118 STAT. 778 PUBLIC LAW 108–265—JUNE 30, 2004 would be as effective as the vendor peer group system and would not result in higher food costs if program participants redeem supple mental food vouchers at vendors described in subparagraph (D)(ii)(I) rather than at vendors other than vendors described in subparagraph (D)(ii)(I). ‘‘(B) COMPETITIVE PRICING.— ‘‘(i) IN GENERAL.—The State agency shall establish competitive price criteria for each peer group for the selection of vendors for participation in the program that— ‘‘(I) ensure that the retail prices charged by vendor applicants for the program are competitive with the prices charged by other vendors; and ‘‘(II) consider— ‘‘(aa) the shelf prices of the vendor for all buyers; or ‘‘(bb) the prices that the vendor bid for supplemental foods, which shall not exceed the shelf prices of the vendor for all buyers. ‘‘(ii) PARTICIPANT ACCESS.—In establishing competitive price criteria, the State agency shall con sider participant access by geographic area. ‘‘(iii) SUBSEQUENT PRICE INCREASES.—The State agency shall establish procedures to ensure that a retail store selected for participation in the program does not, subsequent to selection, increase prices to levels that would make the store ineligible for selection to participate in the program. ‘‘(C) ALLOWABLE REIMBURSEMENT LEVELS.— ‘‘(i) IN GENERAL.—The State agency shall establish allowable reimbursement levels for supplemental foods for each vendor peer group that ensure— ‘‘(I) that payments to vendors in the vendor peer group reflect competitive retail prices; and ‘‘(II) that the State agency does not reimburse a vendor for supplemental foods at a level that would make the vendor ineligible for authorization under the criteria established under subparagraph (B). ‘‘(ii) PRICE FLUCTUATIONS.—The allowable reimbursement levels may include a factor to reflect fluctuations in wholesale prices. ‘‘(iii) PARTICIPANT ACCESS.—In establishing allow able reimbursement levels, the State agency shall con sider participant access in a geographic area. ‘‘(D) EXEMPTIONS.—The State agency may exempt from competitive price criteria and allowable reimbursement levels established under this paragraph— ‘‘(i) pharmacy vendors that supply only exempt infant formula or medical foods that are eligible under the program; and ‘‘(ii) vendors— ‘‘(I)(aa) for which more than 50 percent of the annual revenue of the vendor from the sale of food items consists of revenue from the sale Procedures.
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