Right Rebate Act of 2019

II 116TH CONGRESS 1ST SESSION S. 205 To amend title XIX of the Social Security Act to prevent the misclassification of drugs for purposes of the Medicaid drug rebate program. IN THE SENATE OF THE UNITED STATES JANUARY 24, 2019 Mr. WYDEN (for himself and Mr. GRASSLEY) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend title XIX of the Social Security Act to prevent the misclassification of drugs for purposes of the Med- icaid drug rebate program. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Right Rebate Act of 4 2019’’. 5 VerDate Sep 11 2014 03:29 Jan 29, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S205.IS S205 kjohnson on DSK79L0C42 with BILLS 2 •S 205 IS SEC. 2. PREVENTING THE MISCLASSIFICATION OF DRUGS 1 UNDER THE MEDICAID DRUG REBATE PRO- 2 GRAM. 3 (a) APPLICATION OF CIVIL MONEY PENALTY FOR 4 MISCLASSIFICATION OF COVERED OUTPATIENT 5 DRUGS.— 6 (1) IN GENERAL.—Section 1927(b)(3) of the 7 Social Security Act (42 U.S.C. 1396r–8(b)(3)) is 8 amended— 9 (A) in the paragraph heading, by inserting 10 ‘‘AND DRUG PRODUCT’’ after ‘‘PRICE’’; 11 (B) in subparagraph (A)— 12 (i) in clause (ii), by striking ‘‘; and’’ 13 at the end and inserting a semicolon; 14 (ii) in clause (iii), by striking the pe- 15 riod at the end and inserting a semicolon; 16 (iii) in clause (iv), by striking the 17 semicolon at the end and inserting ‘‘; 18 and’’; and 19 (iv) by inserting after clause (iv) the 20 following new clause: 21 ‘‘(v) not later than 30 days after the 22 last day of each month of a rebate period 23 under the agreement, such drug product 24 information as the Secretary shall require 25 VerDate Sep 11 2014 03:29 Jan 29, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S205.IS S205 kjohnson on DSK79L0C42 with BILLS 3 •S 205 IS for each of the manufacturer’s covered out- 1 patient drugs.’’; 2 (C) in subparagraph (C)— 3 (i) in clause (ii), by inserting ‘‘, in- 4 cluding information related to drug pric- 5 ing, drug product information, and data 6 related to drug pricing or drug product in- 7 formation,’’ after ‘‘provides false informa- 8 tion’’; and 9 (ii) by adding at the end the following 10 new clauses: 11 ‘‘(iii) MISCLASSIFIED OR 12 MISREPORTED INFORMATION.— 13 ‘‘(I) IN GENERAL.—Any manu- 14 facturer with an agreement under this 15 section that knowingly (as defined in 16 section 1003.110 of title 42, Code of 17 Federal Regulations (or any successor 18 regulation)) misclassifies a covered 19 outpatient drug, such as by knowingly 20 submitting incorrect drug category in- 21 formation, is subject to a civil money 22 penalty for each covered outpatient 23 drug that is misclassified in an 24 amount not to exceed 2 times the 25 VerDate Sep 11 2014 03:29 Jan 29, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S205.IS S205 kjohnson on DSK79L0C42 with BILLS 4 •S 205 IS amount of the difference, as deter- 1 mined by the Secretary, between— 2 ‘‘(aa) the total amount of 3 rebates that the manufacturer 4 paid with respect to the drug to 5 all States for all rebate periods 6 during which the drug was 7 misclassified; and 8 ‘‘(bb) the total amount of 9 rebates that the manufacturer 10 would have been required to pay, 11 as determined by the Secretary, 12 with respect to the drug to all 13 States for all rebate periods dur- 14 ing which the drug was misclassi- 15 fied if the drug had been cor- 16 rectly classified. 17 ‘‘(II) OTHER PENALTIES AND 18 RECOVERY OF UNDERPAID RE- 19 BATES.—The civil money penalties de- 20 scribed in subclause (I) are in addi- 21 tion to other penalties as may be pre- 22 scribed by law and any other recovery 23 of the underlying underpayment for 24 rebates due under this section or the 25 VerDate Sep 11 2014 03:29 Jan 29, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S205.IS S205 kjohnson on DSK79L0C42 with BILLS 5 •S 205 IS terms of the rebate agreement as de- 1 termined by the Secretary. 2 ‘‘(iv) INCREASING OVERSIGHT AND 3 ENFORCEMENT.—Each year the Secretary 4 shall retain, in addition to any amount re- 5 tained by the Secretary to recoup inves- 6 tigation and litigation costs related to the 7 enforcement of the civil money penalties 8 under this subparagraph and subsection 9 (c)(4)(B)(ii)(III), an amount equal to 25 10 percent of the total amount of civil money 11 penalties collected under this subparagraph 12 and subsection (c)(4)(B)(ii)(III) for the 13 year, and such retained amount shall be 14 available to the Secretary, without further 15 appropriation and until expended, for ac- 16 tivities related to the oversight and en- 17 forcement of this section and agreements 18 under this section, including— 19 ‘‘(I) improving drug data report- 20 ing systems; 21 ‘‘(II) evaluating and ensuring 22 manufacturer compliance with rebate 23 obligations; and 24 VerDate Sep 11 2014 03:29 Jan 29, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S205.IS S205 kjohnson on DSK79L0C42 with BILLS 6 •S 205 IS ‘‘(III) oversight and enforcement 1 related to ensuring that manufactur- 2 ers accurately and fully report drug 3 information, including data related to 4 drug classification.’’; and 5 (iii) in subparagraph (D)— 6 (I) in clause (iv), by striking ‘‘; 7 and’’ and inserting a comma; 8 (II) in clause (v), by striking the 9 period and inserting ‘‘; and’’; and 10 (III) by inserting after clause (v) 11 the following new clause: 12 ‘‘(vi) in the case of categories of drug 13 product or classification information that 14 were not considered confidential by the 15 Secretary on the day before the date of the 16 enactment of the Right Rebate Act of 17 2019.’’. 18 (2) TECHNICAL AMENDMENTS.— 19 (A) Section 1903(i)(10) of the Social Secu- 20 rity Act (42 U.S.C. 1396b(i)(10)) is amended— 21 (i) in subparagraph (C)— 22 (I) by adjusting the left margin 23 so as to align with the left margin of 24 subparagraph (B); and 25 VerDate Sep 11 2014 03:29 Jan 29, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S205.IS S205 kjohnson on DSK79L0C42 with BILLS 7 •S 205 IS (II) by striking ‘‘, and’’ and in- 1 serting a semicolon; 2 (ii) in subparagraph (D), by striking 3 ‘‘; or’’ and inserting ‘‘; and’’; and 4 (iii) by adding at the end the fol- 5 lowing new subparagraph: 6 ‘‘(E) with respect to any amount expended 7 for a covered outpatient drug for which a sus- 8 pension under section 1927(c)(4)(B)(ii)(II) is in 9 effect; or’’. 10 (B) Section 1927(b)(3)(C)(ii) of the Social 11 Security Act (42 U.S.C. 1396r–8(b)(3)(C)(ii)) 12 is amended by striking ‘‘subsections (a) and 13 (b)’’ and inserting ‘‘subsections (a), (b), (f)(3), 14 and (f)(4)’’. 15 (b) RECOVERY OF UNPAID REBATE AMOUNTS DUE 16 TO MISCLASSIFICATION OF COVERED OUTPATIENT 17 DRUGS.— 18 (1) IN GENERAL.—Section 1927(c) of the So- 19 cial Security Act (42 U.S.C. 1396r–8(c)) is amended 20 by adding at the end the following new paragraph: 21 ‘‘(4) RECOVERY OF UNPAID REBATE AMOUNTS 22 DUE TO MISCLASSIFICATION OF COVERED OUT- 23 PATIENT DRUGS.— 24 VerDate Sep 11 2014 03:29 Jan 29, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S205.IS S205 kjohnson on DSK79L0C42 with BILLS 8 •S 205 IS ‘‘(A) IN GENERAL.—If the Secretary deter- 1 mines that a manufacturer with an agreement 2 under this section paid a lower per-unit rebate 3 amount to a State for a rebate period as a re- 4 sult of the misclassification by the manufac- 5 turer of a covered outpatient drug (without re- 6 gard to whether the manufacturer knowingly 7 made the misclassification or should have 8 known that the misclassification would be 9 made) than the per-unit rebate amount that the 10 manufacturer would have paid to the State if 11 the drug had been correctly classified, the man- 12 ufacturer shall pay to the State an amount 13 equal to the product of— 14 ‘‘(i) the difference between— 15 ‘‘(I) the per-unit rebate amount 16 paid to the State for the period; and 17 ‘‘(II) the per-unit rebate amount 18 that the manufacturer would have 19 paid to the State for the period, as 20 determined by the Secretary, if the 21 drug had been correctly classified; and 22 ‘‘(ii) the total units of the drug paid 23 for under the State plan in the period. 24 VerDate Sep 11 2014 03:29 Jan 29, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S205.IS S205 kjohnson on DSK79L0C42 with BILLS 9 •S 205 IS ‘‘(B) AUTHORITY TO CORRECT 1 MISCLASSIFICATIONS.— 2 ‘‘(i) IN GENERAL.—If the Secretary 3 determines that a manufacturer with an 4 agreement under this section has misclassi- 5 fied a covered outpatient drug (without re- 6 gard to whether the manufacturer know- 7 ingly made the misclassification or should 8 have known that the misclassification 9 would be made), the Secretary shall notify 10 the manufacturer of the misclassification 11 and require the manufacturer to correct 12 the misclassification in a timely manner. 13 ‘‘(ii) ENFORCEMENT.—If, after receiv- 14 ing notice of a misclassification from the 15 Secretary under clause (i), a manufacturer 16 fails to correct the misclassification by 17 such time as the Secretary shall require, 18 until the manufacturer makes such correc- 19 tion, the Secretary may— 20 ‘‘(I) correct the misclassification 21 on behalf of the manufacturer; 22 ‘‘(II) suspend the misclassified 23 drug and the drug’s status as a cov- 24 ered outpatient drug under the manu- 25 VerDate Sep 11 2014 03:29 Jan 29, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S205.IS S205 kjohnson on DSK79L0C42 with BILLS 10 •S 205 IS facturer’s national rebate agreement; 1 or 2 ‘‘(III) impose a civil money pen- 3 alty (which shall be in addition to any 4 other recovery or penalty which may 5 be available under this section or any 6 other provision of law) for each rebate 7 period during which the drug is 8 misclassified not to exceed an amount 9 equal to the product of— 10 ‘‘(aa) the total number of 11 units of each dosage form and 12 strength of such misclassified 13 drug paid for under any State 14 plan during such a rebate period; 15 and 16 ‘‘(bb) 23.1 percent of the av- 17 erage manufacturer price for the 18 dosage form and strength of such 19 misclassified drug. 20 ‘‘(C) REPORTING AND TRANSPARENCY.— 21 ‘‘(i) IN GENERAL.—The Secretary 22 shall submit a report to Congress on at 23 least an annual basis that includes infor- 24 mation on the covered outpatient drugs 25 VerDate Sep 11 2014 03:29 Jan 29, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S205.IS S205 kjohnson on DSK79L0C42 with BILLS 11 •S 205 IS that have been identified as misclassified, 1 the steps taken to reclassify such drugs, 2 the actions the Secretary has taken to en- 3 sure the payment of any rebate amounts 4 which were unpaid as a result of such 5 misclassification, and a disclosure of ex- 6 penditures from the fund created in sub- 7 section (b)(3)(C)(iv), including an account- 8 ing of how such funds have been allocated 9 and spent in accordance with such sub- 10 section. 11 ‘‘(ii) PUBLIC ACCESS.—The Secretary 12 shall make the information contained in 13 the report required under clause (i) avail- 14 able to the public on a timely basis. 15 ‘‘(D) OTHER PENALTIES AND ACTIONS.— 16 Actions taken and penalties imposed under this 17 clause shall be in addition to other remedies 18 available to the Secretary including terminating 19 the manufacturer’s rebate agreement for non- 20 compliance with the terms of such agreement 21 and shall not exempt a manufacturer from, or 22 preclude the Secretary from pursuing, any civil 23 money penalty under this title or title XI, or 24 VerDate Sep 11 2014 03:29 Jan 29, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S205.IS S205 kjohnson on DSK79L0C42 with BILLS 12 •S 205 IS any other penalty or action as may be pre- 1 scribed by law.’’. 2 (2) OFFSET OF RECOVERED AMOUNTS AGAINST 3 MEDICAL ASSISTANCE.—Section 1927(b)(1)(B) of 4 the Social Security Act (42 U.S.C. 1396r– 5 8(b)(1)(B)) is amended by inserting ‘‘, including 6 amounts received by a State under subsection 7 (c)(4),’’ after ‘‘in any quarter’’. 8 (c) CLARIFYING DEFINITIONS.—Section 9 1927(k)(7)(A) of the Social Security Act (42 U.S.C. 10 1396r–8(k)(7)(A)) is amended— 11 (1) by striking ‘‘an original new drug applica- 12 tion’’ and inserting ‘‘a new drug application’’ each 13 place it appears; 14 (2) in clause (i), by inserting ‘‘but including a 15 drug product approved for marketing as a non-pre- 16 scription drug that is regarded as a covered out- 17 patient drug under paragraph (4)’’ after ‘‘drug de- 18 scribed in paragraph (5)’’; 19 (3) in clause (ii), by striking ‘‘was originally 20 marketed’’ and inserting ‘‘is marketed’’; and 21 (4) in clause (iv)— 22 (A) by inserting ‘‘, including a drug prod- 23 uct approved for marketing as a non-prescrip- 24 tion drug that is regarded as a covered out- 25 VerDate Sep 11 2014 03:29 Jan 29, 2019 Jkt 089200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S205.IS S205 kjohnson on DSK79L0C42 with BILLS 13 •S 205 IS patient drug under paragraph (4),’’ after ‘‘cov- 1 ered outpatient drug’’; and 2 (B) by adding at the end the following new 3 sentence: ‘‘Such term also includes a covered 4 outpatient drug that is a biological product li- 5 censed, produced, or distributed under a bio- 6 logics license application approved by the Food 7 and Drug Administration.’’. 8 (d) EXCLUSION OF MANUFACTURERS FOR KNOWING 9 MISCLASSIFICATION OF COVERED OUTPATIENT 10 DRUGS.—Section 1128(b) of the Social Security Act (42 11 U.S.C. 1320a–7(b)) is amended by adding at the end the 12 following new paragraph: 13 ‘‘(17) KNOWINGLY MISCLASSIFYING COVERED 14 OUTPATIENT DRUGS.—Any manufacturer or officer, 15 director, agent, or managing employee of such man- 16 ufacturer that knowingly misclassifies a covered out- 17 patient drug under an agreement under section 18 1927, knowingly fails to correct such misclassifica- 19 tion, or knowingly provides false information related 20 to drug pricing, drug product information, or data 21 related to drug pricing or drug product informa- 22 tion.’’. 23 (e) EFFECTIVE DATE.—The amendments made by 24 this section shall take effect on the date of the enactment 25 VerDate Sep 11 2014 03:29 Jan 29, 2019 Jkt 089200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\S205.IS S205 kjohnson on DSK79L0C42 with BILLS 14 •S 205 IS of this Act, and shall apply to covered outpatient drugs 1 supplied by manufacturers under agreements under sec- 2 tion 1927 of the Social Security Act (42 U.S.C. 1396r– 3 8) on or after such date. 4 Æ VerDate Sep 11 [Text truncated for display. 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