“(A)
“(i) The formulary is developed and reviewed by a pharmacy and therapeutics committee consisting of physicians, pharmacists, and other appropriate individuals appointed by the Governor of the State.
“(ii) Subject to clause (vi), the State establishes and implements a conflict of interest policy for the pharmacy and therapeutics committee that—
“(I) is publicly accessible;
“(II) requires all committee members to complete, on at least an annual basis, a disclosure of relationships, associations, and financial dealings that may affect their independence of judgement in committee matters; and
“(III) contains clear processes, such as recusal from voting or discussion, for those members who report a conflict of interest, along with appropriate processes to address any instance where a member fails to report a conflict of interest.
“(iii) The membership of the pharmacy and therapeutics committee—
“(I) includes at least 1 actively practicing physician and at least 1 actively practicing pharmacist, each of whom—
“(aa) is independent and free of conflict with respect to manufacturers and Medicaid participating plans or subcontractors, including pharmacy benefit managers; and
“(bb) has expertise in the care of 1 or more Medicaid-specific populations such as elderly or disabled individuals, children with complex medical needs, or low-income individuals with chronic illnesses; and
“(II) is made publicly available.
“(iv) At the option of the State, the State’s drug use review board established under subsection (g)(3) may serve as the pharmacy and therapeutics committee provided the State ensures that such board meets the requirements of clauses (ii) and (iii).
“(v) The State reviews and has final approval of the formulary established by the pharmacy and therapeutics committee.
“(vi) If the Secretary determines it appropriate or necessary based on the findings and recommendations of the Comptroller General of the United States in the report submitted to Congress under section 203 of the Lower Costs, More Cures Act of 2019, the Secretary shall issue guidance that States must follow for establishing conflict of interest policies for the pharmacy and therapeutics committee in accordance with the requirements of clause (ii), including appropriate standards and requirements for identifying, addressing, and reporting on conflicts of interest.”
“(B) Audits and surveys of manufacturer price and drug product information
“(i) Audits—The Secretary shall conduct ongoing audits of the price and drug product information reported by manufacturers under subparagraph (A) for the most recently ended rebate period to ensure the accuracy and timeliness of such information. In conducting such audits, the Secretary may employ evaluations, surveys, statistical sampling, predictive analytics and other relevant tools and methods.
“(ii) Verifications surveys of average manufacturer price and manufacturer’s average sales price—In addition to the audits required under clause (i), the Secretary may survey wholesalers and manufacturers (including manufacturers that directly distribute their covered outpatient drugs (in this subparagraph referred to as “direct sellers”)), when necessary, to verify manufacturer prices and manufacturer’s average sales prices (including wholesale acquisition cost) to make payment reported under subparagraph (A).
“(iii) Penalties—In addition to other penalties as may be prescribed by law, including under subparagraph (C) of this paragraph, the Secretary may impose a civil monetary penalty in an amount not to exceed $185,000 on an annual basis on a wholesaler, manufacturer, or direct seller, if the wholesaler, manufacturer, or direct seller of a covered outpatient drug refuses a request for information about charges or prices by the Secretary in connection with an audit or survey under this subparagraph or knowingly provides false information. The provisions of section 1128A (other than subsections (a) (with respect to amounts of penalties or additional assessments) and (b)) shall apply to a civil money penalty under this clause in the same manner as such provisions apply to a penalty or proceeding under section 1128A(a).
“(iv) Reports
“(I) Report to Congress—The Secretary shall, not later than 18 months after date of enactment of this subparagraph, submit a report to the Committee on Energy and Commerce of the House of Representatives and the Committee on Finance of the Senate regarding additional regulatory or statutory changes that may be required in order to ensure accurate and timely reporting and oversight of manufacturer price and drug product information, including whether changes should be made to reasonable assumption requirements to ensure such assumptions are reasonable and accurate or whether another methodology for ensuring accurate and timely reporting of price and drug product information should be considered to ensure the integrity of the drug rebate program under this section.
“(II) Annual reports—The Secretary shall, on at least an annual basis, submit a report to the Committee on Energy and Commerce of the House of Representatives and the Committee on Finance of the Senate summarizing the results of the audits and surveys conducted under this subparagraph during the period that is the subject of the report.
“(III) Content—Each report submitted under subclause (II) shall, with respect to the period that is the subject of the report, include summaries of—
“(aa) error rates in the price, drug product, and other relevant information supplied by manufacturers under subparagraph (A);
“(bb) the timeliness with which manufacturers, wholesalers, and direct sellers provide information required under subparagraph (A) or under clause (i) or (ii) of this subparagraph;
“(cc) the number of manufacturers, wholesalers, and direct sellers and drug products audited under this subparagraph;
“(dd) the types of price and drug product information reviewed under the audits conducted under this subparagraph;
“(ee) the tools and methodologies employed in such audits;
“(ff) the findings of such audits, including which manufacturers, if any, were penalized under this subparagraph; and
“(gg) such other relevant information as the Secretary shall deem appropriate.
“(IV) Protection of information—In preparing a report required under subclause (II), the Secretary shall redact such proprietary information as the Secretary determines appropriate to prevent disclosure of, and to safeguard, such information.
“(v) Appropriations—Out of any funds in the Treasury not otherwise appropriated, there is appropriated to the Secretary $2,000,000 for fiscal year 2020 and each fiscal year thereafter to carry out this subparagraph.”
“(6) Pass-through pricing required—A contract between the State and a pharmacy benefit manager (referred to in this paragraph as a “PBM”), or a contract between the State and a managed care entity or other specified entity (as such terms are defined in section 1903(m)(9)(D)) that includes provisions making the entity responsible for coverage of covered outpatient drugs dispensed to individuals enrolled with the entity, shall require that payment for such drugs and related administrative services (as applicable), including payments made by a PBM on behalf of the State or entity, is based on a pass-through pricing model under which—
“(A) any payment made by the entity of the PBM (as applicable) for such a drug—
“(i) is limited to—
“(I) ingredient cost; and
“(II) a professional dispensing fee that is not less than the professional dispensing fee that the State plan or waiver would pay if the plan or waiver was making the payment directly;
“(ii) is passed through in its entirety by the entity or PBM to the pharmacy that dispenses the drug; and
“(iii) is made in a manner that is consistent with section 1902(a)(30)(A) and sections 447.512, 447.514, and 447.518 of title 42, Code of Federal Regulations (or any successor regulation), as if such requirements applied directly to the entity or the PBM;
“(B) payment to the entity or the PBM (as applicable) for administrative services performed by the entity or PBM is limited to a reasonable administrative fee that covers the reasonable cost of providing such services;
“(C) the entity or the PBM (as applicable) shall make available to the State, and the Secretary upon request, all costs and payments related to covered outpatient drugs and accompanying administrative services incurred, received, or made by the entity or the PBM, including ingredient costs, professional dispensing fees, administrative fees, post-sale and post-in-voice fees. Discounts, or related adjustments such as direct and indirect remuneration fees, and any and all remuneration; and
“(D) any form of spread pricing whereby any amount charged or claimed by the entity or the PBM (as applicable) is in excess of the amount paid to the pharmacies on behalf of the entity, including any post-sale or post-invoice fees, discounts, or related adjustments such as direct and indirect remuneration fees or assessments (after allowing for a reasonable administrative fee as described in subparagraph (B)) is not allowable for purposes of claiming Federal matching payments under this title.”
“(1) Survey of retail prices—The Secretary shall conduct a survey of retail community drug prices, to include at least the national average drug acquisition cost, as follows:
“(A) Use of vendor—The Secretary may contract services for—
“(i) with respect to retail community pharmacies, the determination on a monthly basis of retail survey prices of the national average drug acquisition cost for covered outpatient drugs for such pharmacies, net of all discounts and rebates (to the extent any information with respect to such discounts and rebates is available), the average reimbursement received for such drugs by such pharmacies from all sources of payment, including third parties, and, to the extent available, the usual and customary charges to consumers for such drugs; and”
“(F) Survey reporting—In order to meet the requirement of section 1902(a)(54), a State shall require that any retail community pharmacy in the State that receives any payment, administrative fee, discount, or rebate related to the dispensing of covered outpatient drugs to individuals receiving benefits under this title, regardless of whether such payment, fee, discount, or rebate is received from the State or a managed care entity directly or from a pharmacy benefit manager or another entity that has a contract with the State or a managed care entity, shall respond to surveys of retail prices conducted under this subsection.
“(G) Survey information—Information on retail community prices obtained under this paragraph shall be made publicly available and shall include at least the following:
“(i) The monthly response rate of the survey including a list of pharmacies not in compliance with subparagraph (F).
“(ii) The sampling frame and number of pharmacies sampled monthly.
“(iii) Characteristics of reporting pharmacies, including type (such as independent or chain), geographic or regional location, and dispensing volume.
“(iv) Reporting of a separate national average drug acquisition cost for each drug for independent retail pharmacies and chain operated pharmacies.
“(v) Information on price concessions including on and off invoice discounts, rebates, and other price concessions.
“(vi) Information on average professional dispensing fees paid.
“(H) Penalties
“(i) Failure to provide timely information—A retail community pharmacy that fails to respond to a survey conducted under this subsection on a timely basis may be subject to a civil monetary penalty in the amount of $10,000 for each day in which such information has not been provided.
“(ii) False information—A retail community pharmacy that knowingly provides false information in response to a survey conducted under this subsection may be subject to a civil money penalty in an amount not to exceed $100,000 for each item of false information.
“(iii) Other penalties—Any civil money penalties imposed under this subparagraph shall be in addition to other penalties as may be prescribed by law. The provisions of section 1128A (other than subsections (a) and (b)) shall apply to a civil money penalty under this subparagraph in the same manner as such provisions apply to a penalty or proceedings under section 1128A(a).
“(I) Report on specialty pharmacies
“(i) In general—Not later than 1 year after the effective date of this subparagraph, the Secretary shall submit a report to Congress examining specialty drug coverage and reimbursement under this title.
“(ii) Content of report—Such report shall include a description of how State Medicaid programs define specialty drugs, how much State Medicaid programs pay for specialty drugs, how States and managed care plans determine payment for specialty drugs, the settings in which specialty drugs are dispensed (such as retail community pharmacies or specialty pharmacies), whether acquisition costs for specialty drugs are captured in the national average drug acquisition cost survey, and recommendations as to whether specialty pharmacies should be included in the survey of retail prices to ensure national average drug acquisition costs capture drugs sold at specialty pharmacies and how such specialty pharmacies should be defined.”
“(III) in the case of rebate periods that begin on or after the date of enactment of this subclause, on the wholesale acquisition cost (as defined in section 1847A(c)(6)(B)) for covered outpatient drugs for the rebate period under the agreement (including for all such drugs that are sold under a new drug application approved under section 505(c) of the Federal Food, Drug, and Cosmetic Act);”
“(viii) to the Secretary to disclose (through a website accessible to the public) the most recently reported wholesale acquisition cost (as defined in section 1847A(c)(6)(B)) for each covered outpatient drug (including for all such drugs that are sold under a new drug application approved under section 505(c) of the Federal Food, Drug, and Cosmetic Act), as reported under subparagraph (A)(i)(III).”
“(l) State option To pay for covered outpatient drugs through risk-Sharing value-Based agreements
“(1) In general—Beginning January 1, 2022, a State shall have the option to pay (whether on a fee-for-service or managed care basis) for covered outpatient drugs that are potentially curative treatments intended for one-time use that are administered to individuals under this title by entering into a risk-sharing value-based payment agreement with the manufacturer of the drug in accordance with the requirements of this subsection.
“(2) Secretarial approval
“(A) In general—A State shall submit a request to the Secretary to enter into a risk-sharing value based payment agreement, and the Secretary shall not approve a proposed risk-sharing value-based payment agreement between a State and a manufacturer for payment for a covered outpatient drug of the manufacturer unless the following requirements are met:
“(i) Manufacturer is party to rebate agreement and in compliance with requirements—The manufacturer has a rebate agreement in effect as required under subsections (a) and (b) of this section and is in compliance with all applicable requirements under this title.
“(ii) No increase to projected net Federal spending
“(I) In general—The Chief Actuary certifies that the projected payments for each covered outpatient drug under such proposed agreement would not result in greater estimated Federal spending under this title than the net Federal spending that would result in the absence of the agreement.
“(II) Net federal spending defined—For purposes of this subsection, the term net Federal spending means the amount of Federal payments the Chief Actuary estimates would be made under this title for administering a covered outpatient drug to an individual eligible for medical assistance under a State plan or a waiver of such plan, reduced by the amount of all rebates the Chief Actuary estimates would be paid with respect to the administering of such drug, including all rebates under this title and any supplemental or other additional rebates, in the absence of such an agreement.
“(III) Information—The Chief Actuary shall make the certifications required under this clause based on the most recently available and reliable drug pricing and product information. The State and manufacturer shall provide the Secretary and the Chief Actuary with all necessary information required to make the estimates needed for such certifications.
“(iii) Launch and list price justifications—The manufacturer submits all relevant information and supporting documentation necessary for pricing decisions as deemed appropriate by the Secretary, which shall be truthful and non-misleading, including manufacturer information and supporting documentation for launch price or list price increases, and any applicable justification required under section 1128L.
“(iv) Confidentiality of information; penalties—The provisions of subparagraphs (C) and (D) of subsection (b)(3) shall apply to a manufacturer that fails to submit the information and documentation required under clauses (ii) and (iii) on a timely basis, or that knowingly provides false or misleading information, in the same manner as such provisions apply to a manufacturer with a rebate agreement under this section.
“(B) Consideration of State request for approval
“(i) In general—The Secretary shall treat a State request for approval of a risk-sharing value-based payment agreement in the same manner that the Secretary treats a State plan amendment, and subpart B of part 430 of title 42, Code of Federal Regulations, including, subject to clause (ii), the timing requirements of section 430.16 of such title (as in effect on the date of enactment of this subsection), shall apply to a request for approval of a risk-sharing value-based payment agreement in the same manner as such subpart applies to a State plan amendment.
“(ii) Timing—The Secretary shall consult with the Commissioner of Food and Drugs as required under subparagraph (C) and make a determination on whether to approve a request from a State for approval of a proposed risk-sharing value-based payment agreement (or request additional information necessary to allow the Secretary to make a determination with respect to such request for approval) within the time period, to the extent practicable, specified in section 430.16 of title 42, Code of Federal Regulations (as in effect on the date of enactment of this subsection), but in no case shall the Secretary take more than 180 days after the receipt of such request for approval or response to such request for additional information to make such a determination (or request additional information).
“(C) Consultation with the Commissioner of Food and Drugs—In considering whether to approve a risk-sharing value-based payment agreement, the Secretary, to the extent necessary, shall consult with the Commissioner of Food and Drugs to determine whether the relevant clinical parameters specified in such agreement are appropriate.
“(3) Installment-based payment structure
“(A) In general—A risk-sharing value-based payment agreement shall provide for a payment structure under which, for every installment year of the agreement (subject to subparagraph (B)), the State shall pay the total installment year amount in equal installments to be paid at regular intervals over a period of time that shall be specified in the agreement.
“(B) Requirements for installment payments
“(i) Timing of first payment—The State shall make the first of the installment payments described in subparagraph (A) for an installment year not later than 30 days after the end of such year.
“(ii) Length of installment period—The period of time over which the State shall make the installment payments described in subparagraph (A) for an installment year shall not be longer than 5 years.
“(iii) Nonpayment or reduced payment of installments following a failure to meet clinical parameter—If, prior to the payment date (as specified in the agreement) of any installment payment described in subparagraph (A) or any other alternative date or time frame (as otherwise specified in the agreement), the covered outpatient drug which is subject to the agreement fails to meet a relevant clinical parameter of the agreement, the agreement shall provide that—
“(I) the installment payment shall not be made; or
“(II) the installment payment shall be reduced by a percentage specified in the agreement that is based on the outcome achieved by the drug relative to the relevant clinical parameter.
“(4) Notice of intent
“(A) In general—Subject to subparagraph (B), a manufacturer of a covered outpatient drug shall not be eligible to enter into a risk-sharing value-based payment agreement under this subsection with respect to such drug unless the manufacturer notifies the Secretary that the manufacturer is interested in entering into such an agreement with respect to such drug. The decision to submit and timing of a request to enter into a proposed risk-sharing value-based payment agreement shall remain solely within the discretion of the State and shall only be effective upon Secretarial approval as required under this subsection.
“(B) Treatment of subsequently approved drugs
“(i) In general—In the case of a manufacturer of a covered outpatient drug approved under section 505 of the Federal Food, Drug, and Cosmetic Act or licensed under section 351 of the Public Health Service Act after the date of enactment of this subsection, not more than 90 days after meeting with the Food and Drug Administration following phase II clinical trials for such drug (or, in the case of a drug described in clause (ii), not later than March 31, 2022), the manufacturer must notify the Secretary of the manufacturer's intent to enter into a risk-sharing value-based payment agreement under this subsection with respect to such drug. If no such meeting has occurred, the Secretary may use discretion as to whether a potentially curative treatment intended for one-time use may qualify for a risk-sharing value-based payment agreement under this section. A manufacturer notification of interest shall not have any influence on a decision for approval by the Food and Drug Administration.
“(ii) Application to certain subsequently approved drugs—A drug described in this clause is a covered outpatient drug of a manufacturer—
“(I) that is approved under section 505 of the Federal Food, Drug, and Cosmetic Act or licensed under section 351 of the Public Health Service Act after the date of enactment of this subsection; and
“(II) with respect to which, as of January 1, 2022, more than 90 days have passed after the manufacturer’s meeting with the Food and Drug Administration following phase II clinical trials for such drug.
“(iii) Parallel approval—The Secretary, in coordination with the Administrator of the Centers for Medicare & Medicaid Services and the Commissioner of Food and Drugs, shall, to the extent practicable, approve a State’s request to enter into a proposed risk-sharing value-based payment agreement that otherwise meets the requirements of this subsection at the time that such a drug is approved by the Food and Drug Administration to help provide that no State that wishes to enter into such an agreement is required to pay for the drug in full at one time if the State is seeking to pay over a period of time as outlined in the proposed agreement.
“(iv) Rule of construction—Nothing in this paragraph shall be applied or construed to modify or affect the timeframes or factors involved in the Secretary’s determination of whether to approve or license a drug under section 505 of the Federal Food, Drug, and Cosmetic Act or section 351 of the Public Health Service Act.
“(5) Special payment rules
“(A) In general—Except as otherwise provided in this paragraph, with respect to an individual who is administered a unit of a covered outpatient drug that is purchased under a State plan by a State Medicaid agency under a risk-sharing value-based payment agreement in an installment year, the State shall remain liable to the manufacturer of such drug for payment for such unit without regard to whether the individual remains enrolled in the State plan under this title (or a waiver of such plan) for each installment year for which the State is to make installment payments for covered outpatient drugs purchased under the agreement in such year.
“(B) Death—In the case of an individual described in subparagraph (A) who dies during the period described in such subparagraph, the State plan shall not be liable for any remaining payment for the unit of the covered outpatient drug administered to the individual which is owed under the agreement described in such subparagraph.
“(C) Withdrawal of approval—In the case of a covered outpatient drug that is the subject of a risk-sharing value-based agreement between a State and a manufacturer under this subsection, including a drug approved in accordance with section 506(c) of the Federal Food, Drug, and Cosmetic Act, and such drug is the subject of an application that has been withdrawn by the Secretary, the State plan shall not be liable for any remaining payment that is owed under the agreement.
“(D) Alternative arrangement under agreement—Subject to approval by the Secretary, the terms of a proposed risk-sharing value-based payment agreement submitted for approval by a State may provide that subparagraph (A) shall not apply.
“(E) Guidance—Not later than January 1, 2022, the Secretary shall issue guidance to States establishing a process for States to notify the Secretary when an individual who is administered a unit of a covered outpatient drug that is purchased by a State plan under a risk-sharing value-based payment agreement ceases to be enrolled under the State plan under this title (or a waiver of such plan) or dies before the end of the installment period applicable to such unit under the agreement.
“(6) Treatment of payments under risk-sharing value-based agreements for purposes of average manufacturer price; best price—The Secretary shall treat any payments made to the manufacturer of a covered outpatient drug under a risk-sharing value-based payment agreement under this subsection during a rebate period in the same manner that the Secretary treats payments made under a State supplemental rebate agreement under sections 447.504(c)(19) and 447.505(c)(7) of title 42, Code of Federal Regulations (or any successor regulations), for purposes of determining average manufacturer price and best price under this section with respect to the covered outpatient drug and a rebate period and for purposes of offsets required under subsection (b)(1)(B).
“(7) Assessments and report to Congress
“(A) Assessments
“(i) In general—Not later than 180 days after the end of each assessment period of any risk-sharing value-based payment agreement for a State approved under this subsection, the Secretary shall conduct an evaluation of such agreement which shall include an evaluation by the Chief Actuary to determine whether program spending under the risk-sharing value-based payment agreement aligned with the projections for the agreement made under paragraph (2)(A)(ii), including an assessment of whether actual Federal spending under this title under the agreement was less or more than net Federal spending would have been in the absence of the agreement.
“(ii) Assessment period—For purposes of clause (i)—
“(I) the first assessment period for a risk-sharing value-based payment agreement shall be the period of time over which payments are scheduled to be made under the agreement for the first 10 individuals who are administered covered outpatient drugs under the agreement except that such period shall not exceed the 5-year period after the date on which the Secretary approves the agreement; and
“(II) each subsequent assessment period for a risk-sharing value-based payment agreement shall be the 5-year period following the end of the previous assessment period.
“(B) Results of assessments
“(i) Termination option—If the Secretary determines as a result of the assessment by the Chief Actuary under subparagraph (A) that the actual Federal spending under this title for any covered outpatient drug that was the subject of the State's risk-sharing value-based payment agreement was greater than the net Federal spending that would have resulted in the absence of the agreement, the Secretary may terminate approval of such agreement and shall immediately conduct an assessment under this paragraph of any other ongoing risk-sharing value-based payment agreement to which the same manufacturer is a party.
“(ii) Repayment required
“(I) In general—If the Secretary determines as a result of the assessment by the Chief Actuary under subparagraph (A) that the Federal spending under the risk-sharing value-based agreement for a covered outpatient drug that was subject to such agreement was greater than the net Federal spending that would have resulted in the absence of the agreement, the manufacturer shall repay the difference to the State and Federal governments in a timely manner as determined by the Secretary.
“(II) Termination for failure to pay—The failure of a manufacturer to make repayments required under subclause (I) in a timely manner shall result in immediate termination of all risk-sharing value-based agreements to which the manufacturer is a party.
“(III) Additional penalties—In the case of a manufacturer that fails to make repayments required under subclause (I), the Secretary may treat such manufacturer in the same manner as a manufacturer that fails to pay required rebates under this section, and the Secretary may—
“(aa) suspend or terminate the manufacturer’s rebate agreement under this section; and
“(bb) pursue any other remedy that would be available if the manufacturer had failed to pay required rebates under this section.
“(C) Report to Congress—Not later than 5 years after the first risk-sharing value-based payment agreement is approved under this subsection, the Secretary shall submit to Congress and make available to the public a report that includes—
“(i) an assessment of the impact of risk-sharing value-based payment agreements on access for individuals who are eligible for benefits under a State plan or waiver under this title to medically necessary covered outpatient drugs and related treatments;
“(ii) an analysis of the impact of such agreements on overall State and Federal spending under this title;
“(iii) an assessment of the impact of such agreements on drug prices, including launch price and price increases; and
“(iv) such recommendations to Congress as the Secretary deems appropriate.
“(8) Guidance and regulations
“(A) In general—Not later than January 1, 2022, the Secretary shall issue guidance to States seeking to enter into risk-sharing value-based payment agreements under this subsection that includes a model template for such agreements. The Secretary may issue any additional guidance or promulgate regulations as necessary to implement and enforce the provisions of this subsection.
“(B) Model agreements
“(i) In general—If a State expresses an interest in pursuing a risk-sharing value-based payment agreement under this subsection with a manufacturer for the purchase of a covered outpatient drug, the Secretary may share with such State any risk-sharing value-based agreement between a State and the manufacturer for the purchase of such drug that has been approved under this subsection. While such shared agreement may serve as a template for a State that wishes to propose, the use of a previously approved agreement shall not affect the submission and approval process for approval of a proposed risk-sharing value-based payment agreement under this subsection, including the requirements under paragraph (2)(A).
“(ii) Confidentiality—In the case of a risk-sharing value-based payment agreement that is disclosed to a State by the Secretary under this subparagraph and that is only in effect with respect to a single State, the confidentiality of information provisions described in subsection (b)(3)(D) shall apply to such information.
“(C) OIG consultation
“(i) In general—The Secretary shall consult with the Office of the Inspector General of the Department of Health and Human Services to determine whether there are potential program integrity concerns with agreement approvals or templates and address accordingly.
“(ii) OIG policy updates as necessary—The Inspector General of the Department of Health and Human Services shall review and update, as necessary, any policies or guidelines of the Office of the Inspector General of the Department of Human Services (including policies related to the enforcement of section 1128B) to accommodate the use of risk-sharing value-based payment agreements in accordance with this section.
“(9) Rules of construction
“(A) Modifications—Nothing in this subsection or any regulations promulgated under this subsection shall prohibit a State from requesting a modification from the Secretary to the terms of a risk-sharing value-based payment agreement. A modification that is expected to result in any increase to projected net State or Federal spending under the agreement shall be subject to recertification by the Chief Actuary as described in paragraph (2)(A)(ii) before the modification may be approved.
“(B) Rebate agreements—Nothing in this subsection shall be construed as requiring a State to enter into a risk-sharing value-based payment agreement or as limiting or superseding the ability of a State to enter into a supplemental rebate agreement for a covered outpatient drug.
“(C) FFP for payments under risk-sharing value-based payment agreements—Federal financial participation shall be available under this title for any payment made by a State to a manufacturer for a covered outpatient drug under a risk-sharing value-based payment agreement in accordance with this subsection, except that no Federal financial participation shall be available for any payment made by a State to a manufacturer under such an agreement on and after the effective date of a disapproval of such agreement by the Secretary.
“(D) Continued application of other provisions—Except as expressly provided in this subsection, nothing in this subsection or in any regulations promulgated under this subsection shall affect the application of any other provision of this Act.
“(10) Appropriations—For fiscal year 2020 and each fiscal year thereafter, there are appropriated to the Secretary $5,000,000 for the purpose of carrying out this subsection.
“(11) Definitions—In this subsection:
“(A) Chief Actuary—The term Chief Actuary means the Chief Actuary of the Centers for Medicare & Medicaid Services.
“(B) Installment year—The term installment year means, with respect to a risk-sharing value-based payment agreement, a 12-month period during which a covered outpatient drug is administered under the agreement.
“(C) Potentially curative treatment intended for one-time use—The term potentially curative treatment intended for one-time use means a treatment that consists of the administration of a covered outpatient drug that—
“(i) is a form of gene therapy for a rare disease, as defined by the Commissioner of Food and Drugs, designated under section 526 of the Federal Food, Drug, and Cosmetics Act, and approved under section 505 of such Act or licensed under subsection (a) or (k) of section 351 of the Public Health Service Act to treat a serious or life-threatening disease or condition;
“(ii) if administered in accordance with the labeling of such drug, is expected to result in either—
“(I) the cure of such disease or condition; or
“(II) a reduction in the symptoms of such disease or condition to the extent that such disease or condition is not expected to lead to early mortality; and
“(iii) is expected to achieve a result described in clause (ii), which may be achieved over an extended period of time, after not more than 3 administrations.
“(D) Relevant clinical parameter—The term relevant clinical parameter means, with respect to a covered outpatient drug that is the subject of a risk-sharing value-based payment agreement—
“(i) a clinical endpoint specified in the drug’s labeling or supported by one or more of the compendia described in section 1861(t)(2)(B)(ii)(I) that—
“(I) is able to be measured or evaluated on an annual basis for each year of the agreement on an independent basis by a provider or other entity; and
“(II) is required to be achieved (based on observed metrics in patient populations) under the terms of the agreement; or
“(ii) a surrogate endpoint (as defined in section 507(e)(9) of the Federal Food, Drug, and Cosmetic Act), including those developed by patient-focused drug development tools, that—
“(I) is able to be measured or evaluated on an annual basis for each year of the agreement on an independent basis by a provider or other entity; and
“(II) has been qualified by the Food and Drug Administration.
“(E) Risk-sharing value-based payment agreement—The term risk-sharing value-based payment agreement means an agreement between a State plan and a manufacturer—
“(i) for the purchase of a covered outpatient drug of the manufacturer that is a potentially curative treatment intended for one-time use;
“(ii) under which payment for such drug shall be made pursuant to an installment-based payment structure that meets the requirements of paragraph (3);
“(iii) which conditions payment on the achievement of at least 2 relevant clinical parameters (as defined in subparagraph (C));
“(iv) which provides that—
“(I) the State plan will directly reimburse the manufacturer for the drug; or
“(II) a third party will reimburse the manufacture in a manner approved by the Secretary; and
“(v) is approved by the Secretary in accordance with paragraph (2).
“(F) Total installment year amount—The term total installment year amount means, with respect to a risk-sharing value-based payment agreement for the purchase of a covered outpatient drug and an installment year, an amount equal to the product of—
“(i) the unit price of the drug charged under the agreement; and
“(ii) the number of units of such drug administered under the agreement during such installment year.”
“(3) Limiting definition
“(A) In general—The term covered outpatient drug does not include any drug, biological product, or insulin provided as part of, or as incident to and in the same setting as, any of the following (and for which payment may be made under this title as part of payment for the following and not as direct reimbursement for the drug):
“(i) Inpatient hospital services.
“(ii) Hospice services.
“(iii) Dental services, except that drugs for which the State plan authorizes direct reimbursement to the dispensing dentist are covered outpatient drugs.
“(iv) Physicians’ services.
“(v) Outpatient hospital services.
“(vi) Nursing facility services and services provided by an intermediate care facility for the mentally retarded.
“(vii) Other laboratory and x-ray services.
“(viii) Renal dialysis.
“(B) Other exclusions—Such term also does not include any such drug or product for which a National Drug Code number is not required by the Food and Drug Administration or a drug or biological used for a medical indication which is not a medically accepted indication.
“(C) State option—At the option of a State, such term may include any drug, biological product, or insulin for which the State is the primary payer under this title or a demonstration project concerning this title, and that is provided on an outpatient basis as part of, or as incident to and in the same setting as, described in clause (iv) or (v) of subparagraph (A) and for which payment is made as part of payment for such services.
“(D) No effect on best price—Any drug, biological product, or insulin excluded from the definition of such term as a result of this paragraph shall be treated as a covered outpatient drug for purposes of determining the best price (as defined in subsection (c)(1)(C)) for such drug, biological product, or insulin.”