PUBLIC LAW 102-585—NOV. 4, 1992 106 STAT. 4967 SEC. 602. LIMITATIONS ON PRICES OF DRUGS PURCHASED BY CER- TAIN CLINICS AND HOSPITALS. (a) IN GENERAL.— Part D of title III of the Public Health Service Act is amended by adding the following subpart: "Subpart VII—Drug Pricing Agreements "LIMITATION ON PRICES OF DRUGS PURCHASED BY COVERED ENTmES "SEC 340B. (a) REQUIREMENTS FOR AGREEMENT WITH 42 USC 256b. SECRETARY.— "(1) IN GENERAL.— The Secretary shall enter into an agreement with each manufacturer of covered drugs under whidi the amount required to be paid (taking into account any rebate or discount, as provided by the Secretary) to the manmacturer for covered drugs (other than drugs described in paragraph (3)) purchased by a covered entity on or after the first day of the first month that begins after the date of the enactment of this section, does not exceed an amount equal to the average manufacturer price for the drug under title XIX of the Social Security Act in the preceding calendar quarter, reduced by the rebate percentoge described in paragraph (2). "(2) REBATE PERCENTAGE DEFINED. — "(A) IN GENERAL. — For a covered outpatient drug purchased in a calendar quarter, the 'rebate percentoge' is the amount (expressed as a percentoge) ec^ual to^ "(i) the average total rebate reqmred under section 1927(c) of the Social Security Act with respect to the drug (for a unit of the dosage form and strength involved) during the preceding calendar quarter; divided by "(ii) the average manufacturer price for such a unit of the ding during such quarter. "(B) OVER THE COUNTER DRUGS.— "(i) IN GENERAL. —For purposes of subparagraph (A), in the case of over the counter drugs, uie 'rebate percentage' shall be determined as u the rebate required under section 1927(c) of the Social Security Act is based on the applicable percentoge provided under section 1927(c)(4) of such Act. "(ii) DEFINITION.— The term 'over the counter drug' means a drug that may be sold without a prescription and which is prescribeid by a physician (or other persons authorized to prescribe such drug under Stote law). "(3) DRUGS PROVIDED UNDER STATE MEDICAID PLANS.— Drugs described in this paragraph are drugs purchased by the entity for which payment is made by the Stote under the Stote plan for medical assistance under title XIX of the Social Security Act. "(4) COVERED ENTITY DEFINED.— In this section, the term 'covered entity* means an entity that meete the requiremento described in pars^aph (5) and is one of the following: "(A) A Federally-qualified health center (as defined in section 1905aX2XB) of the Social Security Act). "(B) An entity receiving a grant under section 340A
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