To amend title XVIII of the Social Security Act to revise the methodology by which payment for orphan drugs and biologicals is made under program prospective payment system for hospital outpatient department services under the Medicare Program.

Summary: Medicare Patient Access to Drugs for Rare Diseases Act of 2003 - Amends title XVIII (Medicare) of the Social Security Act to revise the methodology by which payment for orphan drugs and biologicals is made under the Medicare prospective payment system for hospital outpatient department (OPD) services.

Directs the Secretary to report to specified congressional committees on payment for orphan drugs and biologicals and blood clotting factors for individuals with hemophilia in the OPD setting, including recommendations for either continuing or discontinuing the exclusion of such drugs and biologicals from payment under Medicare.

Provides for a moratorium on decreases in payment rates for orphan drugs and biologicals and blood clotting factors for certain individuals with hemophilia.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicare Patient Access to Drugs for 
Rare Diseases Act of 2003''.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--Congress makes the following findings:
            (1) Rare diseases and disorders are those which affect 
        small patient populations, defined as fewer than 200,000 
        individuals in the United States. Taken together, 25,000,000 
        Americans suffer from one of the 6,000 rare diseases and 
        disorders.
            (2) Because prescription drug manufacturers could not make 
        a profit from marketing drugs for such small patient 
        populations, very little ``rare disease'' research was 
        conducted prior to 1983. Only 10 orphan drugs existed at that 
        time.
            (3) The Orphan Drug Act, signed into law in 1983, created 
        financial incentives for the research, development, production 
        and distribution of such orphan drugs.
            (4) Since 1983, more than 240 new orphan drugs have been 
        developed, approved, and marketed in the United States and more 
        than 800 additional drugs are in the research pipeline.
            (5) The tremendous success of the Orphan Drug Act cannot be 
        taken for granted because--
                    (A) patient access to the more expensive orphan 
                drugs is a continuing problem; and
                    (B) there is a need to stimulate more research for 
                the millions of Americans and thousands of rare 
                diseases for which there are not yet effective 
                therapies.
            (6) When Congress adopted the medicare hospital outpatient 
        prospective payment system (HOPPS) in 1999, it defined orphan 
        drugs based on the Federal Food, Drug and Cosmetic (FFD&C) Act 
        and placed such orphan drugs in a category that provided 
        sufficient reimbursement to assure continuing access for rare 
        disease patients.
            (7) Despite expressions of concern from Congress, the HOPPS 
        regulation for 2003 does not continue this policy and, instead, 
        uses a definition of orphan drugs that is not supported by the 
        history of the Orphan Drug Act and forces most orphan drugs 
        into categories in which they are reimbursed at levels 
        significantly below hospital acquisition costs.
            (8) Unless medicare provides adequate reimbursement for 
        orphan drugs, hospitals are much less likely to have them 
        available for beneficiaries with rare diseases, such as 
        cervical dystonia, alpha-1 antitripsin deficiency, rare 
        cancers, porphyria, sickle cell anemia, Tourette syndrome, 
        cystic fibrosis, and amyotrophic lateral sclerosis (Lou 
        Gehrig's disease).
    (b) Purpose.--The purpose of this Act is to assure that medicare 
beneficiaries with rare diseases have continued access to orphan drugs 
in the hospital outpatient setting and that the FFD&C Act definition of 
rare diseases is used by the medicare program.

SEC. 3. PAYMENT FOR ORPHAN DRUGS AND BIOLOGICALS UNDER THE PROSPECTIVE 
              PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT DEPARTMENT 
              SERVICES.

    (a) Payment for Orphan Drugs and Biologicals.--
            (1) In general.--Section 1833(t)(1)(B) of the Social 
        Security Act (42 U.S.C. 1395l(t)(1)(B)) is amended--
                    (A) by striking the period at the end of clause 
                (iv) and inserting a semi-colon; and
                    (B) by inserting at the end the following new 
                clauses:
                            ``(v) for periods before January 1, 2007, 
                        does not include a drug or biological that has 
                        been designated as an orphan drug under section 
                        526 of the Federal Food, Drug and Cosmetic Act 
                        or a drug or biological which is described 
                        under the same Healthcare Procedure Coding 
                        System product code (or product code under a 
                        successor coding system designated in 
                        regulations promulgated under section 1173(c)), 
                        has the same non-proprietary name, or is the 
                        `same drug' as that term is defined by the Food 
                        and Drug Administration under regulations 
                        promulgated under section 527 of the Federal, 
                        Food, Drug and Cosmetic Act; and
                            ``(vi) for periods before January 1, 2007, 
                        does not include blood clotting factors for 
                        individuals with hemophilia for which a 
                        biologics license application under subsection 
                        (a) of section 351 of the Public Health Service 
                        Act has been submitted on or before December 
                        31, 2002.''.
            (2) Considerations in applying exemption rules.--
                    (A) In general.--In determining whether a drug or 
                biological is excluded from the prospective payment 
                system under section 1833(t) of the Social Security Act 
                (42 U.S.C. 1395l(t)) for hospital outpatient department 
                services by reason of the amendment made by paragraph 
                (1), the Secretary shall not take into account the fact 
that a drug or biological may have uses that have not been designated 
as an orphan drug under section 526 of the Federal Food, Drug and 
Cosmetic Act.
                    (B) Exception for high volume claims.--
                Notwithstanding subparagraph (A), for any drug or 
                biological that would otherwise be covered by the 
                amendment made by paragraph (1), if the number of 
                claims submitted by hospitals for covered OPD services 
                (as defined in section 1833(t)(1)(B) of such Act (42 
                U.S.C. 1395l(t)(1)(B)) without regard to clauses (v) 
                and (vi) of such section) for such drug or biological 
                administered exceeds 30,000 for the year from which 
                claims are reviewed to determine payment rates for a 
                given year, the exclusion under such amendments shall 
                apply only to the indications for which the drug has 
                been designated under section 526 of the Food, Drug and 
                Cosmetic Act or which are included on the Rare Diseases 
                List maintained by the Office of Rare Diseases of the 
                National Institutes of Health.
                    (C) Treatment for high volume claims.--In the case 
                of a drug or biological that, with respect to which the 
                Secretary determines that more than 30,000 claims for 
                the drug or biological has been submitted in a year for 
                covered OPD services as described in subparagraph (B), 
                that drug or biological shall be considered to exceed 
                30,000 claims for all succeeding years.
            (3) Payment methodology.--In the case of a drug or 
        biological covered by the amendment made by paragraph (1), 
        payment for the drug or biological shall be made under section 
        1842(o)(1) of the Social Security Act (42 U.S.C. 1395u(o)(1)).
            (4) Exemption from inherent reasonableness authority.--
        Section 1842(b)(8)(A)(i)(I) of the Social Security Act (42 
        U.S.C. 1395u(b)(8)(A)(i)(I)) is amended by inserting after 
        ``paid under section 1848'' the following: ``and other than 
        drugs and biologicals and blood clotting factors for 
        individuals with hemophilia excluded from the prospective 
        payment system for covered OPD services under clauses (v) or 
        (vi) of section 1833(t)(1)(B).''.
    (b) Report.--Not later than July 1, 2006, the Secretary shall 
submit to the Committees on Ways and Means and Energy and Commerce of 
the House of Representatives and the Committee on Finance of the Senate 
a report on payment for orphan drugs and biologicals and blood clotting 
factors for individuals with hemophilia in the hospital outpatient 
setting including recommendations for either continuing or 
discontinuing the exclusion of such drugs and biologicals from payment 
under section 1833(t) of the Social Security Act (42 U.S.C. 1395l(t)). 
Such report shall include the following:
            (1) Recommendations for methods to appropriately reflect 
        the actual costs of orphan drugs and biologicals and blood 
        clotting factors for individuals with hemophilia under such 
        section. Such methods shall be designed to ensure that the 
        payment rate established for each drug and biological 
        adequately reimburses hospitals for the costs associated with 
        acquiring and dispensing such product, including pharmacy 
        service and overhead costs.
            (2) The impact of making payment for orphan drugs and 
        biologicals and blood clotting factors for individuals with 
        hemophilia under such section 1833(t) on access to such drugs 
        and biologicals by patients with rare diseases.
In preparing this report, the Secretary shall consult with patients, 
physicians, providers of services and suppliers of orphan drugs and 
biologicals and blood clotting factors for individuals with hemophilia 
as well as other organizations involved in the distribution of such 
drugs and biologicals to such patients, physicians, providers of 
services and suppliers.
    (c) Moratorium on Decreases in Payment Rates.--Notwithstanding any 
other provision of law, effective for orphan drugs and biologicals and 
blood clotting factors for individuals with hemophilia furnished by 
hospital outpatient departments on or after January 1, 2007, the 
Secretary may not directly or indirectly decrease the rates of 
reimbursement in effect on December 31, 2006 for such orphan drugs and 
biologicals and blood clotting factors for individuals with hemophilia 
any earlier than six months after the date that the Secretary has 
submitted to Congress the report required under section (b).
    (d) Effective Date.--The amendments made by subsection (a) shall 
apply with respect to items furnished on or after January 1, 2004.