(a) In this section:
(1) “Labeler” means a person that:
(A) has a labeler code from the United States Food and Drug Administration under 21 C.F.R. § 207.20; and
(B) receives prescription drugs from a manufacturer or wholesaler and repackages those drugs for later retail sale.
(2) “Manufacturer” means a manufacturer of prescription drugs as defined by 42 U.S.C. § 1396r-8(k)(5) and its subsequent amendments, including a subsidiary or affiliate of a manufacturer.
(3) “Wholesaler” means a person licensed under Subchapter I, Chapter 431, Health and Safety Code.
(b) For purposes of this section, the term “supplemental rebates” means cash rebates paid by a manufacturer to the state on the basis of appropriate quarterly health and human services program utilization data relating to the manufacturer’s products, pursuant to a state supplemental rebate agreement negotiated with the manufacturer and, if necessary, approved by the federal government under Section 1927 of the federal Social Security Act (42 U.S.C. § 1396r-8).

(c) The commission may enter into a written agreement with a manufacturer to accept certain program benefits in lieu of supplemental rebates, as defined by this section, only if:
(1) the program benefit yields savings that are at least equal to the amount the manufacturer would have provided under a state supplemental rebate agreement during the current biennium as determined by the written agreement;
(2) the manufacturer posts a performance bond guaranteeing savings to the state, and agrees that if the savings are not achieved in accordance with the written agreement, the manufacturer will forfeit the bond to the state less any savings that were achieved; and
(3) the program benefit is in addition to other program benefits currently offered by the manufacturer to recipients of Medicaid or related programs.
(d) For purposes of this section, a program benefit may mean disease management programs authorized under this title, drug product donation programs, drug utilization control programs, prescriber and beneficiary counseling and education, fraud and abuse initiatives, and other services or administrative investments with guaranteed savings to a program operated by a health and human services agency.
(e) Other than as required to satisfy the provisions of this section, the program benefits shall be deemed an alternative to, and not the equivalent of, supplemental rebates and shall be treated in the state’s submissions to the federal government (including, as appropriate, waiver requests and quarterly Medicaid claims) so as to maximize the availability of federal matching payments.
(f) Agreements by the commission to accept program benefits as defined by this section:
(1) may not prohibit the commission from entering into similar agreements related to different drug classes with other entities;
(2) shall be limited to a time period expressly determined by the commission; and
(3) may only cover products that have received approval by the Federal Drug Administration at the time of the agreement, and new products approved after the agreement may be incorporated only under an amendment to the agreement.
(g) For purposes of this section, the commission may consider a monetary contribution or donation to the arrangements described in Subsection (c) for the purpose of offsetting expenditures to other state health care programs, but which funding may not be used to offset expenditures for covered outpatient drugs as defined by 42 U.S.C. § 1396r-8(k)(2) under the vendor drug program. An arrangement under this subsection may not yield less than the amount the state would have benefited under a supplemental rebate. The commission may consider an arrangement under this section as satisfying the requirements related to § 531.072(b).
(h) Subject to Subsection (i), the commission shall negotiate with manufacturers and labelers, including generic manufacturers and labelers, to obtain supplemental rebates for prescription drugs provided under:
(1) the Medicaid vendor drug program in excess of the Medicaid rebates required by 42 U.S.C. § 1396r-8 and its subsequent amendments;
(2) the child health plan program; and
(3) any other state program administered by the commission or a health and human services agency, including community mental health centers and state mental health hospitals.
(i) The commission may by contract authorize a private entity to negotiate with manufacturers and labelers on behalf of the commission.
(j) A manufacturer or labeler that sells prescription drugs in this state may voluntarily negotiate with the commission and enter into an agreement to provide supplemental rebates for prescription drugs provided under:
(1) the Medicaid vendor drug program in excess of the Medicaid rebates required by 42 U.S.C. § 1396r-8 and its subsequent amendments;
(2) the child health plan program; and
(3) any other state program administered by the commission or a health and human services agency, including community mental health centers and state mental health hospitals.
(k) In negotiating terms for a supplemental rebate amount, the commission shall consider:
(1) rebates calculated under the Medicaid rebate program in accordance with 42 U.S.C. § 1396r-8 and its subsequent amendments;
(2) any other available information on prescription drug prices or rebates; and
(3) other program benefits as specified in Subsection (c).
(l) Repealed by Acts 2011, 82nd Leg., R.S., Ch. 1083, Sec. 25(58), eff. June 17, 2011.
(m) In negotiating terms for a supplemental rebate, the commission shall use the average manufacturer price (AMP), as defined in 42 U.S.C. Section 1396r-8(k)(1), as the cost basis for the product.
(n) Prior to or during supplemental rebate agreement negotiations for drugs being considered for the preferred drug list, the commission shall disclose to pharmaceutical manufacturers any clinical edits or clinical protocols that may be imposed on drugs within a particular drug category that are placed on the preferred list during the contract period. Clinical edits will not be imposed for a preferred drug during the contract period unless the above disclosure is made.

Text of section effective until April 01, 2025