Allowable use and robust oversight of contract pharmacies

(a) Use of contract pharmacies Section 340B(a) of the Public Health Service Act (42 U.S.C. 256b(a)) is further amended by adding at the end the following: (13) Contract pharmacies (A) In general In the case of a covered entity that elects to contract with a pharmacy or pharmacies to dispense covered outpatient drugs purchased by a covered entity at or below the applicable ceiling price described in paragraph (1) to patients of the covered entity, a manufacturer of a covered outpatient drug that is subject to an agreement with the Secretary under paragraph (1) shall— (i) offer each covered entity covered outpatient drugs for purchase at or below the applicable ceiling price described in paragraph (1) regardless of whether the drug is dispensed directly by the covered entity or via a contract pharmacy arrangement; (ii) deliver or allow the delivery of covered outpatient drugs purchased by covered entity sites to pharmacy locations as requested by a covered entity, in accordance with the covered entity’s contract pharmacy agreements; (iii) not place any of the following conditions on the ability of a covered entity to purchase a covered outpatient drug at or below the applicable ceiling price described in paragraph (1) for dispensing according to its written contract pharmacy arrangements: (I) Restricting distribution options only with respect to covered outpatient drugs, covered entities, or contract pharmacies. (II) Requiring the submission of claims data directly to the manufacturer out of submissions to the entity receiving the contract to maintain the clearinghouse under section 1150D of the Social Security Act. (III) Conditioning, restricting, or refusing participation in such an arrangement solely on the basis that the covered entity elected to use a contract pharmacy. (IV) Any such other conditions specified by the Secretary through notice and comment rulemaking. (B) Registration of contract Each covered entity shall register with the Secretary any contract described in subparagraph (A), in accordance with such registration requirements established by the Secretary through notice and comment rulemaking. Such registration requirements shall include requiring covered entities to— (i) submit all contract pharmacy agreements to the Secretary in a timely manner; (ii) register each contract pharmacy arrangement with the Secretary, as applicable, prior to implementing the contract pharmacy agreement; and (iii) attest to their compliance with the requirements under this subsection at the time of contract pharmacy registration and annually thereafter. (C) Contract review process The Secretary shall establish through notice and comment rulemaking a process to review all written agreements between a covered entity and each of its contract pharmacies, as described in subparagraph (A), to ensure compliance with the requirements under this subsection. In connection with such review process, there shall be no limitation on the number of contract pharmacies a covered entity may contract with nor any geographic limitation on the location of such contract pharmacies. (D) Transparency The Secretary shall make the following information about contract pharmacy arrangements that have been approved under subparagraphs (A) and (B) available on the public internet website of the Department of Health and Human Services: (i) Name(s) of each covered entity, including the name of its child site(s) that uses contract pharmacy(ies). (ii) Name(s) and address(es) of each contract pharmacy location to which the contract pharmacy arrangement applies. (iii) Effective date(s) of the contract pharmacy arrangement(s). (iv) The last year a drug was dispensed under the contract pharmacy arrangement(s) from each location. (v) The volume of dispensed drugs under this section per reporting period. (vi) The geographic distance between the covered entity reported under (i) and each contract pharmacy reported under (ii). (vii) Information on the contract pharmacy’s status as a mail-order or specialty pharmacy. (viii) Details on the location of the contract pharmacy, including whether the contract pharmacy is located in— (I) an urban area (under Census definition); (II) a rural area (under Census definition); (III) a frontier county or frontier State (as defined in Section 1886(d)(3)(E)(iii)(II) of the Social Security Act); (IV) a medically underserved area (MUA) as defined in section 295p(6); (V) a Healthcare Provider Shortage Area (HPSA) as defined in section 254e; or (VI) an area classified as one for a medically underserved population (MUP) as defined in section 254b(b)(3). (E) Improvements in contract pharmacy arrangement integrity To ensure the integrity of contract pharmacy arrangements described in subparagraph (A), including to prevent diversion and duplicate discounts described in paragraph (5)(A), the Secretary shall promulgate rules to carry out the following: (i) Require a written agreement between a covered entity and any pharmacy with which the covered entity has a contract pharmacy arrangement. Each such agreement shall— (I) list the address of each contract pharmacy location that will dispense drugs on behalf of the covered entity, including all covered entity sites that plan to use the contract pharmacy; (II) be signed and in effect not later than the day before the contract pharmacy begins dispensing covered outpatient drugs purchased under this section on behalf of the covered entity; and (III) include the standard contract provisions established under clause (ii). (ii) Develop standard contract provisions that are required to be included in each written agreement described in clause (i), including provisions providing that— (I) the covered entity will purchase the drug and maintain title to the drug pursuant to the terms of the award or designation from the Department of Health and Human Services that qualifies such entity as a covered entity and any applicable Federal, State, or local law; (II) the contract pharmacy is responsible for providing pharmacy services and providing data to covered entities to support their submission of covered outpatient drug data to a clearinghouse contracted entity described in section 1150D of the Social Security Act; (III) the covered entity will not interfere with patient choice of their pharmacy provider nor require patients to use a certain pharmacy, including to obtain a prescription from the covered entity and obtain the drug from the pharmacy provider of his or her choice; (IV) the contract pharmacy may provide other services to the covered entity or its patients at the option of the covered entity, such as home care, delivery, and reimbursement services; (V) regardless of the services provided by the contract pharmacy, access to covered outpatient drugs purchased under this section will be restricted to patients of the covered entity; (VI) the covered entity and the contract pharmacy will adhere to all Federal, State, and local laws and requirements; (VII) the contract pharmacy will provide the covered entity with any information requested consistent with customary business practices, such as quarterly billing statements, status reports of collections, receiving and dispensing records, and information required for audits under subsection (a)(5)(C); (VIII) the covered entity and the contract pharmacy will utilize the clearinghouse to verify patient eligibility, as defined by the Secretary, and will establish and maintain safeguards to prevent diversion of covered outpatient drugs purchased under this section; (IX) the contract pharmacy may not use covered outpatient drugs purchased under this section to dispense prescriptions that are reimbursed under the Medicaid program under title XIX of the Social Security Act, unless the covered entity, the contract pharmacy, and the State Medicaid agency have established, in writing and made available to pharmaceutical manufacturers upon request, an arrangement to prevent duplicate discounts, consistent with paragraph (5)(A); (X) both the covered entity and the contract pharmacy shall be subject to audits, by the Secretary and drug manufacturers, of records that pertain to the covered entity’s compliance with paragraph (5), to prevent diversion and violations of the duplicate discount prohibition; and (XI) the contract pharmacy is required to submit to the covered entity all data elements the covered entity is required to report to the clearinghouse pursuant to section 1150D of the Social Security Act. (iii) Review written agreements, at the time of registration or recertification, or more frequently if the Secretary determines necessary, between covered entities and contract pharmacies to ensure compliance with the requirements under this section, to analyze program operations, and to provide program oversight. (iv) Provide specific guidance to covered entities regarding the needed practices and procedures for contract pharmacy oversight, including the scope and frequency of such oversight. (v) Establish a retention period of the greater of 5 years or such period as required under applicable State and Federal laws governing medical or pharmacy records during which covered entities and contract pharmacies are required to maintain all relevant auditable records in relation to contract pharmacy arrangements, including records relating to transactions of drugs purchased pursuant to an agreement under paragraph (1), sufficient to demonstrate compliance with the requirements to prevent diversion and violations of the duplicate discount prohibition.. (b) Program integrity Section 340B(d)(1)(B)(vi)(III) of the Public Health Service Act (42 U.S.C. 256b(d)(1)(B)(vi)(III)) is amended— (1) by striking intentionally charges a and inserting the following: intentionally— (aa) charges a covered entity a price for purchase of a covered outpatient drug that exceeds the maximum applicable price under subsection (a)(1);; (2) by striking the period and inserting a semicolon; and (3) by adding at the end the following: (bb) refuses to offer a covered outpatient drug for purchase at or below the maximum applicable price under subsection (a)(1) or deliver or allow to be delivered a covered outpatient drug purchased by a covered entity at or below such maximum applicable price; and (cc) places conditions on the ability of a covered entity to purchase a covered outpatient drug at or below the maximum applicable price under subsection (a)(1)..