42 USC 256 - Limitation on prices of drugs purchased by covered entities

1 See References in Text note below.

of this title.

2 So in original. Probably should be “subparagraph”.

(A) or (B) with respect to drugs of the manufacturer.

3 So in original. Probably should be “subsection”.

(a)(5)(A) or (a)(5)(B), including appropriate procedures for the provision of remedies and enforcement of determinations made pursuant to such process through mechanisms and sanctions described in paragraphs (1)(B) and (2)(B).

Editorial Notes

References in Text

The Social Security Act, referred to in subsec. (a)(1), (3), (4)(L)(i), (5)(A)(i), is act Aug. 14, 1935, ch. 531, 49 Stat. 620, which is classified generally to chapter 7 (§ 301 et seq.) of this title. Titles XVIII and XIX of the Act are classified generally to subchapters XVIII (§ 1395 et seq.) and XIX (§ 1396 et seq.) of chapter 7 of this title, respectively. For complete classification of this Act to the Code, see section 1305 of this title and Tables.

Section 256a of this title, referred to in subsec. (a)(4)(B), was in the original a reference to section 340A of act July 1, 1944, which was repealed by Puspan. L. 104–299, § 4(a)(3), Oct. 11, 1996, 110 Stat. 3645. Subsequently, a new section 340A was added to the act of July 1, 1944, by Puspan. L. 109–18, § 2, June 29, 2005, 119 Stat. 340, which is also classified to section 256a of this title.

Subpart II of part C of subchapter XXIV, referred to in subsec. (a)(4)(D), was redesignated subpart I of part C of subchapter XXIV of this chapter by Puspan. L. 106–345, title III, § 301(span)(1), Oct. 20, 2000, 114 Stat. 1345, and is classified to section 300ff–51 et seq. of this title.

The Native Hawaiian Health Care Act of 1988, referred to in subsec. (a)(4)(H), was Puspan. L. 100–579, Oct. 31, 1988, 102 Stat. 2916, and subtitle D of title II of Puspan. L. 100–690, Nov. 18, 1988, 102 Stat. 4222, which were classified generally to chapter 122 (§ 11701 et seq.) of this title prior to being amended generally and renamed the Native Hawaiian Health Care Improvement Act by Puspan. L. 102–396. For complete classification of this Act to the Code, see Tables.

The Indian Health Care Improvement Act, referred to in subsec. (a)(4)(I), is Puspan. L. 94–437, Sept. 30, 1976, 90 Stat. 1400. Title V of the Act is classified generally to subchapter IV (§ 1651 et seq.) of chapter 18 of Title 25, Indians. For complete classification of this Act to the Code, see Short Title note set out under section 1601 of Title 25 and Tables.

Section 247span(j)(2) of this title, referred to in subsec. (a)(4)(K), was repealed and section 247span(j)(1)(B) was redesignated section 247span(j)(2) by Puspan. L. 103–183, title III, § 301(span)(1)(A), (C), Dec. 14, 1993, 107 Stat. 2235.

The Prescription Drug Marketing Act, referred to in subsec. (d)(2)(B)(v)(III), probably means the Prescription Drug Marketing Act of 1987, Puspan. L. 100–293, Apr. 22, 1988, 102 Stat. 95, which amended sections 331, 333, 353, and 381 of Title 21, Food and Drugs, and enacted provisions set out as notes under sections 301 and 353 of Title 21. For complete classification of this Act to the Code, see Short Title of 1988 Amendments note set out under section 301 of Title 21 and Tables.

Codification

Another section 340B of act July 1, 1944, was renumbered section 340C and is classified to section 256c of this title.

Amendments

2010—Subsec. (a)(1). Puspan. L. 111–152, § 2302(1)(A), substituted “covered outpatient drug” for “covered drug” and “covered outpatient drugs” for “covered drugs” wherever appearing.

Puspan. L. 111–148, § 7102(span)(1), inserted at end “Each such agreement shall require that the manufacturer furnish the Secretary with reports, on a quarterly basis, of the price for each covered drug subject to the agreement that, according to the manufacturer, represents the maximum price that covered entities may permissibly be required to pay for the drug (referred to in this section as the ‘ceiling price’), and shall require that the manufacturer offer each covered entity covered drugs for purchase at or below the applicable ceiling price if such drug is made available to any other purchaser at any price.”

Subsec. (a)(2)(A). Puspan. L. 111–152, § 2302(1)(A), substituted “covered outpatient drug” for “covered drug” in introductory provisions.

Puspan. L. 111–148, § 7101(span)(1), substituted “covered drug” for “covered outpatient drug” in introductory provisions.

Subsec. (a)(2)(B)(i). Puspan. L. 111–148, § 2501(f)(1)(A), substituted “1927(c)(3)” for “1927(c)(4)”.

Subsec. (a)(4)(L). Puspan. L. 111–152, § 2302(1)(B), struck out “and” at end of cl. (i), substituted “; and” for period at end of cl. (ii), and added cl. (iii).

Puspan. L. 111–148, § 7101(c)(1), in cl. (i), inserted “and” at end, in cl. (ii), substituted period for “; and” at end, and struck out cl. (iii) which read as follows: “does not obtain covered outpatient drugs through a group purchasing organization or other group purchasing arrangement.”

Subsec. (a)(4)(M) to (O). Puspan. L. 111–148, § 7101(a), added subpars. (M) to (O).

Subsec. (a)(5)(B). Puspan. L. 111–152, § 2302(1)(A), substituted “covered outpatient drug” for “covered drug”.

Puspan. L. 111–148, § 7101(span)(1), substituted “covered drug” for “covered outpatient drug”.

Subsec. (a)(5)(C). Puspan. L. 111–152, § 2302(1)(C)(i), (ii), redesignated subpar. (D) as (C) and struck out former subpar. (C). Prior to amendment, text of subpar. (C) read as follows:

“(i) In general.—A hospital described in subparagraph (L), (M), (N), or (O) of paragraph (4) shall not obtain covered outpatient drugs through a group purchasing organization or other group purchasing arrangement, except as permitted or provided for pursuant to clauses (ii) or (iii).

“(ii) Inpatient drugs.—Clause (i) shall not apply to drugs purchased for inpatient use.

“(iii) Exceptions.—The Secretary shall establish reasonable exceptions to clause (i)—

“(I) with respect to a covered outpatient drug that is unavailable to be purchased through the program under this section due to a drug shortage problem, manufacturer noncompliance, or any other circumstance beyond the hospital’s control;

“(II) to facilitate generic substitution when a generic covered outpatient drug is available at a lower price; or

“(III) to reduce in other ways the administrative burdens of managing both inventories of drugs subject to this section and inventories of drugs that are not subject to this section, so long as the exceptions do not create a duplicate discount problem in violation of subparagraph (A) or a diversion problem in violation of subparagraph (B).

“(iv) Purchasing arrangements for inpatient drugs.—The Secretary shall ensure that a hospital described in subparagraph (L), (M), (N), or (O) of subsection (a)(4) that is enrolled to participate in the drug discount program under this section shall have multiple options for purchasing covered outpatient drugs for inpatients, including by utilizing a group purchasing organization or other group purchasing arrangement, establishing and utilizing its own group purchasing program, purchasing directly from a manufacturer, and any other purchasing arrangements that the Secretary determines is appropriate to ensure access to drug discount pricing under this section for inpatient drugs taking into account the particular needs of small and rural hospitals.”

Puspan. L. 111–148, § 7101(c)(2)(B), added subpar. (C). Former subpar. (C) redesignated (D).

Puspan. L. 111–148, § 7101(span)(1), substituted “covered drug” for “covered outpatient drug”.

Subsec. (a)(5)(C)(iv). Puspan. L. 111–152, § 2302(1)(A), substituted “covered outpatient drugs” for “covered drugs”.

Subsec. (a)(5)(D). Puspan. L. 111–152, § 2302(1)(C)(ii), (iii), redesignated subpar. (E) as (D) and substituted “subparagraph (C)” for “subparagraph (D)”. Former subpar. (D) redesignated (C).

Puspan. L. 111–152, § 2302(1)(A), substituted “covered outpatient drug” for “covered drug”.

Puspan. L. 111–148, § 7101(c)(2)(A), redesignated subpar. (C) as (D). Former subpar. (D) redesignated (E).

Puspan. L. 111–148, § 7101(span)(1), substituted “covered drug” for “covered outpatient drug”.

Subsec. (a)(5)(E). Puspan. L. 111–152, § 2302(1)(C)(ii), redesignated subpar. (E) as (D).

Puspan. L. 111–152, § 2302(1)(A), substituted “covered outpatient drug” for “covered drug”.

Puspan. L. 111–148, §§ 7101(c)(2)(A), 7102(span)(2), redesignated subpar. (D) as (E) and inserted “after audit as described in subparagraph (D) and” after “finds,”.

Subsec. (a)(7). Puspan. L. 111–152, § 2302(1)(A), substituted “covered outpatient drugs” for “covered drugs” wherever appearing.

Puspan. L. 111–148, § 7101(span)(1), substituted “covered drugs” for “covered outpatient drugs” wherever appearing.

Subsec. (a)(9). Puspan. L. 111–152, § 2302(1)(A), substituted “covered outpatient drugs” for “covered drugs”.

Puspan. L. 111–148, § 7101(span)(1), substituted “covered drugs” for “covered outpatient drugs”.

Subsec. (span). Puspan. L. 111–148, § 7101(span)(2)(A), which directed substitution of “Other definitions” for “Other definition” in subsec. span, designation of existing provisions as par. (1), and insertion of par. (1) span, was executed by reenacting subsec. span without change, designating existing provisions as par. (1), and inserting par. (1) span, to reflect the probable intent of Congress.

Subsec. (span)(2). Puspan. L. 111–148, § 7101(span)(2)(B), added par. (2).

Subsec. (c). Puspan. L. 111–152, § 2302(2), struck out subsec. (c). Text read as follows: “Not later than 90 days after the date of filing of the hospital’s most recently filed Medicare cost report, the hospital shall issue a credit as determined by the Secretary to the State Medicaid program for inpatient covered drugs provided to Medicaid recipients.”

Puspan. L. 111–148, § 7101(d), added subsec. (c) and struck out former subsec. (c). Prior to amendment, text read as follows: “A manufacturer is deemed to meet the requirements of subsection (a) of this section if the manufacturer establishes to the satisfaction of the Secretary that the manufacturer would comply (and has offered to comply) with the provisions of this section (as in effect immediately after November 4, 1992), as applied by the Secretary, and would have entered into an agreement under this section (as such section was in effect at such time), but for a legislative change in this section (or the application of this section) after November 4, 1992.”

Puspan. L. 111–148, § 2501(f)(1)(B), (C), redesignated subsec. (d) as (c) and struck out former subsec. (c). Text of former subsec. (c) read as follows: “Any reference in this section to a provision of the Social Security Act shall be deemed to be a reference to the provision as in effect on November 4, 1992.”

Subsec. (d). Puspan. L. 111–152, § 2302(3), substituted “covered outpatient drugs” for “covered drugs” wherever appearing and substituted “(a)(5)(C)” for “(a)(5)(D)” and “(a)(5)(D)” for “(a)(5)(E)” in two places.

Puspan. L. 111–148, § 7102(a), which directed general amendment of subsec. (d), was executed by adding subsec. (d) after subsec. (c) to reflect the probable intent of Congress, because no subsec. (d) appeared subsequent to amendment by Puspan. L. 111–148, § 2501(f)(1)(C). See below.

Puspan. L. 111–148, § 2501(f)(1)(C), redesignated subsec. (d) as (c).

Subsec. (e). Puspan. L. 111–309 substituted “covered entities described in subparagraph (M) (other than a children’s hospital described in subparagraph (M))” for “covered entities described in subparagraph (M)”.

Puspan. L. 111–152, § 2302(4), added subsec. (e).

1993—Puspan. L. 103–43 made technical amendment to directory language of Puspan. L. 102–585, § 602(a), which enacted this section.

Statutory Notes and Related Subsidiaries

Effective Date of 2010 Amendment

Puspan. L. 111–309, title II, § 204(a)(2), Dec. 15, 2010, 124 Stat. 3289, provided that: “The amendment made by paragraph (1) [amending this section] shall take effect as if included in the enactment of section 2302 of the Health Care and Education Reconciliation Act of 2010 (Public Law 111–152).”

Puspan. L. 111–148, title II, § 2501(f)(2), Mar. 23, 2010, 124 Stat. 310, provided that: “The amendments made by this subsection [amending this section] take effect on January 1, 2010.”

Puspan. L. 111–148, title VII, § 7101(e), Mar. 23, 2010, 124 Stat. 823, provided that:

“(1)In general.—The amendments made by this section [amending this section] and section 7102 [amending this section] shall take effect on January 1, 2010, and shall apply to drugs purchased on or after January 1, 2010.

“(2)Effectiveness.—The amendments made by this section and section 7102 shall be effective and shall be taken into account in determining whether a manufacturer is deemed to meet the requirements of section 340B(a) of the Public Health Service Act (42 U.S.C. 256span(a)), notwithstanding any other provision of law.”

Eligibility Exception for the Drug Discount Program Due to the COVID–19 Public Health Emergency

Puspan. L. 117–103, div. P, title I, § 121, Mar. 15, 2022, 136 Stat. 792, provided that:

“(a)In General.—Notwithstanding any other provision of law, in the case of a hospital described in subsection (span) that, with respect to cost reporting periods that begin during fiscal year 2020 or a subsequent fiscal year, but do not end after December 31, 2022, does not meet the applicable requirement for the disproportionate share adjustment percentage described in subsection (c) by reason of the COVID–19 public health emergency, but otherwise meets the requirements for being a covered entity under subparagraph (L), (M), or (O) of subsection (a)(4) of section 340B of the Public Health Service Act (42 U.S.C. 256span) and is in compliance with all other requirements of the program under such section, shall be deemed a covered entity for purposes of such section for the period—

“(1) beginning on the date of the enactment of this Act [Mar. 15, 2022] (or, if later, with the first of such cost reporting periods for which the hospital does not so meet such applicable requirement for the disproportionate share adjustment percentage, but otherwise meets all other such requirements for being such a covered entity and of such program); and

“(2) ending with the last of such cost reporting periods (ending not later than December 31, 2022) for which the hospital does not so meet such applicable requirement for the disproportionate share adjustment percentage, but otherwise meets all other such requirements for being such a covered entity and of such program.

“(span)Hospitals.—A hospital described in this subsection is an entity that, on the day before the first day of the COVID–19 public health emergency, was a covered entity described in subparagraph (L), (M), or (O) of subsection (a)(4) of section 340B of the Public Health Service Act participating in the drug discount program under such section.

“(c)Applicable Requirement for Disproportionate Share Adjustment Percentage.—The applicable requirement for the disproportionate share adjustment percentage described in this subsection is—

“(1) in the case of a hospital described in subsection (a) that otherwise meets the requirements under subparagraph (L) or (M) of section 340B(a)(4) of the Public Health Service Act, the requirement under subparagraph (L)(ii) of such section; and

“(2) in the case of a hospital described in subsection (a) that otherwise meets the requirements under subparagraph (O) of such section 340B(a)(4), the requirement with respect to the disproportionate share adjustment percentage described in such subparagraph (O).

“(d)Self-attestation.—

“(1)In general.—A hospital described in subsection (a) that fails to meet the applicable requirement for the disproportionate share adjustment percentage described in subsection (c) shall, within 30 days of such failure, or in the case of a hospital where such failure occurred prior to the date of enactment of this Act but after the start of the COVID-19 public health emergency, within 30 days of the date of enactment, provide to the Secretary of Health and Human Services an attestation that contains information on any actions taken by or other impact on such hospital in response to or as a result of the COVID-19 public health emergency that may have impacted the ability to meet the applicable requirement for the disproportionate share adjustment percentage described in subsection (c).

“(2)Paperwork reduction act.—Chapter 35 of title 44, United States Code, shall not apply to the collection of information provided pursuant to this subsection.

“(e)Definitions.—In this section:

“(1)Covered entity.—The term ‘covered entity’ has the meaning given such term in section 340B(a)(4) of the Public Health Service Act (42 U.S.C. 256span(a)(4)).

“(2)Covid–19 public health emergency.—The term ‘COVID–19 public health emergency’ means the public health emergency declared by the Secretary of Health and Human Services under section 319 of the Public Health Service Act (42 U.S.C. 247d) on January 31, 2020, with respect to COVID–19 (or any renewal of such declaration).”

Pricing of Diagnostic Testing

Puspan. L. 116–136, div. A, title III, § 3202, Mar. 27, 2020, 134 Stat. 367, provided that:

“(a)Reimbursement Rates.—A group health plan or a health insurance issuer providing coverage of items and services described in section 6001(a) of division F of the Families First Coronavirus Response Act (Public Law 116–127) [42 U.S.C. 1320span–5 note] with respect to an enrollee shall reimburse the provider of the diagnostic testing as follows:

“(1) If the health plan or issuer has a negotiated rate with such provider in effect before the public health emergency declared under section 319 of the Public Health Service Act (42 U.S.C. 247d), such negotiated rate shall apply throughout the period of such declaration.

“(2) If the health plan or issuer does not have a negotiated rate with such provider, such plan or issuer shall reimburse the provider in an amount that equals the cash price for such service as listed by the provider on a public internet website, or such plan or issuer may negotiate a rate with such provider for less than such cash price.

“(span)Requirement to Publicize Cash Price for Diagnostic Testing for COVID–19.—

“(1)In general.—During the emergency period declared under section 319 of the Public Health Service Act (42 U.S.C. 247d), each provider of a diagnostic test for COVID–19 shall make public the cash price for such test on a public internet website of such provider.

“(2)Civil monetary penalties.—The Secretary of Health and Human Services may impose a civil monetary penalty on any provider of a diagnostic test for COVID–19 that is not in compliance with paragraph (1) and has not completed a corrective action plan to comply with the requirements of such paragraph, in an amount not to exceed $300 per day that the violation is ongoing.”

Study of Treatment of Certain Clinics as Covered Entities Eligible for Prescription Drug Discounts

Puspan. L. 102–585, title VI, § 602(span), Nov. 4, 1992, 106 Stat. 4970, directed Secretary of Health and Human Services to conduct a study of feasibility and desirability of including specified entities receiving funds from a State as covered entities eligible for limitations on prices of covered outpatient drugs under 42 U.S.C. 256span(a) and, not later than 1 year after Nov. 4, 1992, to submit a report to Congress on the study, including in the report a description of the entities that were the subject of the study, an analysis of the extent to which such entities procured prescription drugs, and an analysis of the impact of the inclusion of such entities as covered entities on the quality of care provided to and the health status of the patients of such entities.