SEC. 1742. PRESCRIPTION DRUG REBATES.

[a] Additional Rebate for New Formulations of Existing Drugs-

[1] IN GENERAL- Section- 1927[c][2] of the Social Security Act [42 U.S.C. 1396r-8[c][2]] is amended by adding at the end the following new subparagraph:

'[C] TREATMENT OF NEW FORMULATIONS- In the case of a drug that is a line extension of a single source drug or an innovator multiple source drug that is an oral solid dosage form, the rebate obligation with respect to such drug under this section shall be the amount computed under this section for such new drug or, if greater, the product of--

'[i] the average manufacturer price of the line extension of a single source drug or an innovator multiple source drug that is an oral solid dosage form;

'[ii] the highest additional rebate [calculated as a percentage of average manufacturer price] under this section for any strength of the original single source drug or innovator multiple source drug; and

'[iii] the total number of units of each dosage form and strength of the line extension product paid for under the State plan in the rebate period [as reported by the State]. In this subparagraph, the term 'line extension' means, with respect to a drug, an extended release formulation of the drug.'.

[2] EFFECTIVE DATE- The amendment made by paragraph [1] shall apply to drugs dispensed after December 31, 2009.

[b] Increase Minimum Rebate Percentage for Single Source Drugs- Section- 1927[c][1][B][i] of the Social Security Act [42 U.S.C. 1396r-8[c][1][B][i]] is amended--

[1] in subclause [IV], by striking 'and' at the end;

[2] in subclause [V]--

[A] by inserting 'and before January 1, 2010' after 'December 31, 1995,'; and

[B] by striking the period at the end and inserting '; and'; and

[3] by adding at the end the following new subclause:

'[VI] after December 31, 2009, is 22.1 percent.'.