To amend title XVIII of the Social Security Act with respect to reform of payment for drugs and biologicals under the Medicare Program.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicare Market Acquisition Drug 
Price Act of 2002''.

SEC. 2. REFORM OF PAYMENT FOR DRUGS AND BIOLOGICALS UNDER THE MEDICARE 
              PROGRAM.

    (a) Payment Reform.--
            (1) In general.--Section 1842(o) of the Social Security Act 
        (42 U.S.C. 1395u(o)) is amended to read as follows:
    ``(o) Payment for Drugs and Biologicals.--
            ``(1) General rule.--If a physician's, supplier's, or any 
        other person's bill or request for payment for services 
        includes a charge for a drug or biological for which payment 
        may be made under this part and the drug or biological is not 
        paid on a cost or prospective payment basis as otherwise 
        provided in this part, the amount payable for the drug or 
        biological shall be based on the following:
                    ``(A) Multi-source (generic) drugs.--In the case of 
                a drug or biological that meets the requirements for a 
                multi-source drug under subclauses (I) and (II) of 
                section 1927(k)(7)(A)(i), 105 percent of the volume-
                weighted median average acquisition price for any drug 
                or biological covered under the same medicare HCPCS 
                code.
                    ``(B) Single source (brand) drugs and 
                biologicals.--In the case of a drug or biological that 
                meets the requirements for a single source drug under 
                section 1927(k)(7)(A)(iv), 105 percent of the average 
                acquisition price for the drug or biological.
                    ``(C) Access exception.--The Secretary may modify 
                the rate otherwise applicable in order to assure access 
                to necessary drugs and biologicals in the case of sole 
                community providers in rural and other areas where the 
                providers are not reasonably able to obtain the drugs 
                and biologicals at the payment rates otherwise 
                applicable. Such modification shall not result in a 
                change of more than 15 percent of the rate otherwise 
                applicable.
                    ``(D) Data-related exception.--If the Secretary 
                determines that there is insufficient data available 
                with respect to compute an average acquisition price 
                for a drug or biological for a quarter or that, because 
                of a significant change in price from quarter-to-
                quarter, the available data on the average acquisition 
                price does not accurately reflect the actual, current 
                acquisition cost for the drug or biological, the 
                Secretary may substitute for the quarters involved an 
                appropriate payment for the drug or biological for such 
                average acquisition price.
                    ``(E) Application of ndc codes.--If the Secretary 
                determines that it is appropriate to provide for 
                payment under this subsection using national drug code 
                (NDC) instead of HCPCS codes, in applying subparagraph 
                (A) the reference to the same HCPCS code shall be 
                deemed a reference to the appropriate national drug 
                codes for those drugs or biologicals that are 
                therapeutically and pharmaceutically equivalent and 
                bioequivalent (as defined for purposes of section 
                1927(k)(7)(A)).
            ``(2) Definition of average acquisition price.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `average acquisition price' means, with 
                respect to a drug or biological and with respect to 
                each dosage form and strength of the drug or biological 
                product (without regard to any special packaging, 
                labeling, or identifiers on the dosage form or product 
                or package), the average of all final sales prices 
                charged by the manufacturer of the drug or biological 
                product in the United States, excluding sales exempt 
from inclusion in the calculation of best price under section 
1927(c)(1)(C) (other than under clause (ii)(III) of such section) and 
excluding sales subject to a rebate under section 1927, as reported 
under paragraph (3).
                    ``(B) Net price.--Such average acquisition price 
                shall be calculated net of all of the following (as 
                estimated by the Secretary):
                            ``(i) Volume discounts.
                            ``(ii) Prompt pay discounts and cash 
                        discounts.
                            ``(iii) Charge-backs.
                            ``(iv) Short-dated product discounts (for 
                        spoilage and other factors).
                            ``(v) Free goods and services.
                            ``(vi) Rebates.
                            ``(vii) All other price concessions 
                        provided by the drug manufacturer.
                The Secretary may make subsequent adjustments in such 
                average acquisition price to take into account updated 
                information and differences between the price 
                previously estimated and the actual average acquisition 
                price.
                    ``(C) Weighting.--The average of all final sales 
                prices described in subparagraph (A) shall be 
                determined by dividing--
                            ``(i) the sum of all final prices charged 
                        by the manufacturer (net of the adjustments 
                        made under subparagraph (B)) for sales in the 
                        period involved that are included in 
                        subparagraph (A) for the drug or biological, by
                            ``(ii) the total number of units of such 
                        sales in the period.
                    ``(D) Distribution of reports.--The Secretary shall 
                promptly distribute applicable payment rates under this 
                subsection to carriers and fiscal intermediaries and 
                other contractors that make payment for drugs and 
                biologicals under this section in order to apply a 
                uniform reimbursement rate under this section.
            ``(3) Price reporting requirement.--
                    ``(A) In general.--As a condition for payment for 
                any drug or biological of a manufacturer under this 
                subsection, the manufacturer of the drug or biological 
                shall--
                            ``(i) report, on a quarterly basis, to the 
                        Secretary (or the Secretary's designee) the 
                        manufacturer's average acquisition price and 
                        the information required under subparagraph (C) 
                        for all drugs and biologicals of the 
                        manufacturer by national drug code (NDC);
                            ``(ii) maintain such records (in written or 
                        electronic form) regarding such sales and 
                        prices for all such drugs and biologicals as 
                        may be necessary to audit the information so 
                        reported or required to be reported; and
                            ``(iii) provide the Secretary with access 
                        to such records in order to permit the 
                        Secretary to audit information so reported or 
                        required to be reported.
                    ``(B) Penalties.--The provisions of section 
                1927(b)(3)(C) shall apply with respect to the reporting 
                of information under subparagraph (A) in the same 
                manner as it applies to the reporting of information 
                under section 1927(b)(3)(A), except that the reference 
                in clause (i) of such section to $10,000 is deemed a 
                reference to $100,000 and any reference to a suspension 
                of an agreement is deemed a reference to a suspension 
                of payment for the drug or biological involved under 
                this part. The Secretary shall promptly refer to the 
                Inspector General of the Department of Health and Human 
                Services and, if appropriate, to appropriate officials 
                in the Department of Justice cases in which the 
                Secretary becomes aware of a false price representation 
                made in the information submitted under this paragraph.
                    ``(C) Form of reporting.--Information required to 
                be reported under subparagraph (A)(i) shall be reported 
                in a form and manner specified by the Secretary. The 
                information required to be reported shall include the 
                identification of the generic name of the drug or 
                biological and its brand name (if any), the national 
                drug code (NDC) and the HCPCS code assigned to the drug 
                or biological, the dosage form, strength, volume, and 
                package size involved. The information for a quarter 
                shall be submitted not later than 30 days after the end 
                of the quarter. The information shall be accompanied by 
                a written and signed certification by an officer of the 
                manufacturer attesting to the accuracy of the 
                information reported. Such information shall include 
                updated information on the net price realized (taking 
into account rebates and other amounts affecting net price), regardless 
of the period for which such a rebate or other adjustment in net price 
might have been earned.
                    ``(D) Auditing.--The Secretary shall audit on a 
                periodic basis information reported or required to be 
                reported under this paragraph. The Secretary may 
                conduct such independent price gathering activities, 
                such as surveys and review of published catalog 
                information or other transactional information, as may 
                be appropriate to verify the accuracy of the 
                information reported.
            ``(4) Dispensing fee.--If payment for a drug or biological 
        is made to a licensed pharmacy approved to dispense drugs or 
        biologicals under this part, the Secretary shall pay a 
        dispensing fee (less the applicable deductible and coinsurance 
        amounts) to the pharmacy. Such a dispensing fee shall be 
        subject to adjustment from year to year based upon changes in 
        the consumer price index over time and may be adjusted as the 
        Secretary determines to be appropriate to reflect differences 
        in the costs of dispensing different drugs and biologicals.
            ``(5) Payment required on an assignment-related basis.--
                    ``(A) In general.--Payment for a charge for any 
                drug or biological for which payment may be made under 
                this part may be made only on an assignment-related 
                basis.
                    ``(B) Application of enforcement provisions.--The 
                provisions of subsection (b)(18)(B) shall apply to 
                charges for such drugs or biologicals in the same 
                manner as they apply to services furnished by a 
                practitioner described in subsection (b)(18)(C).''.
            (2) Effective date.--Subject to subsection (c)(2), the 
        amendment made by paragraph (1) shall apply to drugs and 
        biologicals furnished on or after January 1, 2003.
    (b) Revision in Practice Expense Payments.--
            (1) Adjustment in oncologist medical supply expenses.--In 
        computing the practice expense component of the physician fee 
        schedule under section 1848 of the Social Security Act (42 
        U.S.C. 1395w-4) with respect to payment for services of 
        oncologists, the Secretary of Health and Human Services shall 
        make adjustments to oncologists' reported medical supply 
        expenses in order to ensure that such expenses better reflect 
        the actual supply costs of providing such services.
            (2) Allocation of indirect expenses.--In establishing such 
        fee schedule, the Secretary shall change the allocation of 
        indirect expenses in a manner so that all services, including 
        services without direct physician involvement, are allocated 
        the appropriate share of indirect expenses.
            (3) Services without direct physician involvement.--In 
        establishing such fee schedule, the Secretary shall calculate 
        payments, for those services without direct physician 
        involvement under the basic method, using information on the 
        resources required for each services and, if deemed necessary, 
        shall validate the underlying resource-based estimates of 
        direct practice expenses required to provide each service.
            (4) Budget neutral adjustment.--The changes in payment made 
        by this subsection shall not be treated as a change in law or 
        regulation described in section 1848(f)(2)(D) of the Social 
        Security Act (42 U.S.C. 1395w-4(f)(2)(D)).
            (5) Effective date.--The provisions of this subsection 
        apply to payments for services furnished on or after January 1, 
        2003.
    (c) Study of Payments for Blood Clotting Factors and Other 
Biologicals.--
            (1) In general.--The Secretary of Health and Human Services 
        shall provide for a study of the appropriateness of the 
        medicare payment methodology for blood clotting factors and 
        other biologicals under part B of title XVIII of the Social 
        Security Act. Not later than 9 months after the date of the 
        enactment of this Act, the Secretary shall submit to Congress a 
        report on such study and shall include in such report 
        recommendations regarding whether to apply the payment 
        methodology provided under the amendment made by subsection 
        (a)(1) and alternative recommendations for appropriate 
        dispensing fees.
            (2) Delay in effective date.--The amendment made by 
        subsection (a)(1) shall not apply to blood clotting factors 
        furnished before the first day of the first calendar year that 
        begins at least 6 months after the date the report under 
        paragraph (1) has been submitted to the Congress.

Summary: Medicare Market Acquisition Drug Price Act of 2002 - Amends title XVIII (Medicare) of the Social Security Act (SSA) to revise payment for drugs and biologicals under Medicare. Directs the Secretary of Health and Human Services, in computing the practice expense component of the Medicare physician fee schedule with respect to payment for services of oncologists, to make adjustments to an oncologist's reported medical supply expenses in order to ensure that they better reflect the actual supply costs of providing such services.