(a) Pharmacy Reimbursement Limits-

(1) IN GENERAL- Section 1927(e) of the Social Security Act (42 U.S.C. 1396r-8(e)) is amended--

(A) in paragraph (4), by striking ‘(or, effective January 1, 2007, two or more)’; and

(B) by striking paragraph (5) and inserting the following:

‘(5) USE OF AMP IN UPPER PAYMENT LIMITS- The Secretary shall calculate the Federal upper reimbursement limit established under paragraph (4) as no less than 175 percent of the weighted average (determined on the basis of utilization) of the most recently reported monthly average manufacturer prices for pharmaceutically and therapeutically equivalent multiple source drug products that are available for purchase by retail community pharmacies on a nationwide basis. The Secretary shall implement a smoothing process for average manufacturer prices. Such process shall be similar to the smoothing process used in determining the average sales price of a drug or biological under section 1847A.’.

(2) DEFINITION OF AMP- Section 1927(k)(1) of such Act (42 U.S.C. 1396r-8(k)(1)) is amended--

(A) in subparagraph (A), by striking ‘by’ and all that follows through the period and inserting ‘by--

‘(i) wholesalers for drugs distributed to retail community pharmacies; and

‘(ii) retail community pharmacies that purchase drugs directly from the manufacturer.’; and

(B) by striking subparagraph (B) and inserting the following:

‘(B) EXCLUSION OF CUSTOMARY PROMPT PAY DISCOUNTS AND OTHER PAYMENTS-

‘(i) IN GENERAL- The average manufacturer price for a covered outpatient drug shall exclude--

‘(I) customary prompt pay discounts extended to wholesalers;

‘(II) bona fide service fees paid by manufacturers to wholesalers or retail community pharmacies, including (but not limited to) distribution service fees, inventory management fees, product stocking allowances, and fees associated with administrative services agreements and patient care programs (such as medication compliance programs and patient education programs);

‘(III) reimbursement by manufacturers for recalled, damaged, expired, or otherwise unsalable returned goods, including (but not limited to) reimbursement for the cost of the goods and any reimbursement of costs associated with return goods handling and processing, reverse logistics, and drug destruction; and

‘(IV) payments received from, and rebates or discounts provided to, pharmacy benefit managers, managed care organizations, health maintenance organizations, insurers, hospitals, clinics, mail order pharmacies, long term care providers, manufacturers, or any other entity that does not conduct business as a wholesaler or a retail community pharmacy.

‘(ii) INCLUSION OF OTHER DISCOUNTS AND PAYMENTS- Notwithstanding clause (i), any other discounts, rebates, payments, or other financial transactions that are received by, paid by, or passed through to, retail community pharmacies shall be included in the average manufacturer price for a covered outpatient drug.’; and

(C) in subparagraph (C), by striking ‘the retail pharmacy class of trade’ and inserting ‘retail community pharmacies’.

(3) DEFINITION OF MULTIPLE SOURCE DRUG- Section 1927(k)(7) of such Act (42 U.S.C. 1396r-8(k)(7)) is amended--

(A) in subparagraph (A)(i)(III), by striking ‘the State’ and inserting ‘the United States’; and

(B) in subparagraph (C)--

(i) in clause (i), by inserting ‘and’ after the semicolon;

(ii) in clause (ii), by striking ‘; and’ and inserting a period; and

(iii) by striking clause (iii).

(4) DEFINITIONS OF RETAIL COMMUNITY PHARMACY; WHOLESALER- Section 1927(k) of such Act (42 U.S.C. 1396r-8(k)) is amended by adding at the end the following new paragraphs:

‘(10) RETAIL COMMUNITY PHARMACY- The term ‘retail community pharmacy’ means an independent pharmacy, a chain pharmacy, a supermarket pharmacy, or a mass merchandiser pharmacy that is licensed as a pharmacy by the State and that dispenses medications to the general public at retail prices. Such term does not include a pharmacy that dispenses prescription medications to patients primarily through the mail, nursing home pharmacies, long-term care facility pharmacies, hospital pharmacies, clinics, charitable or not-for-profit pharmacies, government pharmacies, or pharmacy benefit managers.

‘(11) WHOLESALER- The term ‘wholesaler’ means a drug wholesaler that is engaged in wholesale distribution of prescription drugs to retail community pharmacies, including (but not limited to) manufacturers, repackers, distributors, own-label distributors, private-label distributors, jobbers, brokers, warehouses (including manufacturer’s and distributor’s warehouses, chain drug warehouses, and wholesale drug warehouses) independent wholesale drug traders, and retail community pharmacies that conduct wholesale distributions.’.

(b) Disclosure of Price Information to the Public- Section 1927(b)(3) of such Act (42 U.S.C. 1396r-8(b)(3)) is amended--

(1) in subparagraph (A)--

(A) in the first sentence, by inserting after clause (iii) the following:

‘(iv) not later than 30 days after the last day of each month of a rebate period under the agreement, on the manufacturer’s total number of units that are used to calculate the monthly average manufacturer price for each covered outpatient drug;’; and

(B) in the second sentence, by inserting ‘(relating to the weighted average of the most recently reported monthly average manufacturer prices)’ after ‘(D)(v)’; and

(2) in subparagraph (D)(v), by striking ‘average manufacturer prices’ and inserting ‘the weighted average of the most recently reported monthly average manufacturer prices and the average retail survey price determined for each multiple source drug in accordance with subsection (f)’.

(c) Clarification of Application of Survey of Retail Prices- Section 1927(f)(1) of such Act (42 U.S.C. 1396r-8(b)(1)) is amended--

(1) in subparagraph (A)(i), by inserting ‘with respect to a retail community pharmacy,’ before ‘the determination’; and

(2) in subparagraph (C)(ii), by striking ‘retail pharmacies’ and inserting ‘retail community pharmacies’.

(d) Effective Date- The amendments made by this section shall take effect on the first day of the first calendar year quarter that begins at least 180 days after the date of enactment of this Act, without regard to whether or not final regulations to carry out such amendments have been promulgated by such date.