
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 23, 2000]
[Document not affected by Public Laws enacted between
  January 23, 2000 and December 4, 2001]
[CITE: 38USC8126]

 
                      TITLE 38--VETERANS' BENEFITS
 
            PART VI--ACQUISITION AND DISPOSITION OF PROPERTY
 
   CHAPTER 81--ACQUISITION AND OPERATION OF HOSPITAL AND DOMICILIARY 
FACILITIES; PROCUREMENT AND SUPPLY; ENHANCED-USE LEASES OF REAL PROPERTY
 
                  SUBCHAPTER II--PROCUREMENT AND SUPPLY
 
Sec. 8126. Limitation on prices of drugs procured by Department 
        and certain other Federal agencies
        
    (a) Each manufacturer of covered drugs shall enter into a master 
agreement with the Secretary under which--
        (1) beginning January 1, 1993, the manufacturer shall make 
    available for procurement on the Federal Supply Schedule of the 
    General Services Administration each covered drug of the 
    manufacturer;
        (2) with respect to each covered drug of the manufacturer 
    procured by a Federal agency described in subsection (b) on or after 
    January 1, 1993, that is purchased under depot contracting systems 
    or listed on the Federal Supply Schedule, the manufacturer has 
    entered into and has in effect a pharmaceutical pricing agreement 
    with the Secretary (or the Federal agency involved, if the Secretary 
    delegates to the Federal agency the authority to enter into such a 
    pharmaceutical pricing agreement) under which the price charged 
    during the one-year period beginning on the date on which the 
    agreement takes effect may not exceed 76 percent of the non-Federal 
    average manufacturer price (less the amount of any additional 
    discount required under subsection (c)) during the one-year period 
    ending one month before such date (or, in the case of a covered drug 
    for which sufficient data for determining the non-Federal average 
    manufacturer price during such period are not available, during such 
    period as the Secretary considers appropriate), except that such 
    price may nominally exceed such amount if found by the Secretary to 
    be in the best interests of the Department or such Federal agencies;
        (3) with respect to each covered drug of the manufacturer 
    procured by a State home receiving funds under section 1741 of this 
    title, the price charged may not exceed the price charged under the 
    Federal Supply Schedule at the time the drug is procured; and
        (4) unless the manufacturer meets the requirements of paragraphs 
    (1), (2), and (3), the manufacturer may not receive payment for the 
    purchase of drugs or biologicals from--
            (A) a State plan under title XIX of the Social Security Act, 
        except as authorized under section 1927(a)(3) of such Act,
            (B) any Federal agency described in subsection (b), or
            (C) any entity that receives funds under the Public Health 
        Service Act.

    (b) The Federal agencies described in this subsection are as 
follows:
        (1) The Department.
        (2) The Department of Defense.
        (3) The Public Health Service, including the Indian Health 
    Service.
        (4) The Coast Guard.

    (c) With respect to any covered drug the price of which is 
determined in accordance with a pharmaceutical pricing agreement entered 
into pursuant to subsection (a)(2), beginning on or after January 1, 
1993, the manufacturer shall provide a discount in an amount equal to 
the amount by which the change in non-Federal price exceeds the amount 
equal to--
        (1) the non-Federal average manufacturer price of the drug 
    during the 3-month period that ends one year before the last day of 
    the month preceding the month during which the contract for the 
    covered drug goes into effect (or, in the case of a covered drug for 
    which sufficient data for determining the non-Federal average 
    manufacturer price during such period is not available, during such 
    period as the Secretary considers appropriate); multiplied by
        (2) the percentage increase in the Consumer Price Index for all 
    urban consumers (U.S. city average) between the last month of the 
    period described in paragraph (1) and the last month preceding the 
    month during which the contract goes into effect for which Consumer 
    Price Index data is available.

    (d) In the case of a covered drug of a manufacturer that has entered 
into a multi-year contract with the Secretary under subsection (a)(2) 
for the procurement of the drug--
        (1) during any one-year period that follows the first year for 
    which the contract is in effect, the contract price charged for the 
    drug may not exceed the contract price charged during the preceding 
    one-year period, increased by the percentage increase in the 
    Consumer Price Index for all urban consumers (U.S. city average) 
    during the 12-month period ending with the last month of such 
    preceding one-year period for which Consumer Price Index data is 
    available; and
        (2) in applying subsection (c) to determine the amount of the 
    discount provided with respect to the drug during a year that 
    follows the first year for which the contract is in effect, any 
    reference in such subsection to ``the month during which the 
    contract goes into effect'' shall be considered a reference to the 
    first month of such following year.

    (e)(1) The manufacturer of any covered drug the price of which is 
determined in accordance with a pharmaceutical pricing agreement entered 
into pursuant to subsection (a)(2) shall--
        (A) not later than 30 days after the first day of the last 
    quarter that begins before the agreement takes effect (or, in the 
    case of an agreement that takes effect on January 1, 1993, not later 
    than December 4, 1992), report to the Secretary the non-Federal 
    average manufacturer price for the drug during the one-year period 
    that ends on the last day of the previous quarter; and
        (B) not later than 30 days after the last day of each quarter 
    for which the agreement is in effect, report to the Secretary the 
    non-Federal average manufacturer price for the drug during such 
    quarter.

    (2) The provisions of subparagraphs (B) and (C) of section 
1927(b)(3) of the Social Security Act shall apply to drugs described in 
paragraph (1) and the Secretary in the same manner as such provisions 
apply to covered outpatient drugs and the Secretary of Health and Human 
Services under such subparagraphs, except that references in such 
subparagraphs to prices or information reported or required under 
``subparagraph (A)'' shall be deemed to refer to information reported 
under paragraph (1).
    (3) In order to determine the accuracy of a drug price that is 
reported to the Secretary under paragraph (1), the Secretary may audit 
the relevant records of the manufacturer or of any wholesaler that 
distributes the drug, and may delegate the authority to audit such 
records to the appropriate Federal agency described in subsection (b).
    (4) Any information contained in a report submitted to the Secretary 
under paragraph (1) or obtained by the Secretary through any audit 
conducted under paragraph (3) shall remain confidential, except as the 
Secretary determines necessary to carry out this section and to permit 
the Comptroller General and the Director of the Congressional Budget 
Office to review the information provided.
    (f) The Secretary shall supply to the Secretary of Health and Human 
Services--
        (1) upon the execution or termination of any master agreement, 
    the name of the manufacturer, and
        (2) on a quarterly basis, a list of manufacturers who have 
    entered into master agreements under this section.

    (g)(1) 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.
    (2) A manufacturer is deemed to meet the requirements of subsection 
(a) 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 the enactment 
of this section), 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 after November 4, 1992.
    (h) In this section:
        (1) The term ``change in non-Federal price'' means, with respect 
    to a covered drug that is subject to an agreement under this 
    section, an amount equal to--
            (A) the non-Federal average manufacturer price of the drug 
        during the 3-month period that ends with the month preceding the 
        month during which a contract goes into effect (or, in the case 
        of a covered drug for which sufficient data for determining the 
        non-Federal average manufacturer price during such period is not 
        available, during such period as the Secretary considers 
        appropriate); minus
            (B) the non-Federal average manufacturer price of the drug 
        during the 3-month period that ends one year before the end of 
        the period described in subparagraph (A) (or, in the case of a 
        covered drug for which sufficient data for determining the non-
        Federal average manufacturer price during such period is not 
        available, during such period preceding the period described in 
        subparagraph (A) as the Secretary considers appropriate).

        (2) The term ``covered drug'' means--
            (A) a drug described in section 1927(k)(7)(A)(ii) of the 
        Social Security Act, or that would be described in such section 
        but for the application of the first sentence of section 
        1927(k)(3) of such Act;
            (B) a drug described in section 1927(k)(7)(A)(iv) of the 
        Social Security Act, or that would be described in such section 
        but for the application of the first sentence of section 
        1927(k)(3) of such Act; or
            (C) any biological product identified under section 600.3 of 
        title 21, Code of Federal Regulations.

        (3) The term ``depot'' means a centralized commodity management 
    system through which covered drugs procured by an agency of the 
    Federal Government are--
            (A) received, stored, and delivered through--
                (i) a federally owned and operated warehouse system, or
                (ii) a commercial entity operating under contract with 
            such agency; or

            (B) delivered directly from the commercial source to the 
        entity using such covered drugs.

        (4) The term ``manufacturer'' means any entity which is engaged 
    in--
            (A) the production, preparation, propagation, compounding, 
        conversion, or processing of prescription drug products, either 
        directly or indirectly by extraction from substances of natural 
        origin, or independently by means of chemical synthesis, or by a 
        combination of extraction and chemical synthesis, or
            (B) in the packaging, repackaging, labeling, relabeling, or 
        distribution of prescription drug products.

    Such term does not include a wholesale distributor of drugs or a 
    retail pharmacy licensed under State law.
        (5) The term ``non-Federal average manufacturer price'' means, 
    with respect to a covered drug and a period of time (as determined 
    by the Secretary), the weighted average price of a single form and 
    dosage unit of the drug that is paid by wholesalers in the United 
    States to the manufacturer, taking into account any cash discounts 
    or similar price reductions during that period, but not taking into 
    account--
            (A) any prices paid by the Federal Government; or
            (B) any prices found by the Secretary to be merely nominal 
        in amount.

        (6) The term ``weighted average price'' means, with respect to a 
    covered drug and a period of time (as determined by the Secretary) 
    an amount equal to--
            (A) the sum of the products of the average price per package 
        unit of each quantity of the drug sold during the period and the 
        number of package units of the drug sold during the period; 
        divided by
            (B) the total number of package units of the drug sold 
        during the period.

    (i)(1) If the Secretary modifies a multi-year contract described in 
subsection (d) to include a covered drug of the manufacturer that was 
not available for inclusion under the contract at the time the contract 
went into effect, the price of the drug shall be determined as follows:
        (A) For the portion of the first contract year during which the 
    drug is so included, the price of the drug shall be determined in 
    accordance with subsection (a)(2), except that the reference in such 
    subsection to ``the one-year period beginning on the date the 
    agreement takes effect'' shall be considered a reference to such 
    portion of the first contract year.
        (B) For any subsequent contract year, the price of the drug 
    shall be determined in accordance with subsection (d), except that 
    each reference in such subsection to ``the first year for which the 
    contract is in effect'' shall be considered a reference to the 
    portion of the first contract year during which the drug is included 
    under the contract.

    (2) In this subsection, the term ``contract year'' means any one-
year period for which a multi-year contract described in subsection (d) 
is in effect.

(Added Pub. L. 102-585, title VI, Sec. 603(a)(1), Nov. 4, 1992, 106 
Stat. 4971; amended Pub. L. 103-18, Sec. 1(a), Apr. 12, 1993, 107 Stat. 
53; Pub. L. 103-446, title XII, Sec. 1201(e)(27), (f)(6), Nov. 2, 1994, 
108 Stat. 4686, 4687; Pub. L. 104-106, div. A, title VII, Sec. 737(a), 
Feb. 10, 1996, 110 Stat. 383; Pub. L. 105-115, title I, 
Sec. 125(b)(2)(E), Nov. 21, 1997, 111 Stat. 2325.)

                       References in Text

    The Social Security Act, referred to in subsecs. (a)(4)(A), (e)(2), 
(g)(1), and (h)(2)(A), (B), is act Aug. 14, 1935, ch. 531, 49 Stat. 620, 
as amended, which is classified generally to chapter 7 (Sec. 301 et 
seq.) of Title 42, The Public Health and Welfare. Title XIX of the Act 
is classified generally to subchapter XIX (Sec. 1396 et seq.) of chapter 
7 of Title 42. Section 1927 of the Act is classified to section 1396r-8 
of Title 42. For complete classification of this Act to the Code, see 
section 1305 of Title 42 and Tables.
    The Public Health Service Act, referred to in subsec. (a)(4)(C), is 
act July 1, 1944, ch. 373, 58 Stat. 682, as amended, which is classified 
generally to chapter 6A (Sec. 201 et seq.) of Title 42. For complete 
classification of this Act to the Code, see Short Title note set out 
under section 201 of Title 42 and Tables.
    Enactment of this section, referred to in subsec. (g)(2), means 
enactment of Pub. L. 102-585, which enacted this section and was 
approved Nov. 4, 1992.


                               Amendments

    1997--Subsec. (h)(2). Pub. L. 105-115 inserted ``or'' at end of 
subpar. (B), substituted a period for ``; or'' at end of subpar. (C), 
and struck out subpar. (D), which read as follows: ``insulin certified 
under section 506 of the Federal Food, Drug, and Cosmetic Act.''
    1996--Subsec. (b)(4). Pub. L. 104-106 added par. (4).
    1994--Subsec. (e)(1)(A). Pub. L. 103-446, Sec. 1201(e)(27)(A), 
(f)(6)(A), substituted ``December 4, 1992'' for ``30 days after the date 
of the enactment of this section'' and ``one-year period'' for ``1-year 
period''.
    Subsec. (f)(2). Pub. L. 103-446, Sec. 1201(e)(27)(B), substituted a 
period for ``, and'' at end.
    Subsec. (g)(1), (2). Pub. L. 103-446, Sec. 1201(f)(6)(B), 
substituted ``November 4, 1992'' for ``the date of the enactment of this 
section''.
    1993--Subsec. (a)(2). Pub. L. 103-18, Sec. 1(a)(1), struck out 
``preceding such date'' before ``as the Secretary considers 
appropriate''.
    Subsec. (c). Pub. L. 103-18, Sec. 1(a)(2), in introductory 
provisions, struck out ``for calendar quarters'' after ``subsection 
(a)(2),'', and in par. (1), struck out ``preceding the month during 
which the contract goes into effect'' after ``during such period'' and 
substituted ``multiplied by'' for ``increased by''.
    Subsec. (d)(1). Pub. L. 103-18, Sec. 1(a)(3), amended par. (1) 
generally. Prior to amendment, par. (1) read as follows: ``during any 
one-year period that follows the first year for which the contract is in 
effect, the price charged may not exceed the price charged during the 
preceding one-year period, increased by the percentage increase in the 
Consumer Price Index for all urban consumers (U.S. city average) between 
the last months of such one-year periods for which Consumer Price Index 
data is available; and''.
    Subsec. (i). Pub. L. 103-18, Sec. 1(a)(4), added subsec. (i).


                    Effective Date of 1996 Amendment

    Section 737(b) of Pub. L. 104-106 provided that: ``The amendment 
made by subsection (a) [amending this section] shall take effect as if 
included in the enactment of section 603 of the Veterans Health Care Act 
of 1992 (Public Law 102-585; 106 Stat. 4971).''


                    Effective Date of 1993 Amendment

    Section 1(b) of Pub. L. 103-18 provided that: ``The amendments made 
by subsection (a) [amending this section] shall take effect as if 
included in the enactment of section 603 of the Veterans Health Care Act 
of 1992 [Pub. L. 102-585].''

                  Section Referred to in Other Sections

    This section is referred to in title 42 section 1396r-8.
