Patients' Formulary Rights Act of 1999

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Patients' Formulary Rights Act of 
1999''.

SEC. 2. PATIENT PROTECTIONS AGAINST ABUSE OF FORMULARIES FOR 
              PRESCRIPTION DRUGS.

    (a) Group Health Plans.--
            (1) Public health service act amendments.--(A) Subpart 2 of 
        part A of title XXVII of the Public Health Service Act is 
        amended by adding at the end the following new section:

``SEC. 2707. STANDARDS RELATING TO USE OF FORMULARIES AND THERAPEUTIC 
              SUBSTITUTION.

    ``(a) Requirements on Use of Formularies.--
            ``(1) In general.--A group health plan, and a health 
        insurance issuer offering group health insurance coverage, 
        shall not use a formulary unless the plan or issuer--
                    ``(A) notifies participants, beneficiaries, and 
                enrollees, prior to initial enrollment or coverage, and 
                makes available at any time to health care 
                professionals who prescribe prescription drugs under 
                the plan or coverage of the information described in 
                paragraph (2);
                    ``(B) notifies participants, beneficiaries, 
                enrollees, and health care providers who prescribe 
                covered prescription drugs under the plan or coverage 
                on a routine and annual basis of any changes in 
                (including deletions from) the formulary; and
                    ``(C) in the case of a participant, beneficiary, or 
                enrollee who is provided coverage for a prescription 
                drug at the time the drug is removed from the 
                formulary, to permit the participant, beneficiary, or 
                enrollee to continue to have the drug prescribed for 
                treatment of the same condition for which it was 
                previously prescribed.
            ``(2) Information to be disclosed.--The information 
        described in this paragraph is as follows (with respect to 
        prescription drug coverage under a group health plan or health 
        insurance coverage):
                    ``(A) Extent of therapeutic substitution.--What 
                constitutes the practice or therapeutic substitution 
                that may be effected under the plan or coverage.
                    ``(B) Formulary.--A complete list of all the 
                prescription drugs included in the formulary and any 
                changes in the formulary and how decisions to include 
                drugs in the formulary are made.
                    ``(C) Access to nonformulary drugs.--The fact that 
                a patient can have a prescription filled as written 
                (rather than subject to therapeutic substitution) if 
                the prescribing health care professional uses a 
                `dispense as written' or similar endorsement.
                    ``(D) Payment for nonformulary drugs.--Whether or 
                not the plan or coverage will cover or pay for 
                prescription drugs not included in the formulary and, 
                if it will, the extent of such coverage or payment.
                    ``(E) Cost-sharing.--The copayments and other cost-
                sharing that is applicable under the plan or coverage 
                for prescription drugs included on the formulary and 
                for those not included on the formulary.
                    ``(F) Limits on payments.--Limitations on the 
                dollar amount the plan or coverage will cover for 
                outpatient prescription drugs, including any such 
                limits on a per year, per lifetime, or per diagnosis 
                basis.
            ``(3) Formulary defined.--For purposes of this subsection, 
        the term `formulary' includes any method under which a plan or 
        issuer limits the particular drugs (among those that may be 
        legally prescribed for treatment) for which coverage is made 
        available under the plan or health insurance coverage offered 
        by the issuer.
    ``(b) Notice of Requirement.--A group health plan under this part 
shall comply with the notice requirement under section 714(b) of the 
Employee Retirement Income Security Act of 1974 with respect to the 
requirements of this section as if such section applied to such plan.
    ``(c) Formulary Defined.--For purposes of this section, the term 
`formulary' includes any method under which a plan or issuer limits the 
particular drugs (among those that may be legally prescribed for 
treatment) for which coverage is made available under the plan or 
health insurance coverage offered by the issuer.''.
            (B) Section 2723(c) of such Act (42 U.S.C. 300gg-23(c)) is 
        amended by striking ``section 2704'' and inserting ``sections 
        2704 and 2707''.
            (2) ERISA amendments.--(A) Subpart B of part 7 of subtitle 
        B of title I of the Employee Retirement Income Security Act of 
        1974 is amended by adding at the end the following new section:

``SEC. 714. STANDARDS RELATING TO USE OF FORMULARIES AND THERAPEUTIC 
              SUBSTITUTION.

    ``(a) Requirements on Use of Formularies.--
            ``(1) In general.--A group health plan, and a health 
        insurance issuer offering group health insurance coverage, 
        shall not use a formulary unless the plan or issuer--
                    ``(A) notifies participants, beneficiaries, and 
                enrollees, prior to initial enrollment or coverage, and 
                makes available at any time to health care 
                professionals who prescribe prescription drugs under 
                the plan or coverage of the information described in 
                paragraph (2);
                    ``(B) notifies participants, beneficiaries, 
                enrollees, and health care providers who prescribe 
                covered prescription drugs under the plan or coverage 
                on a routine and annual basis of any changes in 
                (including deletions from) the formulary; and
                    ``(C) in the case of a participant, beneficiary, or 
                enrollee who is provided coverage for a prescription 
                drug at the time the drug is removed from the 
                formulary, to permit the participant, beneficiary, or 
                enrollee to continue to have the drug prescribed for 
                treatment of the same condition for which it was 
                previously prescribed.
            ``(2) Information.--The information described in this 
        paragraph is as follows (with respect to prescription drug 
        coverage under a group health plan or health insurance 
        coverage):
                    ``(A) Extent of therapeutic substitution.--What 
                constitutes the practice or therapeutic substitution 
                that may be effected under the plan or coverage.
                    ``(B) Formulary.--A complete list of all the 
                prescription drugs included in the formulary and any 
                changes in the formulary and how decisions to include 
                drugs in the formulary are made.
                    ``(C) Access to nonformulary drugs.--The fact that 
                a patient can have a prescription filled as written 
                (rather than subject to therapeutic substitution) if 
                the prescribing health care professional uses a 
                `dispense as written' or similar endorsement.
                    ``(D) Payment for nonformulary drugs.--Whether or 
                not the plan or coverage will cover or pay for 
                prescription drugs not included in the formulary and, 
                if it will, the extent of such coverage or payment.
                    ``(E) Cost-sharing.--The copayments and other cost-
                sharing that is applicable under the plan or coverage 
                for prescription drugs included on the formulary and 
                for those not included on the formulary.
                    ``(F) Limits on payments.--Limitations on the 
                dollar amount the plan or coverage will cover for 
                outpatient prescription drugs, including such any such 
                limits on a per year, per lifetime, or per diagnosis 
                basis.
    ``(b) Notice Under Group Health Plan.--The imposition of the 
requirement of this section shall be treated as a material modification 
in the terms of the plan described in section 102(a)(1), for purposes 
of assuring notice of such requirements under the plan; except that the 
summary description required to be provided under the last sentence of 
section 104(b)(1) with respect to such modification shall be provided 
by not later than 60 days after the first day of the first plan year in 
which such requirement apply.
    ``(c) Formulary Defined.--For purposes of this section, the term 
`formulary' includes any method under which a plan or issuer limits the 
particular drugs (among those that may be legally prescribed for 
treatment) for which coverage is made available under the plan or 
health insurance coverage offered by the issuer.''.
            (B) Section 731(c) of such Act (29 U.S.C. 1191(c)) is 
        amended by striking ``section 711'' and inserting ``sections 
        711 and 714''.
            (C) Section 732(a) of such Act (29 U.S.C. 1191a(a)) is 
        amended by striking ``section 711'' and inserting ``sections 
        711 and 714''.
            (D) The table of contents in section 1 of such Act is 
        amended by inserting after the item relating to section 713 the 
        following new item:

``Sec. 714. Standards relating to use of formularies and therapeutic 
                            substitution.''.
            (3) Internal revenue code amendments.--
                    (A) In general.--Subchapter B of chapter 100 of the 
                Internal Revenue Code of 1986 is amended--
                            (i) in the table of sections, by inserting 
                        after the item relating to section 9812 the 
                        following new item:

                              ``Sec. 9813. Standards relating to use of 
                                        formularies and therapeutic 
                                        substitution.''; and
                            (ii) by inserting after section 9812 the 
                        following:

``SEC. 9813. STANDARDS RELATING TO USE OF FORMULARIES AND THERAPEUTIC 
              SUBSTITUTION.

    ``(a) Requirements on Use of Formularies.--
            ``(1) In general.--A group health plan shall not use a 
        formulary unless the plan or issuer--
                    ``(A) notifies participants and beneficiaries, 
                prior to initial enrollment or coverage, and makes 
                available at any time to health care professionals who 
                prescribe prescription drugs under the plan of the 
                information described in paragraph (2);
                    ``(B) notifies participants, beneficiaries, and 
                health care providers who prescribe covered 
                prescription drugs under the plan on a routine and 
                annual basis of any changes in (including deletions 
                from) the formulary; and
                    ``(C) in the case of a participant or beneficiary 
                who is provided coverage for a prescription drug at the 
                time the drug is removed from the formulary, to permit 
                the participant or beneficiary to continue to have the 
                drug prescribed for treatment of the same condition for 
                which it was previously prescribed.
            ``(2) Information.--The information described in this 
        paragraph is as follows (with respect to prescription drug 
coverage under a group health plan):
                    ``(A) Extent of therapeutic substitution.--What 
                constitutes the practice or therapeutic substitution 
                that may be effected under the plan.
                    ``(B) Formulary.--A complete list of all the 
                prescription drugs included in the formulary and any 
                changes in the formulary and how decisions to include 
                drugs in the formulary are made.
                    ``(C) Access to nonformulary drugs.--The fact that 
                a patient can have a prescription filled as written 
                (rather than subject to therapeutic substitution) if 
                the prescribing health care professional uses a 
                `dispense as written' or similar endorsement.
                    ``(D) Payment for nonformulary drugs.--Whether or 
                not the plan will cover or pay for prescription drugs 
                not included in the formulary and, if it will, the 
                extent of such coverage or payment.
                    ``(E) Cost-sharing.--The copayments and other cost-
                sharing that is applicable under the plan for 
                prescription drugs included on the formulary and for 
                those not included on the formulary.
                    ``(F) Limits on payments.--Limitations on the 
                dollar amount the plan will cover for outpatient 
                prescription drugs, including such any such limits on a 
                per year, per lifetime, or per diagnosis basis.
    ``(b) Formulary Defined.--For purposes of this section, the term 
`formulary' includes any method under which a plan or issuer limits the 
particular drugs (among those that may be legally prescribed for 
treatment) for which coverage is made available under the plan.''
                    (B) Conforming amendment.--Section 4980D(d)(1) of 
                such Code is amended by striking ``section 9811'' and 
                inserting ``sections 9811 and 9813''.
    (b) Individual Health Insurance.--(1) Part B of title XXVII of the 
Public Health Service Act is amended by inserting after section 2752 
the following new section:

``SEC. 2753. STANDARD RELATING PATIENT FREEDOM OF CHOICE.

    ``(a) In General.--The provisions of section 2707(a) shall apply to 
health insurance coverage offered by a health insurance issuer in the 
individual market in the same manner as they apply to health insurance 
coverage offered by a health insurance issuer in connection with a 
group health plan in the small or large group market.
    ``(b) Notice.--A health insurance issuer under this part shall 
comply with the notice requirement under section 714(b) of the Employee 
Retirement Income Security Act of 1974 with respect to the requirements 
referred to in subsection (a) as if such section applied to such issuer 
and such issuer were a group health plan.''.
    (2) Section 2762(b)(2) of such Act (42 U.S.C. 300gg-62(b)(2)) is 
amended by striking ``section 2751'' and inserting ``sections 2751 and 
2753''.
    (c) Medicare+Choice Plans.--Section 1852 of the Social Security Act 
(42 U.S.C. 1395w-22) is amended by adding at the end the following new 
subsection:
    ``(l) Formulary Requirements.--
            ``(1) In general.--A Medicare+Choice organization shall 
        comply with the requirements of section 2707 of the Public 
        Health Service Act with respect to a Medicare+Choice plan it 
        offers in the same manner as such requirements apply to health 
        insurance coverage offered in connection with a group health 
        plan.
            ``(2) Construction.--Nothing in paragraph (1) shall be 
        construed as superseding other requirements of this part, 
        except to the extent the Secretary specifically finds that such 
        other requirements are less stringent, and do not duplicate, 
        the requirements referred to in such paragraph.''.
    (d) Effective Dates.--
            (1) Group health plans and group health insurance 
        coverage.--Subject to paragraph (4), the amendments made by 
        subsection (a) apply with respect to group health plans for 
        plan years beginning on or after January 1, 2001.
            (2) Individual health insurance coverage.--The amendments 
        made by subsection (b) apply with respect to health insurance 
        coverage offered, sold, issued, renewed, in effect, or operated 
        in the individual market on or after such date.
            (3) Medicare+choice plans.--The amendments made by 
        subsection (b) apply with respect to Medicare+Choice plans 
        offered on or after such date.
            (4) Collective bargaining exception.--In the case of a 
        group health plan maintained pursuant to 1 or more collective 
        bargaining agreements between employee representatives and 1 or 
        more employers ratified before the date of enactment of this 
        Act, the amendments made subsection (a) shall not apply to plan 
        years beginning before the later of--
                    (A) the date on which the last collective 
                bargaining agreements relating to the plan terminates 
                (determined without regard to any extension thereof 
                agreed to after the date of enactment of this Act), or
                    (B) January 1, 2001.
        For purposes of subparagraph (A), any plan amendment made 
        pursuant to a collective bargaining agreement relating to the 
        plan which amends the plan solely to conform to any requirement 
        added by subsection (a) shall not be treated as a termination 
        of such collective bargaining agreement.
    (e) Coordination of Administration.--The Secretary of Labor, the 
Secretary of the Treasury, and the Secretary of Health and Human 
Services shall ensure, through the execution of an interagency 
memorandum of understanding among such Secretaries, that--
            (1) regulations, rulings, and interpretations issued by 
        such Secretaries relating to the same matter over which two or 
        more such Secretaries have responsibility under the provisions 
        of this Act (and the amendments made thereby) are administered 
        so as to have the same effect at all times; and
            (2) coordination of policies relating to enforcing the same 
        requirements through such Secretaries in order to have a 
        coordinated enforcement strategy that avoids duplication of 
        enforcement efforts and assigns priorities in enforcement.

Summary: Includes within required formulary information: (1) the extent of therapeutic substitution. (2) a complete list of all drugs included in the formulary, (3) information on access to nonformulary drugs. (4) whether or not, and to what extent, coverage will exist for nonformulary drugs, (5) copayments or other cost-sharing for formulary drugs. And (6) limits on coverage payments for outpatient formulary and nonformulary drugs. Amends title XVIII (Medicare) of the Social Security Act to require its authorized health insurance issuers and any MedicareChoice organization to comply with such notification requirements in the same manner that such requirements apply to health insurance coverage or issuers in connection with a group plan. Requires the coordination of notification and formulary requirements through an interagency memorandum of understanding among the Secretaries of Labor, the Treasury, and Health and Human Services.