Contract pharmacies

Section 340B(a)(5) of the Public Health Service Act (42 U.S.C. 256b(a)(5)) is further amended by adding at the end the following: (F) Contract pharmacies (i) In general Subject to the conditions set forth in this subparagraph, a covered entity may enter into written agreements with contract pharmacies to dispense to patients of such entity covered outpatient drugs purchased by such entity under the 340B program. Subject to such conditions, a manufacturer of covered outpatient drugs shall ship or facilitate shipment of such drugs to contract pharmacies at the request of such covered entity. Except with respect to covered outpatient drugs shipped to and dispensed by a contract pharmacy as provided in this subparagraph, and notwithstanding any other provision in this section, a manufacturer of covered outpatient drugs shall have no obligation to pay a discount or rebate under this section with respect to covered outpatient drugs delivered or otherwise transferred to any location other than a registered address of the covered entity (including an entity pharmacy or child site, as applicable) listed in the identification system described in subsection (d)(2)(B)(iv). (ii) Conditions for covered entity use of contract pharmacies In order for a covered entity to enter into a written agreement with a contract pharmacy to dispense to patients of such entity covered outpatient drugs purchased by such entity under the program under this section, the entity shall— (I) (aa) be described in one of subparagraphs (A) through (K) of paragraph (4) and purchase covered outpatient drugs for its patients within the scope of the Federal grant, project, or Federal grant-authorizing statute, as applicable, that qualifies such entity for participation in the program under this section; or (bb) be described in one of subparagraphs (L) through (O) of paragraph (4); (II) establish and implement compliance procedures to satisfy the requirements described in subparagraphs (A), (B), (G) (as applicable), (H) (as applicable), (J), and (K) of paragraph (5) and section 1193(d) of the Social Security Act with respect to covered outpatient drugs purchased by the covered entity under this section, including with respect to such drugs dispensed by a contract pharmacy, which compliance procedures shall be considered records of the covered entity subject to audit under subparagraph (C); (III) prior to purchasing covered outpatient drugs subject to an agreement under this section to be shipped to or dispensed by such pharmacy, register such pharmacy in the identification system described in subsection (d)(2)(B)(iv) as a contract pharmacy, to include such pharmacy’s national provider identifier, and certify to the Secretary upon initial registration of such pharmacy in such system and annually thereafter that such pharmacy complies with all requirements under this subparagraph, including the covered entity compliance procedures described in subclause (II); and (IV) as applicable, comply with the requirements and limitations set forth in clauses (iii) through (vii) of this subparagraph. (iii) Limitation on contract pharmacies for certain hospital covered entities Notwithstanding clause (ii), a covered entity described in paragraph (4)(L), a free-standing cancer hospital described in paragraph (4)(M), and a rural referral center described in paragraph (4)(O) may not enter into written agreements with more than 5 contract pharmacies to dispense covered outpatient drugs purchased by the covered entity under this section to patients of such entity under this subparagraph. For purposes of this clause, a contract pharmacy shall not include a mail order pharmacy. (iv) Service area requirement for eligible contract pharmacies A contract pharmacy with which a covered entity enters into a written agreement to dispense covered outpatient drugs to patients of such entity subject to the conditions in this subparagraph shall be located in the service area of the covered entity (as defined in clause (x)(IV)). Notwithstanding any other provision in this subparagraph, this clause (iv) shall not apply with respect to a covered entity described in paragraph (4)(G) or a contract pharmacy that is a mail order pharmacy. (v) Requirements for use of mail order pharmacies (I) In general Notwithstanding any other provision in this section, a covered outpatient drug subject to an agreement under this section may be dispensed to a patient of a covered entity through a mail order pharmacy only if— (aa) the covered entity dispensing such drug (or on whose behalf such drug is dispensed) through a mail order pharmacy to such a patient is described in one of subparagraphs (A) through (K) of paragraph (4), such entity is not a specified nonhospital covered entity (as defined in subsection (b)(4)), and, except for a covered entity described in subparagraph (G) of such subsection, the patient dispensed such drug resides within the service area of the covered entity (as defined in clause (x)(IV)); or (bb) the covered entity dispensing such drug (or on whose behalf such drug is dispensed) through a mail order pharmacy to such a patient is described in subparagraph (N) of paragraph (4) or is a sole community hospital described in subparagraph (O) of such paragraph, and the patient dispensed such drug resides in a county that is not part of a Metropolitan Statistical Area, as defined by the Office of Management and Budget. (II) Requirements for use of mail order contract pharmacies Subject to the conditions set forth in this subparagraph, a covered entity described in item (aa) or (bb) of subclause (I) may enter into written agreements with contract pharmacies that are mail order pharmacies to dispense to patients described in such relevant clause covered outpatient drugs purchased by such entity under the 340B program. (vi) Requirements for covered entity compliance procedures and written agreements Not later than 180 days following the date of enactment of the 340B ACCESS Act, the Secretary shall issue guidance to covered entities specifying requirements for— (I) covered entity compliance procedures described in clause (ii)(II) that the Secretary determines are sufficient to ensure that covered outpatient drugs are not subject to duplicate discounts in violation of subsection (a)(5)(A) (including with respect to such drugs used by Medicaid managed care enrollees), that such drugs cannot be resold or otherwise transferred to persons who do not meet the definition of a patient of the covered entity in violation of subparagraph (B), that the patient affordability requirements specified in subparagraphs (G) and (H), as applicable, are appropriately applied at the point of drug dispense or administration, that data and other information is submitted in accordance with subparagraphs (J) and (K), and that the nonduplication requirement in section 1193(d) of the Social Security Act is satisfied; and (II) written agreements between covered entities and contract pharmacies described in clause (vii). (vii) Written agreement required The written agreement between a covered entity and a contract pharmacy described in this subparagraph shall include binding and enforceable obligations on the contract pharmacy to comply with the covered entity’s compliance procedures described in clause (ii)(II) with respect to covered outpatient drugs dispensed to patients of such entity in accordance with this subparagraph. Within 30 days of the applicable effective date of such written agreement, including any amendment or addendum thereto, the covered entity shall submit a copy of the agreement, together with any amendments or addenda, to the Secretary in a form and manner specified by the Secretary. The Secretary shall review all such agreements, including amendments and addenda, for compliance with the requirements set forth in this subparagraph and may require a covered entity and contract pharmacy to modify an agreement to conform to the requirements of this subparagraph. Such agreements, including amendments and addenda, shall be considered records of the covered entity subject to audit under subparagraph (C). (viii) Clarification for covered outpatient drugs subject to restricted distribution Notwithstanding any other provision in this section, a manufacturer of a covered outpatient drug requiring exclusive use of a specialty pharmacy or a restricted distribution network shall be deemed to have satisfied its obligations under this subparagraph with respect to a contract pharmacy if such manufacturer offers each covered entity such drug for purchase at or below the applicable ceiling price described in paragraph (1) through a wholesaler, distributor, or pharmacy included in the restricted distribution network for such drug. (ix) Penalties for contract pharmacy compliance violations (I) In general A contract pharmacy that is found to have violated the covered entity compliance procedures described in clause (ii)(II), violated subparagraph (A), or violated subparagraph (B) shall— (aa) in the first instance of such violation, be liable to a manufacturer of a covered outpatient drug that is the subject of such violation in an amount equal to the reduction in the price of such drug (as described in subsection (a)(1)), plus interest on such amount, which shall be compounded monthly and equal to the current short-term interest rate as determined by the Federal Reserve for the time period for which the covered entity is liable; (bb) in the second instance of such violation— (AA) be liable to a manufacturer of a covered outpatient drug that is the subject of such violation in an amount equal to the reduction in the price of the drug (as described in paragraph (1)), plus interest on such amount, which shall be calculated in the manner specified in item (aa); and (BB) be required to pay a civil monetary penalty equal to $3,000 for each claim for a covered outpatient drug that is subject to the violation, which amount shall be adjusted for inflation annually to reflect the rate of change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics; and (cc) in the third instance of such violation— (AA) be liable to a manufacturer of a covered outpatient drug that is the subject of such violation in an amount equal to the reduction in the price of the drug (as described in paragraph (1)), plus interest on such amount, which shall be calculated in the manner specified in item (aa); (BB) be required to pay a civil monetary penalty equal to $3,000 for each claim for a covered outpatient drug that is subject to the violation, which amount shall be adjusted for inflation annually to reflect the rate of change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics; and (CC) be removed from the program under this section and disqualified from reentry into such program for a period of not less than two years, or such longer period as the Secretary may determine based on the severity of the violation (or violations) and the risk such pharmacy presents to the integrity of the program, with no ability to reenter the program unless and until the Secretary determines such pharmacy has resolved the violation (or violations) and taken reasonable steps to prevent similar future violations. (II) Corrective action plan In the first instance of a violation described in subclause (I)(aa), in the second instance of a violation described in subclause (I)(bb), and prior to reentry into the program following a violation described in subclause (I)(cc)— (aa) the pharmacy shall conduct an internal review to identify the cause of the violation (or violations) that is inclusive of all calendar quarters within the period in which such violation (or violations) occurred and all covered outpatient drugs subject to an agreement under this section dispensed during such period; (bb) the pharmacy shall prepare a written corrective action plan, in a form specified by the Secretary, which shall include, at a minimum, the results of such internal review, the pharmacy’s methodology for identifying the full scope of such violation (or violations), and the pharmacy’s proposed corrective actions, and submit such plan to the Secretary in a form and manner specified by the Secretary; and (cc) the Secretary shall review such plan, notify the pharmacy of any revisions to such plan, including additional corrective actions, necessary for the Secretary to approve such plan, and publish the approved plan on a public website of the Department of Health and Human Services (with redactions of any confidential or proprietary information). (III) Civil monetary penalty for violations by removed pharmacy A contract pharmacy removed from the program under this section pursuant to subclause (I)(cc) that dispenses a covered outpatient drug subject to an agreement under this section during a time period that such pharmacy is removed from the program and is not approved for reentry shall be required to pay a civil monetary penalty equal to $3,000 for each claim for each such drug dispensed during such period, which amount shall be adjusted for inflation annually to reflect the rate of change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics. (IV) Procedures and delegation The provisions of section 1128A of the Social Security Act (other than subsections (a) and (b)) shall apply for purposes of any payment, civil monetary penalty, or removal described in this clause in the same manner as such provisions apply to a penalty or proceeding under section 1128A(a). The Office of Inspector General of the Department of Health and Human Services shall carry out the provisions of this clause. (x) Definitions In this subparagraph: (I) Contract pharmacy The term contract pharmacy means, with respect to a covered entity described in clause (ii), any individual pharmacy (as determined by a national provider identifier unique to the pharmacy address) that is— (aa) licensed as a pharmacy by the relevant State (or States); (bb) authorized to dispense covered outpatient drugs subject to an agreement under this section to patients of such entity (as defined in subsection (b)(3)) pursuant to a valid written agreement with such entity (as described in this subparagraph); and (cc) not an entity pharmacy. (II) Entity pharmacy The term entity pharmacy means any individual pharmacy (as determined by a national provider identifier unique to the pharmacy address) that is— (aa) (AA) licensed as a pharmacy by the relevant State (or States); and (BB) the same legal entity as the covered entity and located within the covered entity’s service area, if the covered entity is described in one of subparagraphs (A) through (K) of paragraph (4) and is not a specified nonhospital covered entity (as defined in subsection (b)(4)); or (bb) the same legal entity as the covered entity and located within the covered entity’s four walls, if the covered entity is described in one of subparagraphs (L) through (O) of paragraph (4) or is a specified nonhospital covered entity (as defined in subsection (b)(4)). (III) Mail order pharmacy The term mail order pharmacy is a pharmacy that is licensed as a pharmacy by the State (or States) and that dispenses prescription medications to individuals primarily through the mail, as determined in accordance with guidance issued by the Secretary in connection with part 447, subpart I of title 42 of the Code of Federal Regulations (or any successor regulations). (IV) Service area The term service area means, with respect to a covered entity described in paragraph (4), other than a covered entity described in subparagraph (G) of such paragraph, the Public Use Microdata Area (as defined by the United States Census Bureau) in which such entity is located and all Public Use Microdata Areas that are contiguous with the Public Use Microdata Area in which such entity is located, each of which shall be listed in the identification system described in subsection (d)(2)(B)(iv). (xi) Rules of construction (I) Location For purposes of this subparagraph, the location of a covered entity shall be determined based on the physical address of the entity listed in the identification system described in subsection (d)(2)(B)(iv) without regard to any off-campus outpatient facilities. (II) Same legal entity For purposes of this subparagraph, a pharmacy is the same legal entity as the covered entity if the name, ownership, and employer identification number of the pharmacy is identical to the name, ownership, and employer identification number of the covered entity..