Contract pharmacy

(a) Use of contract pharmacies Section 340B(a) of the Public Health Service Act (42 U.S.C. 256b(a)) is amended by adding at the end the following: (11) Contract pharmacies (A) In general A covered entity may elect to use one or more wholly-owned pharmacies, in addition to one or more contract pharmacies, to acquire and dispense to patients of the covered entity covered outpatient drugs purchased by the covered entity pursuant to an agreement described in paragraph (1). (B) Limits on certain contract pharmacies (i) In general Subject to clause (ii), each covered entity that elects to use one or more contract pharmacies to dispense covered outpatient drugs purchased by the covered entity pursuant to an agreement described in paragraph (1) to patients of the covered entity shall cancel the contract with any such pharmacy that has not dispensed any covered outpatient drugs to such patients in the most recent 12-month period. (ii) Exceptions A covered entity is not required to cancel the contract of a pharmacy that has not dispensed covered outpatient drugs in the most recent 12-month period, as described in clause (i), if— (I) there is a change of ownership of the covered entity or pharmacy requiring a new contract to continue an established arrangement; (II) there is a change to the covered entity’s service area; (III) the contract pharmacy is necessary for the covered entity to preserve access for emergency or contingency use; or (IV) other circumstances exist, as the Secretary may determine appropriate. (iii) Threshold for high number of contract pharmacies The Secretary may develop a process that is not overly burdensome to the covered entities to increase audits on covered entities that use a high number of contract pharmacies, as determined by the Secretary. (C) Registration of contract A covered entity shall register with the Secretary, and annually recertify, any contract for a contract pharmacy arrangement, in accordance with such registration requirements as the Secretary may establish through regulations. Such registration requirements shall include requiring the covered entity to do each of the following: (i) Submit all contract pharmacy agreements to the Secretary in a timely manner, prior to implementing the contract pharmacy agreement. (ii) Register each contract pharmacy arrangement with the Secretary prior to implementing the contract pharmacy agreement. (iii) Attest to the covered entity's compliance with the requirements under this section. (D) Contract review process The Secretary shall establish a process to review written agreements between a covered entity and each of its contract pharmacies described in subparagraph (E)(i), to ensure compliance with the requirements under this subsection. (E) Improvements in contract pharmacy arrangement integrity To ensure the integrity of contract pharmacy arrangements described in this paragraph, 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 one or more contract pharmacies of the covered entity. Each such agreement shall— (I) list the address of each contract pharmacy location that will dispense drugs on behalf of the covered entity or reference the list of such covered entity sites that are active sites in the 340B Office of Pharmacy Affairs Information System (or a successor to such system); (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 contract pharmacy is required to provide pharmacy services; (II) the contract pharmacy is required to provide data to the covered entity to support the submission by the covered entity of covered outpatient data to a clearinghouse contracted entity described in section 1150D(a) of the Social Security Act; (III) neither the contract pharmacy nor the covered entity will require a patient to use a certain pharmacy or to obtain a prescription from the covered entity, or otherwise interfere with patient choice of a pharmacy provider, except in the case of a covered entity participating in the program under section 2616; (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, or 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 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, or receiving and dispensing records; (VII) the covered entity and the contract pharmacy will develop and implement a system to verify eligibility of patients, in accordance with subsection (b)(3), and will establish and maintain safeguards to prevent diversion of covered outpatient drugs; (VIII) 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 an arrangement to prevent duplicate discounts, consistent with paragraph (5)(A), and such arrangement is reported to the Secretary; (IX) the contract pharmacy agrees to be subject to annual independent audits commissioned by the covered entity; and (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. (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 practices and procedures for contract pharmacy oversight, including the scope and frequency of such oversight. (v) Establish a retention period of at least 3 years 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 described in paragraph (5).. (b) Manufacturer requirements Section 340B(a) of the Public Health Service Act (42 U.S.C. 256b(a)), as amended by subsection (a), is further amended by adding at the end the following: (12) Manufacturer requirements A manufacturer of a covered outpatient drug that is subject to an agreement with the Secretary under paragraph (1) shall, as a condition of such agreement, comply with the following requirements: (A) Offer the 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 through a contract pharmacy of the covered entity. (B) Deliver or allow the delivery of covered outpatient drugs purchased by a covered entity at or below the applicable ceiling price described in paragraph (1) to locations, including pharmacy locations as requested by a covered entity, in accordance with the covered entity's contract pharmacy agreements. (C) Not, directly or indirectly, place any of the following conditions on the offers made to a covered entity to purchase a covered outpatient drug at or below the applicable ceiling price described in paragraph (1) for dispensing according to the applicable 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 to the manufacturer, except for submissions to the entity receiving the contract to maintain the clearinghouse under section 1150D of the Social Security Act. (iii) Such other conditions as the Secretary may prohibit through notice and comment rulemaking.. (c) 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 and inserting the following: “intentionally— (aa) charges; (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 ceiling price; (cc) refuses to deliver a covered outpatient drug purchased by a covered entity at or below the ceiling price; or (dd) places conditions on the ability of a covered entity to purchase a covered outpatient drug at or below the ceiling price.. (d) Transparency Paragraph (11) of section 340B(a) of the Public Health Service Act (42 U.S.C. 256b(a)), as added by subsection (a), is amended by adding at the end the following: (F) Transparency Each covered entity that uses one or more contract pharmacies as described in this paragraph shall make the following information about each contract pharmacy arrangement pursuant to this paragraph and registered under subparagraph (C) available to the Secretary for publication on the website of the Department of Health and Human Services: (i) The name of the covered entity, including each child site, that uses a contract pharmacy. (ii) The name and address of each contract pharmacy location to which the contract pharmacy arrangement applies. (iii) The effective date of the contract pharmacy arrangement. (iv) The last year a covered outpatient drug was dispensed under the contract pharmacy arrangement from each location. (v) The number of covered outpatient drugs dispensed annually from each location under this section. (vi) Whether the contract pharmacy is a mail-order or payer-mandated pharmacy.. (e) Auditing Section 340B(a)(5)(C) of the Public Health Service Act (42 U.S.C. 256b(a)(5)(C)) is amended— (1) by striking A covered entity and inserting the following: (i) In general A covered entity; and (2) by adding at the end the following: (ii) Contract pharmacy audits (I) In general A covered entity that uses one or more contract pharmacies shall permit the Secretary or the manufacturer of a covered outpatient drug that the covered entity or pharmacy purchased under this section to audit at the Secretary’s or the manufacturer’s expense the records of the covered entity and contract pharmacy to assess compliance with the contract pharmacy requirements under paragraph (11) with respect to drugs of the manufacturer. (II) Process In order to initiate an audit under subclause (I), a manufacturer shall— (aa) demonstrate credible allegations to the Secretary about noncompliance under subparagraph (B) or (C) of paragraph (11) and evidence of good faith outreach to determine compliance, including through— (AA) notification to the covered entity in writing when the manufacturer determined that the covered entity may have violated the requirements under subparagraph (B) or (C) of paragraph (11); and (BB) providing the covered entity a 30-day period, beginning on the date of notification under subitem (AA), to resolve the matter; and (bb) submit to the Secretary evidence of the credible allegations described in item (aa) to request authorization to proceed with an audit of the covered entity. (III) Corporate officers A corporate officer of the covered entity shall be responsible for corrections of noncompliance identified in an audit conducted under this clause. (IV) Authority to establish audit process The Secretary shall establish, through notice and comment rulemaking, a process for making a determination of a credible allegation under this clause, a timeline for making such a determination, and the audit process relating to the number, scope, and duration of audits authorized under this clause..