A bill to amend title XI of the Social Security Act to ensure full and free competition in the medical device and hospital supply industries.

Summary: Medical Device Competition Act of 2004 - Amends title XI of the Social Security Act with respect to competition in the medical device and hospital supply industries.

Adds a new requirement to the criteria for exemption from criminal penalties for illegal remunerations accorded to any amount paid by a vendor of goods or services to a person authorized to act as a purchasing agent for a group of individuals or entities who are furnishing services reimbursed under a Federal health care program. Requires, in addition to a written contract specifying the amount to be paid, and service provider disclosure of the amount received from a vendor, that: (1) the contracting, business, and ethical practices of the purchasing agent be not inconsistent with regulations promulgated by the Secretary of Health and Human Services; (2) the purchasing agent be certified to be in compliance with such regulations; and (3) the amount to be paid the purchasing agent does not exceed a total of three percent of the purchase price of the goods or services provided by that vendor.

Directs the Secretary to promulgate regulations specifying the contracting, business, and ethical practices of an authorized purchasing agent that are contrary to antitrust law and competitive principles, to ethical standards, or to the goal of ensuring that products necessary for proper patient care or worker safety are readily available to physicians, health care workers, and patients.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medical Device Competition Act of 
2004''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) Given the increasing costs of health care in the United 
        States, there is a compelling public interest in ensuring that 
        there is full and free competition in the medical device and 
        hospital supply industries so that the best and safest products 
        are available to physicians and patients at a competitive 
        price.
            (2) By aggregating purchases, hospital group purchasing can 
        reduce the cost of acquiring medical equipment and hospital 
        supplies so long as such purchasing is done in a manner 
        consistent with antitrust law and free competition.
            (3) Some practices engaged in by certain hospital group 
        purchasing organizations have had the effect of reducing 
        competition in the medical device and hospital supply 
        industries by denying some suppliers and device makers access 
        to the hospital marketplace.
            (4) There is a compelling public interest in having the 
        Secretary of Health and Human Services, in consultation with 
        the Attorney General and Federal Trade Commission, engage in 
        oversight and supervision of the current Federal health care 
        program anti-kickback exemption (also known as the safe harbor) 
        provided to group purchasing organizations under subparagraphs 
        (C) and (E) of section 1128B(b)(3) of the Social Security Act 
        (42 U.S.C. 1320a-7b(b)(3)). This oversight and supervision 
        should ensure that the safe harbor does not shield conduct that 
        harms competition in the hospital supply and medical device 
        industries.

SEC. 3. ENSURING FULL AND FREE COMPETITION.

    (a) In General.--Section 1128B(b)(3)(C) of the Social Security Act 
(42 U.S.C. 1320a-7b(b)(3)(C)) is amended--
            (1) in clause (i), by striking ``, and'' at the end and 
        inserting a semicolon; and
            (2) by adding at the end the following new clauses:
                            ``(iii) the contracting, business, and 
                        ethical practices of the person are not 
                        inconsistent with regulations promulgated by 
                        the Secretary pursuant to subsection (g)(1);
                            ``(iv) the person has been certified by the 
                        Secretary under subsection (g)(2) to be in 
                        compliance with the regulations promulgated 
                        pursuant to subsection (g)(1); and
                            ``(v) the amount to be paid the person does 
                        not exceed a total of 3 percent of the purchase 
                        price of the goods or services provided by that 
                        vendor;''.
    (b) Regulations.--Section 1128B of the Social Security Act (42 
U.S.C. 1320a-7b) is amended by adding at the end the following new 
subsection:
    ``(g)(1)(A) The Secretary, in consultation with the Attorney 
General and the Federal Trade Commission, shall, not later than 1 year 
after the date of enactment of the Medical Device Competition Act of 
2004, issue proposed regulations, and shall, not later than 2 years 
after such date of enactment, promulgate final regulations, specifying 
contracting, business, and ethical practices of persons described in 
paragraph (4) that are contrary to antitrust law and competitive 
principles, to ethical standards, or to the goal of ensuring that 
products necessary for proper patient care or worker safety are readily 
available to physicians, health care workers, and patients.
    ``(B) In issuing and promulgating regulations under subparagraph 
(A), the Secretary shall take into account--
            ``(i) the compelling public policy goals of--
                    ``(I) encouraging competition and innovation in the 
                hospital supply and medical device markets; and
                    ``(II) reducing the cost of health care as a result 
                of aggregating buying power;
            ``(ii) the potentially detrimental impact of certain 
        anticompetitive contracting practices; and
            ``(iii) the need to avoid conflicts of interests and other 
        unethical practices by persons described in paragraph (4).
    ``(2) The Secretary, in consultation with the Attorney General and 
the Federal Trade Commission, shall establish procedures for annually 
certifying that persons described in paragraph (4) are in compliance 
with the final regulations promulgated pursuant to paragraph (1).
    ``(3) The Secretary, in consultation with the Attorney General and 
Federal Trade Commission, shall, not less than 6 months after the date 
of enactment of the Medical Device Competition Act of 2004, issue 
proposed regulations, and shall, not later than 1 year after such date 
of enactment, promulgate final regulations, to clarify its regulations 
promulgated pursuant to section 14(a) of the Medicare and Medicaid 
Patient and Program Protection Act of 1987 to specify that the 
definition of `remuneration' under this section with respect to persons 
described in paragraph (4)--
            ``(A) includes only those reasonable costs associated with 
        the procurement of products and the administration of valid 
        contracts; and
            ``(B) does not include marketing costs, any extraneous 
        fees, or any other payment intended to unduly or improperly 
        influence the award of a contract based on factors other than 
        the cost, quality, safety, or efficacy of the product.
    ``(4) A person described in this paragraph is a person authorized 
to act as a purchasing agent for a group of individuals or entities who 
are furnishing services reimbursable under a Federal health care 
program.''.
    (c) Definition of Purchasing Agent.--Section 1128B of the Social 
Security Act (42 U.S.C. 1320a-7b), as amended by subsection (b), is 
amended by adding at the end the following new subsection:
    ``(h) For purposes of this section, the term `purchasing agent' 
means any individual, organization, or other entity that negotiates and 
implements contracts to purchase hospital supplies or medical 
equipment, devices, products, or goods or services of any kind for any 
group of individuals or entities who are furnishing services 
reimbursable under a Federal health care program, including 
organizations commonly known as `group purchasing organizations'.''.
    (d) Effective Date.--Clause (v) of section 1128B(b)(3)(C) of the 
Social Security Act (42 U.S.C. 1320a-7b(b)(3)(C)), as added by 
subsection (a), shall take effect 1 year after the date of enactment of 
this Act.