A bill to reduce the costs of prescription drugs for medicare beneficiaries, and for other purposes.

Summary: Medicare Enhancements for Needed Drugs Act of 2004 - Directs the Comptroller General to review and report to Congress on the retail cost of prescription drugs in the United States during 2000 and 2003 with an emphasis on the prescription drugs most utilized for individuals age 65 or older. Requires the Comptroller General, after conducting such review, to review continuously the retail cost of such drugs through April 1, 2006, to determine the changes in such costs.

Requires the Comptroller General to conduct an ongoing study, for annual reports to Congress, that compares the average retail cost in the United States for each of the 20 most utilized prescription drugs for individuals age 65 or older with: (1) the average price at which private health plans acquire each such drug; (2) the average price at which the Department of Defense under the Defense Health Program acquires each such drug; (3) the average price at which the Department of Veterans Affairs under the laws administered by the Secretary of Veterans Affairs acquires each such drug; and (4) the average negotiated price for each such drug that eligible beneficiaries have access to under a Medicare prescription drug plan that provides only basic prescription drug coverage.

Amends title XVIII (Medicare) of the Social Security Act (SSA) to include in the comparative plan information for beneficiaries under new Medicare part D (Voluntary Prescription Drug Benefit Program) a comparison of average aggregate prescription drug plan beneficiary costs and savings with respect to covered part D drugs with such costs for the same drugs for a beneficiary with no prescription drug plan.

Repeals the prohibition against interference by the Secretary with the negotiations between drug manufacturers and pharmacies and prescription drug plan sponsors and the requirement of a particular formulary to institute a price structure for the reimbursement of Medicare part D covered drugs. Authorizes the Secretary instead, like other Federal entities that purchase prescription drugs in bulk, to negotiate contracts with manufacturers of covered part D drugs.

Amends the Internal Revenue Code to disallow a tax deduction for advertising expenditures of taxpayers who discriminate against foreign sellers of prescription drugs to domestic consumers.

Amends SSA title XVIII to authorize the Secretary to provide incentive payments out of the Medicare Advantage Regional Plan Stabilization Fund to sponsors offering prescription drug plans that provide enrollees with access to negotiated prices for payment of covered Medicare part D drugs. Requires such prices to be on average not more than ten percent greater than the lesser of: (1) the average price at which the Department of Defense under the Defense Health Program acquires such drugs; or (2) the average price at which the Department of Veterans Affairs acquires such drugs.

Requires the Secretary to request the National Association of Insurance Commissioners to review and report to Congress on the changes to the rules relating to Medicare supplemental policies that provide prescription drug coverage under new Medicare part D.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicare Enhancements for Needed 
Drugs Act of 2004''.

SEC. 2. GAO STUDIES AND REPORTS ON PRICES OF PRESCRIPTION DRUGS.

    (a) Review and Reports on Retail Prices of Prescription Drugs.--
            (1) Initial review.--The Comptroller General of the United 
        States shall conduct a review of the retail cost of 
        prescription drugs in the United States during 2000 through 
        2003, with an emphasis on the prescription drugs most utilized 
        for individuals age 65 or older.
            (2) Subsequent review.--After conducting the review under 
        paragraph (1), the Comptroller General shall continuously 
        review the retail cost of such drugs through April 1, 2006, to 
        determine the changes in such costs.
            (3) Reports.--
                    (A) Initial review.--Not later than September 1, 
                2004, the Comptroller General shall submit to Congress 
                a report on the initial review conducted under 
                paragraph (1).
                    (B) Subsequent review.--Not later than July 1, 
                2005, January 1, 2006, and July 1, 2006, the 
                Comptroller General shall submit to Congress a report 
                on the subsequent review conducted under paragraph (2).
    (b) Annual GAO Study and Report on Retail and Acquisition Prices of 
Certain Prescription Drugs.--
            (1) Ongoing study.--The Comptroller General of the United 
        States shall conduct an ongoing study that compares the average 
        retail cost in the United States for each of the 20 most 
        utilized prescription drugs for individuals age 65 or older 
        with--
                    (A) the average price at which private health plans 
                acquire each such drug;
                    (B) the average price at which the Department of 
                Defense under the Defense Health Program acquires each 
                such drug;
                    (C) the average price at which the Department of 
                Veterans Affairs under the laws administered by the 
                Secretary of Veterans Affairs acquires each such drug; 
                and
                    (D) the average negotiated price for each such drug 
                that eligible beneficiaries enrolled in a prescription 
                drug plan under part D of title XVIII of the Social 
                Security Act, as added by section 101 of the Medicare 
                Prescription Drug, Improvement, and Modernization Act 
                of 2003 (Public Law 108-173), that provides only basic 
                prescription drug coverage have access to under such 
                plans.
            (2) Annual report.--Not later than December 1, 2007, and 
        annually thereafter, the Comptroller General shall submit to 
        Congress a report on the study conducted under paragraph (1), 
        together with such recommendations as the Comptroller General 
        determines appropriate.

SEC. 3. INCLUSION OF AVERAGE AGGREGATE BENEFICIARY COSTS AND SAVINGS IN 
              COMPARATIVE INFORMATION FOR BASIC MEDICARE PRESCRIPTION 
              DRUG PLANS.

    Section 1860D-1(c)(3) of the Social Security Act, as added by 
section 101 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (Public Law 108-173), is amended--
            (1) in subparagraph (A)--
                    (A) in the matter preceding clause (i), by striking 
                ``subparagraph (B)'' and inserting ``subparagraphs (B) 
                and (C)''; and
                    (B) by adding at the end the following new clause:
                            ``(vi) Average aggregate beneficiary costs 
                        and savings.--With respect to plan years 
                        beginning on or after January 1, 2007, the 
                        average aggregate costs, including deductibles 
                        and other cost-sharing, that a beneficiary will 
                        incur for covered part D drugs in the year 
                        under the plan compared to the average 
                        aggregate costs that an eligible beneficiary 
                        with no prescription drug coverage will incur 
                        for covered part D drugs in the year.''; and
            (2) by adding at the end the following new subparagraph:
                    ``(C) Average aggregate beneficiary costs and 
                savings information only for basic prescription drug 
                plans.--The Secretary shall not provide comparative 
                information under subparagraph (A)(vi) with respect 
                to--
                            ``(i) a prescription drug plan that 
                        provides supplemental prescription drug 
                        coverage; or
                            ``(ii) a Medicare Advantage plan.''.

SEC. 4. NEGOTIATING FAIR PRICES FOR MEDICARE PRESCRIPTION DRUGS.

    (a) In General.--Section 1860D-11 of the Social Security Act, as 
added by section 101 of the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (Public Law 108-173), is amended by 
striking subsection (i) (relating to noninterference) and by inserting 
the following:
    ``(i) Authority To Negotiate Prices With Manufacturers.--In order 
to ensure that beneficiaries enrolled under prescription drug plans and 
MA-PD plans pay the lowest possible price, the Secretary shall have 
authority similar to that of other Federal entities that purchase 
prescription drugs in bulk to negotiate contracts with manufacturers of 
covered part D drugs, consistent with the requirements and in 
furtherance of the goals of providing quality care and containing costs 
under this part.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect as if included in the enactment of section 101 of the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (Public 
Law 108-173).

SEC. 5. DISALLOWANCE OF DEDUCTION FOR ADVERTISING EXPENDITURES OF 
              TAXPAYERS WHO DISCRIMINATE AGAINST FOREIGN SELLERS OF 
              PRESCRIPTION DRUGS TO DOMESTIC CONSUMERS.

    (a) General Rule.--Part IX of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to items not deductible) is 
amended by adding at the end the following new section:

``SEC. 280I. ADVERTISING EXPENDITURES OF TAXPAYERS WHO DISCRIMINATE 
              AGAINST FOREIGN SELLERS OF PRESCRIPTION DRUGS TO DOMESTIC 
              CONSUMERS.

    ``(a) In General.--No deduction otherwise allowable under this 
chapter shall be allowed for any amount paid or incurred for 
advertising for the taxable year by any taxpayer who at any time during 
such taxable year discriminates against a qualified pharmacy or 
qualified wholesaler in the sale of prescription drugs.
    ``(b) Advertising.--For purposes of this section, the term 
`advertising' includes direct to consumer advertising and any activity 
designed to promote the use of a prescription drug directed to 
providers or others who may make decisions about the use of 
prescription drugs (other than the provision of free samples).
    ``(c) Qualified Pharmacy; Qualified Wholesaler.--For purposes of 
this section--
            ``(1) Qualified pharmacy.--The term `qualified pharmacy' 
        means any pharmacy located outside the United States which 
        sells prescription drugs to consumers living in the United 
        States.
            ``(2) Qualified wholesaler.--The term `qualified 
        wholesaler' means any wholesaler located outside the United 
        States which sells prescription drugs to entities selling 
        prescription drugs to consumers living in the United States.
    ``(d) Discrimination.--For purposes of subsection (a), a taxpayer 
shall be treated as discriminating against a qualified pharmacy or 
qualified wholesaler in the sale of prescription drugs if such taxpayer 
publicly, privately or otherwise refuses to do business with a person 
or entity on the basis that the person or entity will pass along 
discounts offered to the person or entity to consumers living in the 
United States.''.
    (b) Clerical Amendment.--The table of sections for part IX of 
subchapter B of chapter 1 of such Code is amended by adding at the end 
thereof the following new item:

                              ``Sec. 280I. Advertising expenditures of 
                                        taxpayers who discriminate 
                                        against foreign sellers of 
                                        prescription drugs to domestic 
                                        consumers.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 6. COST CONTAINMENT INCENTIVES.

    (a) In General.--Section 1860D-42 of the Social Security Act, as 
added by section 101 of the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (Public Law 108-173), is amended by 
adding at the end the following new subsection:
    ``(c) Incentives to PDP Sponsors To Negotiate Lower Prices.--
            ``(1) Authority.--The Secretary is authorized to provide 
        incentive payments to PDP sponsors offering prescription drug 
        plans that provide enrollees with access to negotiated prices 
        used for payment of covered part D drugs under the plans that 
        on average are not more than 10 percent greater than the lesser 
        of--
                    ``(A) the average price at which the Department of 
                Defense under the Defense Health Program acquires such 
                drugs; or
                    ``(B) the average price at which the Department of 
                Veterans Affairs under the laws administered by the 
                Secretary of Veterans Affairs acquires such drugs.
            ``(2) Information from va and dod.--Upon request of the 
        Secretary of Health and Human Services, the Secretary of 
        Defense and the Secretary of Veterans Affairs shall make 
        available to the Secretary of Health and Human Services such 
        information regarding acquisition prices of prescription drugs 
        as the Secretary of Health and Human Services determines is 
        necessary to conduct the incentive payment program under this 
        subsection.
            ``(3) Application.--No incentive payments may be made under 
        this subsection except pursuant to an application that is 
        submitted and approved in a time, manner, and form specified by 
        the Secretary.
            ``(4) Funding.--There shall be available to the Secretary 
        from the MA Regional Plan Stabilization Fund under section 
        1858(e) during the period beginning on January 1, 2007, and 
        ending on December 31, 2013, a total of $500,000,000 for making 
        incentive payments under this subsection.
            ``(5) Annual reports.--For each year in which an incentive 
        payment is awarded under this subsection, the Secretary shall 
        submit a report to Congress containing a description of the 
        operation of the incentive payment program.''.
    (b) Stabilization Fund Amendments.--Section 1858(e)(1) of the 
Social Security Act, as added by section 221(c) of the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (Public 
Law 108-173), is amended--
            (1) in the matter preceding subparagraph (A), by striking 
        ``2'' and inserting ``3''; and
            (2) by adding at the end the following new subparagraph:
                    ``(C) PDP incentive payments.--To provide incentive 
                payments to PDP sponsors pursuant to section 1860D-
                42(c).''.
    (c) Effective Date.--The amendments made by this section shall take 
effect as if included in the enactment of the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 (Public Law 108-173).

SEC. 7. NAIC REVIEW AND REPORT ON CHANGES IN MEDIGAP POLICIES THAT 
              PROVIDE COVERAGE OF PRESCRIPTION DRUGS CONTAINED IN THE 
              MEDICARE PRESCRIPTION DRUG, IMPROVEMENT, AND 
              MODERNIZATION ACT OF 2003.

    (a) In General.--The Secretary shall request the National 
Association of Insurance Commissioners to conduct a review of the 
changes to the rules relating to medicare supplemental policies that 
provide prescription drug coverage contained in subsection (v) of 
section 1882 of the Social Security Act (42 U.S.C. 1395ss), as added by 
section 104(a) of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (Public Law 108-173).
    (b) Impact on Medicare Beneficiaries.--The review conducted 
pursuant to subsection (a) should focus on the impact the changes 
described in such subsec