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1 (2) in paragraphs (5), (7), and (9) of sub-
2 section (a), by striking ‘‘outpatient’’ each place it
3 appears.
4 (b) MEDICAID CREDITS ON INPATIENT DRUGS.—
5 Subsection (c) of section 340B (42 U.S.C. 256b(c)) is
6 amended to read as follows:
7 ‘‘(c) MEDICAID CREDITS ON INPATIENT DRUGS.—
8 ‘‘(1) IN GENERAL.—For the cost reporting pe-
9 riod covered by the most recently filed Medicare cost
10 report under title XVIII of the Social Security Act,
11 a hospital described in subparagraph (L), (M), (N),
12 (R), (S), or (T) of subsection (a)(4) and enrolled to
13 participate in the drug discount program under this
14 section shall provide to each State under its plan
15 under title XIX of such Act—
16 ‘‘(A) a credit on the estimated annual
17 costs to such hospital of single source and inno-
18 vator multiple source drugs provided to Med-
19 icaid beneficiaries for inpatient use; and
20 ‘‘(B) a credit on the estimated annual
21 costs to such hospital of noninnovator multiple
22 source drugs provided to Medicaid beneficiaries
23 for inpatient use.
24 ‘‘(2) AMOUNT OF CREDITS.—

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1 ‘‘(A) SINGLE SOURCE AND INNOVATOR

2 MULTIPLE SOURCE DRUGS.—For purposes of

3 paragraph (1)(A)—
4 ‘‘(i) the credit under such paragraph
5 shall be equal to the product of—
6 ‘‘(I) the annual value of single
7 source and innovator multiple source
8 drugs purchased under this section by
9 the hospital based on the drugs’ aver-
10 age manufacturer price;
11 ‘‘(II) the estimated percentage of
12 the hospital’s drug purchases attrib-
13 utable to Medicaid beneficiaries for in-
14 patient use; and
15 ‘‘(III) the minimum rebate per-
16 centage described in section
17 1927(c)(1)(B) of the Social Security
18 Act;
19 ‘‘(ii) the reference in clause (i)(I) to
20 the annual value of single source and inno-
21 vator multiple source drugs purchased
22 under this section by the hospital based on
23 the drugs’ average manufacturer price
24 shall be equal to the sum of—

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1 ‘‘(I) the annual quantity of each
2 single source and innovator multiple
3 source drug purchased during the cost
4 reporting period, multiplied by
5 ‘‘(II) the average manufacturer
6 price for that drug;
7 ‘‘(iii) the reference in clause (i)(II) to
8 the estimated percentage of the hospital’s
9 drug purchases attributable to Medicaid
10 beneficiaries for inpatient use; shall be
11 equal to—
12 ‘‘(I) the Medicaid inpatient drug
13 charges as reported on the hospital’s
14 most recently filed Medicare cost re-
15 port, divided by
16 ‘‘(II) total drug charges reported
17 on the cost report; and
18 ‘‘(iv) the terms ‘single source drug’
19 and ‘innovator multiple source drug’ have
20 the meanings given such terms in section
21 1927(k)(7) of the Social Security Act.
22 ‘‘(B) NONINNOVATOR MULTIPLE SOURCE

23 DRUGS.—For purposes of paragraph (1)(B)—

24 ‘‘(i) the credit under such paragraph
25 shall be equal to the product of—

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1 ‘‘(I) the annual value of noninno-
2 vator multiple source drugs purchased
3 under this section by the hospital
4 based on the drugs’ average manufac-
5 turer price;
6 ‘‘(II) the estimated percentage of
7 the hospital’s drug purchases attrib-
8 utable to Medicaid beneficiaries for in-
9 patient use; and
10 ‘‘(III) the applicable percentage
11 as defined in section 1927(c)(3)(B) of
12 the Social Security Act;
13 ‘‘(ii) the reference in clause (i)(I) to
14 the annual value of noninnovator multiple
15 source drugs purchased under this section
16 by the hospital based on the drugs’ average
17 manufacturer price shall be equal to the
18 sum of—
19 ‘‘(I) the annual quantity of each
20 noninnovator multiple source drug
21 purchased during the cost reporting
22 period, multiplied by
23 ‘‘(II) the average manufacturer
24 price for that drug;

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989
1 ‘‘(iii) the reference in clause (i)(II) to
2 the estimated percentage of the hospital’s
3 drug purchases attributable to Medicaid
4 beneficiaries for inpatient use shall be
5 equal to—
6 ‘‘(I) the Medicaid inpatient drug
7 charges as reported on the hospital’s
8 most recently filed Medicare cost re-
9 port, divided by
10 ‘‘(II) total drug charges reported
11 on the cost report; and
12 ‘‘(iv) the term ‘noninnovator multiple
13 source drug’ has the meaning given such
14 term in section 1927(k)(7) of the Social
15 Security Act.
16 ‘‘(3) CALCULATION OF CREDITS.—

17 ‘‘(A) IN GENERAL.—Each State calculates

18 credits under paragraph (1) and informs hos-
19 pitals of amount under section 1927(a)(5)(D)
20 of the Social Security Act.
21 ‘‘(B) HOSPITAL PROVISION OF INFORMA-

22 TION.—Not later than 30 days after the date of

23 the filing of the hospital’s most recently filed
24 Medicare cost report, the hospital shall provide
25 the State with the information described in

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1 paragraphs (2)(A)(ii) and (2)(B)(ii). With re-
2 spect to each drug purchased during the cost
3 reporting period, the hospital shall provide the
4 dosage form, strength, package size, date of
5 purchase and the number of units purchased.
6 ‘‘(4) PAYMENT DEADLINE.—The credits pro-
7 vided by a hospital under paragraph (1) shall be
8 paid within 60 days after receiving the information
9 specified in paragraph (3)(A).
10 ‘‘(5) OPT OUT.—A hospital shall not be re-
11 quired to provide the Medicaid credit required under
12 paragraph (1) if it can demonstrate to the State
13 that it will lose reimbursement under the State plan
14 resulting from the extension of discounts to inpa-
15 tient drugs under subsection (b)(2) and that the loss
16 of reimbursement will exceed the amount of the
17 credit otherwise owed by the hospital.
18 ‘‘(6) OFFSET AGAINST MEDICAL ASSISTANCE.—

19 Amounts received by a State under this subsection

20 in any quarter shall be considered to be a reduction
21 in the amount expended under the State plan in the
22 quarter for medical assistance for purposes of sec-
23 tion 1903(a)(1) of the Social Security Act.’’.
24 (c) CONFORMING AMENDMENTS.—Section 1927 of
25 the Social Security Act (42 U.S.C. 1396r–8) is amended—

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1 (1) in subsection (a)(5)(A), by striking ‘‘covered
2 outpatient drugs’’ and inserting ‘‘covered drugs (as
3 defined in section 340B(b)(2) of the Public Health
4 Service Act)’’;
5 (2) in subsection (a)(5), by striking subpara-
6 graph (D) and inserting the following:
7 ‘‘(D) STATE RESPONSIBILITY FOR CALCU-

8 LATING HOSPITAL CREDITS.—The State shall

9 calculate the credits owed by the hospital under
10 paragraph (1) of section 340B(c) of the Public
11 Health Service Act and provide the hospital
12 with both the amounts and an explanation of
13 how it calculated the credits. In performing the
14 calculations specified in paragraphs (2)(A)(ii)
15 and (2)(B)(ii) of such section, the State shall
16 use the average manufacturer price applicable
17 to the calendar quarter in which the drug was
18 purchased by the hospital.’’; and
19 (3) in subsection (k)(1)—
20 (A) in subparagraph (A), by striking ‘‘sub-
21 paragraph (B)’’ and inserting ‘‘subparagraphs
22 (B) and (D)’’; and
23 (B) by adding at the end the following:
24 ‘‘(D) CALCULATION FOR COVERED

25 DRUGS.—With respect to a covered drug (as de-

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1 fined in section 340B(b)(2) of the Public
2 Health Service Act), the average manufacturer
3 price shall be determined in accordance with
4 subparagraph (A) except that, in the event a
5 covered drug is not distributed to the retail
6 pharmacy class of trade, it shall mean the aver-
7 age price paid to the manufacturer for the drug
8 in the United States by wholesalers for drugs
9 distributed to the acute care class of trade,
10 after deducting customary prompt pay dis-
11 counts.’’.
12 SEC. 2503. EFFECTIVE DATE.

13 (a) IN GENERAL.—The amendments made by this

14 subtitle shall take effect on July 1, 2010, and shall apply
15 to drugs dispensed on or after such date.
16 (b) EFFECTIVENESS.—The amendments made by
17 this subtitle shall be effective, and shall be taken into ac-
18 count in determining whether a manufacturer is deemed
19 to meet the requirements of section 340B(a) of the Public
20 Health Service Act (42 U.S.C. 256b(a)) and of section
21 1927(a)(5) of the Social Security Act (42 U.S.C. 1396r–
22 8(a)(5)), notwithstanding any other provision of law.

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