowances for free
goods contingent on purchase requirements, to
the extent actually paid or credited to the
retail pharmacy. Discounts that may be paid in
a calendar quarter for an aggregate purchase of
generic drugs, applied to each drug in
proportion to the percentage purchased.
``(ii) An estimate of the rebates and
discounts that may be earned by retail
community pharmacies but not credited in the
time period in which the average retail
acquisition cost is calculated for each drug in
the survey, as determined in accordance with a
methodology specified by the survey contractor
after consultation with the affected
stakeholders.
``(iii) In the event of a reduction in the
acquisition price of a drug by a manufacturer
where that manufacturer issues a credit to the
pharmacy to lower the cost of existing
inventory to the new acquisition price, such
credit shall be applied to the existing
inventory, acquired at the higher cost, to
lower the cost basis of that existing inventory
and such lower cost basis shall be the
acquisition price for such inventory in any
price reported.
``(iv) With respect to drugs dispensed by
pharmacies that own and operate their own
warehouse distribution systems, insofar as the
retail acquisition costs takes into account the
costs associated with the ownership and
operation of such distribution system, such
costs shall be a fixed percentage of the
average wholesaler markup, as promulgated each
year by the Secretary.
``(D) Community retail pharmacy.--The term
`community retail pharmacy' means a traditional
independent, chain, mass merchandise, or supermarket
pharmacy.
``(E) Pharmacy benefits manager.--The term
`pharmacy benefits manager' means an entity that
contracts with a managed care organization, self-
insured company, or government program to provide a
range of pharmacy management benefit services,
including pharmacy network management, drug utilization
review, outcomes management, and disease management.
``(F) Widely available.--The term `widely
available' means, with respect to a multiple source
drug, that the drug is available for purchase by retail
community pharmacies throughout the nation from at
least two national wholesalers.''.
(c) Surveys of Community Retail Prices.--Subsection (f) of such
section is amended by adding at the end the following new paragraph:
``(5) Surveys for determining community retail prices for
multiple source drugs.--The following rules apply to the
determination of retail acquisition costs for multiple source
drugs for purposes of computing the median retail acquisition
cost under subsection (e)(5):
``(A) In general.--The Secretary shall conduct
national surveys on a quarterly basis of community
retail pharmacies using the criteria described in such
subsection to determine retail acquisition costs for
all multiple source drugs. The first such survey shall
be for the calendar quarter in which Saving Our
Community Pharmacies Act of 2007 is enacted.
``(B) Sample.--Each such survey shall consist of a
randomly selected sample that--
``(i) represents at least 5 percent of the
community retail pharmacies; and
``(ii) contains a representative percentage
of business among the types of community retail
pharmacies, including independent, chain, mass
merchandise, and supermarket pharmacies.
``(C) Survey information.--The cost surveys shall
include surveys of the elements used in computing
retail acquisition costs, including those items
excluded (or included) in computing such costs under
subparagraphs (B) and (C) of subsection (k)(10). In
completing the cost surveys and disclosing other
information under this section, retail community
pharmacies may make reasonable assumptions and
interpretations that are reasonably consistent with the
terms of this section.
``(D) Treatment of pharmacies under common
ownership or purchasing arrangements.--In the case of
retail community pharmacies that purchase a multiple
source drug through common ownership, management, or
other arrangements, such pharmacies shall report the
average price paid for the multiple source drug across
all pharmacies operating under such common ownership,
management, or arrangement.
``(E) Confidentiality.--The information disclosed
in response to surveys under this paragraph is
confidential and the Secretary (or any contractor
therewith) shall not disclose such information in a
form which discloses the identity of a specific
pharmacy or company, or the retail acquisition costs
for multiple source drugs of such a pharmacy or
company, except--
``(i) as the Secretary determines to be
necessary to carry out this section;
``(ii) to permit the Comptroller General to
review the information provided;
``(iii) to permit the Director of the
Congressional Budget Office to review the
information provided; and
``(iv) to the Secretary to disclose
(through a website accessible to the public)
median retail acquisition costs.
The Secretary shall post on a public Federal website
for the Medicaid program (and otherwise make available
to States) the median retail acquisition costs for
multiple source drugs.
``(F) Contractor bidding.--The Secretary shall
provide for surveys under this paragraph to be
conducted through a contract with a qualified entity.
In contracting for such services, the Secretary shall
competitively bid for an outside vendor in accordance
with the Federal Acquisition Regulations. The Secretary
shall consult with retail community pharmacies during
the process of developing a request for proposals,
receiving and reviewing bids, and contracting with such
a vendor. Any contract entered into as part of this
bidding process shall require the successful bidder to
keep confidential and not disclose to any other Federal
agency or other third parties, including State
agencies, all survey responses and any other disclosure
made by a retail community pharmacy under this section.
``(G) Auditing.--If the Secretary has reasonable
cause to believe that a survey response submitted by a
retail community pharmacy is not complete or accurate,
the Secretary may conduct an audit of the records used
by the retail community pharmacy to develop that survey
response. In conducting such inspection the Secretary
may require a retail community pharmacy to produce for
inspection, consistent with subparagraph (C), only the
records actually relied upon by the retail community
pharmacy in completing the survey. Retail community
pharmacies shall retain such records for one year, and
the Secretary shall not commence an inspection of
records related to a survey response more than one year
after the survey response was submitted by a retail
community pharmacy.
``(H) Penalty for failure to cooperate in audit for
provision of false information.--The Secretary may
impose a civil monetary penalty on a retail community
pharmacy, if the pharmacy refuses a request by the
Secretary for information in connection with an audit
under subparagraph (G) or knowingly provides false
information in such an audit or in a survey under this
paragraph. The amount of such penalty shall not exceed
$10,000 in the case of such a refusal or $10,000 for
each item of false information provided. The provisions
of section 1128A (other than subsections (a) and (b))
shall apply to a civil money penalty under this
subparagraph in the same manner as such provisions
apply to a penalty or proceeding under section
1128A(a).''.
SEC. 3. ENCOURAGING GENERIC UTILIZATION AND OTHER EVIDENCE-BASED COST
CONTROL PROGRAMS UNDER THE MEDICAID PROGRAM.
Section 1927 of the Social Security Act (42 U.S.C. 1396r-8) is
further amended by adding at the end the following new subsection:
``(l) Establishment of Evidence-Based Prescription Drug Program.--
``(1) In general.--In order to control costs without
reducing the quality of care when providing payment for covered
outpatient drugs. under the State plan under this title, each
State agency shall establish and implement (beginning with the
second calendar quarter that begins after the date of the
enactment of this subsection), an evidence-based prescription
drug program in accordance with paragraph (3). Each such
program shall be designed in a manner so as to result in a
generic dispensing rate for a fiscal year (or, in the case of
implementation after the beginning of a fiscal year for the
remainder of such fiscal year) that is at least the target
generic dispensing rate specified in paragraph (2) for the
State and fiscal year (or portion thereof) involved. The
Secretary is authorized to reduce the Federal financial
participation under this title for quarters in the fiscal year
with respect to covered outpatient drugs to such amount as
would reflect the State's achievement of such a target generic
dispensing rate for such quarters and drugs.
``(2) Target generic dispensing rate.--The target generic
dispensing rate for a State for a fiscal year (or portion
thereof) is the lesser of--
``(A) 65 percent; or
``(B) in the case of--
``(i) a State with a generic dispensing
rate for the previous fiscal year that is below
the national average of such rate for such
fiscal year, 3 percentage points above rate for
the State in the previous fiscal year; or
``(ii) any other State, at least 1 percent
point above such rate for the State in the
previous fiscal year.
``(3) Requirements.--Each such program shall--
``(A) prohibit reimbursement for covered outpatient
drugs that are determined to be ineffective by the
Commissioner of Food and Drugs;
``(B) adopt rules in order to ensure that less
expensive generic drugs will be used in as many cases
as possible with approval of the physician;
``(C) consider the use of drugs with lower abuse
potential in substitution for drugs with significant
abuse potential; and
``(D) establish an independent pharmacy and
therapeutics committee to evaluate the effectiveness of
covered outpatient drugs in the development of such
program.
``(4) Generic dispensing rate.--For purposes of this
subsection, the term `generic dispensing rate' means, with
respect to a multiple source drug, the proportion of the total
volume of such drugs dispensed, that are generic drugs.''.
SEC. 4. CHANGES TO DEFINITION OF MULTIPLE SOURCE DRUG AND APPLICATION
TO UPPER PAYMENT LIMITS.
(a) In General.--Section 1927 of the Social Security Act (42 U.S.C.
1396r-8) is further amended--
(1) in subsection (e)(4)--
(A) by striking ``each multiple source drug'' and
inserting ``each widely available multiple source
drug''; and
(B) by striking ``(or effective January 1, 2007,
two or more)''; and
(2) in subsection (k)(7)(A)(i)--
(A) in the matter before subclause (I), by striking
``1 other drug product'' and inserting ``2 other drug
products''; and
(B) in each of subclauses (I), (II), and (III), by
striking ``is'' and inserting ``are''.
(b) Effective Date.--The amendments made by this section shall take
effect on the first day of the second calendar quarter beginning after
the date of the enactment of this Act.
SEC. 5. GAO STUDY OF COMMUNITY PHARMACY DISPENSING COSTS.
(a) Study.--The Comptroller General of the United States shall
conduct a study on the costs of community retail pharmacies to dispense
prescription drugs.
(b) Report.--Not later than one year after the date of the
enactment of this Act, the Comptroller General shall submit a report to
Congress on the study conducted under subsection (a).
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Energy and Commerce.
Referred to the Subcommittee on Health.
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