; and (ii) in subparagraph (D), in the matter preceding clause (i), by inserting , under subsection (l)(2)(A), after under this paragraph . 208. Applying Medicaid drug rebate requirement to drugs provided as part of outpatient hospital services (a) In general Section 1927(k)(3) of the Social Security Act ( 42 U.S.C. 1396r–8(k)(3) ) is amended to read as follows: (3) Limiting definition (A) In general The term covered outpatient drug does not include any drug, biological product, or insulin provided as part of, or as incident to and in the same setting as, any of the following (and for which payment may be made under this title as part of payment for the following and not as direct reimbursement for the drug): (i) Inpatient hospital services. (ii) Hospice services. (iii) Dental services, except that drugs for which the State plan authorizes direct reimbursement to the dispensing dentist are covered outpatient drugs. (iv) Physicians’ services. (v) Outpatient hospital services. (vi) Nursing facility services and services provided by an intermediate care facility for the mentally retarded. (vii) Other laboratory and x-ray services. (viii) Renal dialysis. (B) Other exclusions Such term also does not include any such drug or product for which a National Drug Code number is not required by the Food and Drug Administration or a drug or biological used for a medical indication which is not a medically accepted indication. (C) State option At the option of a State, such term may include any drug, biological product, or insulin for which the State is the primary payer under this title or a demonstration project concerning this title, and that is provided on an outpatient basis as part of, or as incident to and in the same setting as, described in clause (iv) or (v) of subparagraph (A) and for which payment is made as part of payment for such services. (D) No effect on best price Any drug, biological product, or insulin excluded from the definition of such term as a result of this paragraph shall be treated as a covered