A bill to amend title XIX of the Social Security Act to require drug manufacturers to pay rebates to State prescription drug discount programs as a condition of participation in a rebate agreement for outpatient prescription drugs under the medicaid program, to provide increased rebate payments to State medicaid programs, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``State Prescription Drug Discount Act 
of 2002''.

SEC. 2. FINDINGS.

    Congress makes the following findings:
            (1) More than 70,000,000 Americans, including more than 
        18,000,000 Medicare beneficiaries, are uninsured or 
        underinsured for prescription drug coverage.
            (2) High prescription drug prices are denying uninsured and 
        underinsured Americans access to medically necessary care, 
        thereby threatening their health and safety. Many of these 
        Americans require repeated doctor or medical clinic 
        appointments, becoming sicker because they cannot afford to 
        take the drugs prescribed for them. Many are admitted to or 
        treated at hospitals because they cannot afford the drugs 
        prescribed for them that could have prevented the need for 
        hospitalization. Many enter expensive institutional care 
        settings because they cannot afford the prescription drugs that 
        could have supported them outside of an institution. In each of 
        these circumstances, uninsured and underinsured residents too 
        often become medicaid recipients because of their inability to 
        afford prescription drugs.
            (3) Pursuant to the Social Security Act, State medicaid 
        programs receive discounts in the form of rebates for 
        outpatient prescription drugs. On average, these rebates 
        provide discounts of more than 40 percent off retail prices.
            (4) In 49 States, individual Americans do not have access 
        to medicaid rebates. But in 1 State, since June 1, 2001, over 
        100,000 Americans have received discounts from those rebates 
        through the ``Healthy Maine'' program. This program, 
        established as a demonstration project pursuant to a waiver 
        from the Secretary of Health and Human Services has proven to 
        work. Americans need that program replicated in every State, 
        immediately.
            (5) The Federal and State governments are the only agents 
        that, as a practical matter, can play an effective role as a 
        market participant on behalf of Americans who are uninsured or 
        underinsured.

SEC. 3. STATE PRESCRIPTION DISCOUNT PROGRAM.

    (a) In General.--Section 1927(a) of the Social Security Act (42 
U.S.C. 1396r-8(a)) is amended by adding at the end the following:
            ``(7) Requirements relating to agreements for drugs 
        procured by individuals through state prescription drug 
        discount programs.--
                    ``(A) In general.--A manufacturer meets the 
                requirements of this paragraph if the manufacturer 
                enters into an agreement with the State to make rebate 
                payments for drugs covered by a State prescription drug 
                discount program in the same amounts as are paid by the 
                manufacturer to the State for such drugs under a rebate 
                agreement described in subsection (b).
                    ``(B) State prescription drug discount program 
                defined.--
                            ``(i) In general.--In this paragraph, the 
                        term `State prescription drug discount program' 
                        means a State program under which, with respect 
                        to a rebate period, not less than the amount 
                        equal to 95 percent of all the rebates paid to 
                        the State under agreements entered into under 
                        subparagraph (A) during such period is provided 
                        to eligible State residents in the form of 
                        discounted prices for the purchase of 
                        outpatient prescription drugs.
                            ``(ii) Eligible state resident.--For 
                        purposes of clause (i), the term `eligible 
                        State resident' means an individual who is a 
                        State resident and--
                                    ``(I) who is eligible for benefits 
                                under title XVIII; or
                                    ``(II) whose income does not exceed 
                                300 percent of the income official 
                                poverty line (as defined by the Office 
                                of Management and Budget, and revised 
                                annually in accordance with section 
                                673(2) of the Omnibus Budget 
                                Reconciliation Act of 1981) applicable 
                                to a family of the size involved.
                            ``(iii) Additional subsidies.--Nothing in 
                        this subparagraph shall be construed as--
                                    ``(I) requiring a State to expend 
                                State funds to carry out a State 
                                prescription drug discount program; or
                                    ``(II) prohibiting a State from 
                                electing to contribute State funds to a 
                                State prescription drug discount 
                                program to provide greater subsidies to 
                                eligible State residents for outpatient 
                                prescription drugs covered under the 
                                program.
                    ``(C) No offset against medical assistance.--
                Amounts received by a State under an agreement entered 
                into under subparagraph (A) in any quarter shall not be 
                considered to be a reduction in the amount expended 
                under the State plan in the quarter for medical 
                assistance for purposes of section 1903(a)(1).''.
    (b) Conforming Amendment.--The first sentence of section 1927(a)(1) 
of the Social Security Act (42 U.S.C. 1396r-8(a)(1)) is amended, by 
striking ``and paragraph (6)'' and inserting ``, paragraph (6), and 
paragraph (7)''.

SEC. 4. ENHANCED REBATES FOR STATE MEDICAID PROGRAMS.

    Section 1927(b)(1)(B) of the Social Security Act (42 U.S.C. 1396r-
8(b)(1)(B) is amended--
            (1) by striking ``Amounts'' and inserting the following:
                            ``(i) In general.--Except as provided in 
                        clause (ii) and subsection (a)(7)(C), 
                        amounts''; and
            (2) by adding at the end the following:
                            ``(ii) Enhanced rebate.--In the case of a 
                        State that has a State prescription drug 
                        discount program described in subsection (a)(7) 
                        and that has entered into a rebate agreement 
                        described in paragraph (1) or (4) of subsection 
                        (a) that provides a greater rebate for a 
                        covered outpatient drug than the rebate that 
                        would be paid for the covered outpatient drug 
                        under subsection (c), then, notwithstanding 
                        clause (i), only the amount equal to \1/2\ of 
                        the difference between the amount received by 
                        the State in any quarter under such a rebate 
                        agreement and the amount of the rebate that 
                        would be paid under subsection (c) for such 
                        covered outpatient drug shall be considered to 
                        be a reduction in the amount expended under the 
                        State plan in the quarter for medical 
                        assistance for purposes of section 
                        1903(a)(1).''.

SEC. 5. EFFECTIVE DATE.

    The amendments made by this Act take effect on January 1, 2004.

Summary: State Prescription Drug Discount Act of 2002 - Amends title XIX (Medicaid) of the Social Security Act (SSA) to: (1) require drug manufacturers to pay rebates to State prescription drug discount programs as a condition of participation in a rebate agreement for outpatient prescription drugs under the Medicaid program. And (2) provide for enhanced rebates for State prescription drug discount programs of States with rebate agreements.