SEC. 2501. EXPANDED PARTICIPATION IN 340B PROGRAM.

[a] Expansion of Covered Entities Receiving Discounted Prices- Section- 340B[a][4] [42 U.S.C. 256b[a][4]] is amended by adding at the end the following:

'[M] A children's hospital excluded from the Medicare prospective payment system pursuant to section 1886[d][1][B][iii] of the Social Security Act which would meet the requirements of subparagraph [L], including the disproportionate share adjustment percentage requirement under subparagraph [L][ii], if the hospital were a subsection [d] hospital as defined in section 1886[d][1][B] of the Social Security Act.

'[N] An entity that is a critical access hospital [as determined under section 1820[c][2] of the Social Security Act].

'[O] An entity receiving funds under title V of the Social Security Act [relating to maternal and child health] for the provision of health services.

'[P] An entity receiving funds under subpart I of part B of title XIX of the Public Health Service Act [relating to comprehensive mental health services] for the provision of community mental health services.

'[Q] An entity receiving funds under subpart II of such part B [relating to the prevention and treatment of substance abuse] for the provision of treatment services for substance abuse.

'[R] An entity that is a Medicare-dependent, small rural hospital [as defined in section 1886[d][5][G][iv] of the Social Security Act].

'[S] An entity that is a sole community hospital [as defined in section 1886[d][5][D][iii] of the Social Security Act].

'[T] An entity that is classified as a rural referral center under section 1886[d][5][C] of the Social Security Act.'.

[b] Prohibition on Group Purchasing Arrangements- Section- 340B[a] [42 U.S.C. 256b[a]] is amended--

[1] in paragraph [4][L]--

[A] by adding 'and' at the end of clause [i];

[B] by striking '; and' at the end of clause [ii] and inserting a period; and

[C] by striking clause [iii];

[2] in paragraph [5], by redesignating subparagraphs [C] and [D] as subparagraphs [D] and [E], respectively, and by inserting after subparagraph [B] the following:

'[C] PROHIBITING USE OF GROUP PURCHASING ARRANGEMENTS-

'[i] A hospital described in subparagraph [L], [M], [N], [R], [S], or [T] of paragraph [4] shall not obtain covered outpatient drugs through a group purchasing organization or other group purchasing arrangement, except as permitted or provided pursuant to clause [ii].

'[ii] The Secretary shall establish reasonable exceptions to the requirement of clause [i]--

'[I] with respect to a covered outpatient drug that is unavailable to be purchased through the program under this section due to a drug shortage problem, manufacturer noncompliance, or any other reason beyond the hospital's control;

'[II] to facilitate generic substitution when a generic covered outpatient drug is available at a lower price; and

'[III] to reduce in other ways the administrative burdens of managing both inventories of drugs obtained under this section and not under this section, if such exception does not create a duplicate discount problem in violation of subparagraph [A] or a diversion problem in violation of subparagraph [B].'.