# Patient Protection and Affordable Care Act/Title III/Subtitle D
## Subtitle D--Medicare Part D Improvements for Prescription Drug Plans and MA-PD Plans
### SEC. 3301. MEDICARE COVERAGE GAP DISCOUNT PROGRAM.

* (a) Condition for Coverage of Drugs Under Part D- Part D of Title XVIII of the Social Security Act (42 U.S.C. 1395w-101 et seq.), is amended by adding at the end the following new section:

#### CONDITION FOR COVERAGE OF DRUGS UNDER THIS PART

* Sec. 1860D-43. (a) In General- In order for coverage to be available under this part for covered part D drugs (as defined in section 1860D-2(e)) of a manufacturer, the manufacturer must--
** (1) participate in the Medicare coverage gap discount program under section 1860D-14A;
** (2) have entered into and have in effect an agreement described in subsection (b) of such section with the Secretary; and
** (3) have entered into and have in effect, under terms and conditions specified by the Secretary, a contract with a third party that the Secretary has entered into a contract with under subsection (d)(3) of such section.
* (b) Effective Date- Subsection (a) shall apply to covered part D drugs dispensed under this part on or after July 1, 2010.
* (c) Authorizing Coverage for Drugs Not Covered Under Agreements- Subsection (a) shall not apply to the dispensing of a covered part D drug if--
** (1) the Secretary has made a determination that the availability of the drug is essential to the health of beneficiaries under this part; or
** (2) the Secretary determines that in the period beginning on July 1, 2010, and ending on December 31, 2010, there were extenuating circumstances.
* (d) Definition of Manufacturer- In this section, the term `manufacturer' has the meaning given such term in section 1860D-14A(g)(5).'.
* (b) Medicare Coverage Gap Discount Program- Part D of title XVIII of the Social Security Act (42 U.S.C. 1395w-101) is amended by inserting after section 1860D-14 the following new section:

#### MEDICARE COVERAGE GAP DISCOUNT PROGRAM

* Sec. 1860D-14A. (a) Establishment- The Secretary shall establish a Medicare coverage gap discount program (in this section referred to as the `program') by not later than July 1, 2010. Under the program, the Secretary shall enter into agreements described in subsection (b) with manufacturers and provide for the performance of the duties described in subsection (c)(1). The Secretary shall establish a model agreement for use under the program by not later than April 1, 2010, in consultation with manufacturers, and allow for comment on such model agreement.
* (b) Terms of Agreement-
** (1) IN GENERAL-
*** (A) AGREEMENT- An agreement under this section shall require the manufacturer to provide applicable beneficiaries access to discounted prices for applicable drugs of the manufacturer.
*** (B) PROVISION OF DISCOUNTED PRICES AT THE POINT-OF-SALE- Except as provided in subsection (c)(1)(A)(iii), such discounted prices shall be provided to the applicable beneficiary at the pharmacy or by the mail order service at the point-of-sale of an applicable drug.
*** (C) TIMING OF AGREEMENT-
**** (i) SPECIAL RULE FOR 2010 AND 2011- In order for an agreement with a manufacturer to be in effect under this section with respect to the period beginning on July 1, 2010, and ending on December 31, 2011, the manufacturer shall enter into such agreement not later than May 1, 2010.
**** (ii) 2012 AND SUBSEQUENT YEARS- In order for an agreement with a manufacturer to be in effect under this section with respect to plan year 2012 or a subsequent plan year, the manufacturer shall enter into such agreement (or such agreement shall be renewed under paragraph (4)(A)) not later than January 30 of the preceding year.
** (2) PROVISION OF APPROPRIATE DATA- Each manufacturer with an agreement in effect under this section shall collect and have available appropriate data, as determined by the Secretary, to ensure that it can demonstrate to the Secretary compliance with the requirements under the program.
** (3) COMPLIANCE WITH REQUIREMENTS FOR ADMINISTRATION OF PROGRAM- Each manufacturer with an agreement in effect under this section shall comply with requirements imposed by the Secretary or a third party with a contract under subsection (d)(3), as applicable, for purposes of administering the program, including any determination under clause (i) of subsection (c)(1)(A) or procedures established under such subsection (c)(1)(A).
** (4) LENGTH OF AGREEMENT-
*** (A) IN GENERAL- An agreement under this section shall be effective for an initial period of not less than 18 months and shall be automatically renewed for a period of not less than 1 year unless terminated under subparagraph (B).
*** (B) TERMINATION-
**** (i) BY THE SECRETARY- The Secretary may provide for termination of an agreement under this section for a knowing and willful violation of the requirements of the agreement or other good cause shown. Such termination shall not be effective earlier than 30 days after the date of notice to the manufacturer of such termination. The Secretary shall provide, upon request, a manufacturer with a hearing concerning such a termination, and such hearing shall take place prior to the effective date of the termination with sufficient time for such effective date to be repealed if the Secretary determines appropriate.
**** (ii) BY A MANUFACTURER- A manufacturer may terminate an agreement under this section for any reason. Any such termination shall be effective, with respect to a plan year--
***** (I) if the termination occurs before January 30 of a plan year, as of the day after the end of the plan year; and
***** (II) if the termination occurs on or after January 30 of a plan year, as of the day after the end of the succeeding plan year.
**** (iii) EFFECTIVENESS OF TERMINATION- Any termination under this subparagraph shall not affect discounts for applicable drugs of the manufacturer that are due under the agreement before the effective date of its termination.
**** (iv) NOTICE TO THIRD PARTY- The Secretary shall provide notice of such termination to a third party with a contract under subsection (d)(3) within not less than 30 days before the effective date of such termination.
* (c) Duties Described and Special Rule for Supplemental Benefits-
** (1) DUTIES DESCRIBED- The duties described in this subsection are the following:
*** (A) ADMINISTRATION OF PROGRAM- Administering the program, including--
**** (i) the determination of the amount of the discounted price of an applicable drug of a manufacturer;
**** (ii) except as provided in clause (iii), the establishment of procedures under which discounted prices are provided to applicable beneficiaries at pharmacies or by mail order service at the point-of-sale of an applicable drug;
**** (iii) in the case where, during the period beginning on July 1, 2010, and ending on December 31, 2011, it is not practicable to provide such discounted prices at the point-of-sale (as described in clause (ii)), the establishment of procedures to provide such discounted prices as soon as practicable after the point-of-sale;
**** (iv) the establishment of procedures to ensure that, not later than the applicable number of calendar days after the dispensing of an applicable drug by a pharmacy or mail order service, the pharmacy or mail order service is reimbursed for an amount equal to the difference between--
***** (I) the negotiated price of the applicable drug; and
***** (II) the discounted price of the applicable drug;
**** (v) the establishment of procedures to ensure that the discounted price for an applicable drug under this section is applied before any coverage or financial assistance under other health benefit plans or programs that provide coverage or financial assistance for the purchase or provision of prescription drug coverage on behalf of applicable beneficiaries as the Secretary may specify;
**** (vi) the establishment of procedures to implement the special rule for supplemental benefits under paragraph (2); and
**** (vii) providing a reasonable dispute resolution mechanism to resolve disagreements between manufacturers, applicable beneficiaries, and the third party with a contract under subsection (d)(3).
*** (B) MONITORING COMPLIANCE-
**** (i) IN GENERAL- The Secretary shall monitor compliance by a manufacturer with the terms of an agreement under this section.
**** (ii) NOTIFICATION- If a third party with a contract under subsection (d)(3) determines that the manufacturer is not in compliance with such agreement, the third party shall notify the Secretary of such noncompliance for appropriate enforcement under subsection (e).
*** (C) COLLECTION OF DATA FROM PRESCRIPTION DRUG PLANS AND MA-PD PLANS- The Secretary may collect appropriate data from prescription drug plans and MA-PD plans in a timeframe that allows for discounted prices to be provided for applicable drugs under this section.
** (2) SPECIAL RULE FOR SUPPLEMENTAL BENEFITS- For plan year 2010 and each subsequent plan year, in the case where an applicable beneficiary has supplemental benefits with respect to applicable drugs under the prescription drug plan or MA-PD plan that the applicable beneficiary is enrolled in, the applicable beneficiary shall not be provided a discounted price for an applicable drug under this section until after such supplemental benefits have been applied with respect to the applicable drug.
* (d) Administration-
** (1) IN GENERAL- Subject to paragraph (2), the Secretary shall provide for the implementation of this section, including the performance of the duties described in subsection (c)(1).
** (2) LIMITATION-
*** (A) IN GENERAL- Subject to subparagraph (B), in providing for such implementation, the Secretary shall not receive or distribute any funds of a manufacturer under the program.
*** (B) EXCEPTION- The limitation under subparagraph (A) shall not apply to the Secretary with respect to drugs dispensed during the period beginning on July 1, 2010, and ending on December 31, 2010, but only if the Secretary determines that the exception to such limitation under this subparagraph is necessary in order for the Secretary to begin implementation of this section and provide applicable beneficiaries timely access to discounted prices during such period.
** (3) CONTRACT WITH THIRD PARTIES- The Secretary shall enter into a contract with 1 or more third parties to administer the requirements established by the Secretary in order to carry out this section. At a minimum, the contract with a third party under the preceding sentence shall require that the third party--
*** (A) receive and transmit information between the Secretary, manufacturers, and other individuals or entities the Secretary determines appropriate;
*** (B) receive, distribute, or facilitate the distribution of funds of manufacturers to appropriate individuals or entities in order to meet the obligations of manufacturers under agreements under this section;
*** (C) provide adequate and timely information to manufacturers, consistent with the agreement with the manufacturer under this section, as necessary for the manufacturer to fulfill its obligations under this section; and
*** (D) permit manufacturers to conduct periodic audits, directly or through contracts, of the data and information used by the third party to determine discounts for applicable drugs of the manufacturer under the program.
** (4) PERFORMANCE REQUIREMENTS- The Secretary shall establish performance requirements for a third party with a contract under paragraph (3) and safeguards to protect the independence and integrity of the activities carried out by the third party under the program under this section.
** (5) IMPLEMENTATION- The Secretary may implement the program under this section by program instruction or otherwise.
** (6) ADMINISTRATION- Chapter 35 of title 44, United States Code, shall not apply to the program under this section.
* (e) Enforcement-
** (1) AUDITS- Each manufacturer with an agreement in effect under this section shall be subject to periodic audit by the Secretary.
** (2) CIVIL MONEY PENALTY-
*** (A) IN GENERAL- The Secretary shall impose a civil money penalty on a manufacturer that fails to provide applicable beneficiaries discounts for applicable drugs of the manufacturer in accordance with such agreement for each such failure in an amount the Secretary determines is commensurate with the sum of--
**** (i) the amount that the manufacturer would have paid with respect to such discounts under the agreement, which will then be used to pay the discounts which the manufacturer had failed to provide; and
**** (ii) 25 percent of such amount.
*** (B) APPLICATION- The provisions of section 1128A (other than subsections (a) and (b)) shall apply to a civil money penalty under this paragraph in the same manner as such provisions apply to a penalty or proceeding under section 1128A(a).
* (f) Clarification Regarding Availability of Other Covered Part D Drugs- Nothing in this section shall prevent an applicable beneficiary from purchasing a covered part D drug that is not an applicable drug (including a generic drug or a drug that is not on the formulary of the prescription drug plan or MA-PD plan that the applicable beneficiary is enrolled in).
* (g) Definitions- In this section:
** (1) APPLICABLE BENEFICIARY- The term `applicable beneficiary' means an individual who, on the date of dispensing an applicable drug--
*** (A) is enrolled in a prescription drug plan or an MA-PD plan;
*** (B) is not enrolled in a qualified retiree prescription drug plan;
*** (C) is not entitled to an income-related subsidy under section 1860D-14(a);
*** (D) is not subject to a reduction in premium subsidy under section 1839(i); and
*** (E) who--
**** (i) has reached or exceeded the initial coverage limit under section 1860D-2(b)(3) during the year; and
**** (ii) has not incurred costs for covered part D drugs in the year equal to the annual out-of-pocket threshold specified in section 1860D-2(b)(4)(B).
** (2) APPLICABLE DRUG- The term `applicable drug' means, with respect to an applicable beneficiary, a covered part D drug--
*** (A) approved under a new drug application under section 505(b) of the Federal Food, Drug, and Cosmetic Act or, in the case of a biologic product, licensed under section 351 of the Public Health Service Act (other than a product licensed under subsection (k) of such section 351); and
*** (B)(i) if the PDP sponsor of the prescription drug plan or the MA organization offering the MA-PD plan uses a formulary, which is on the formulary of the prescription drug plan or MA-PD plan that the applicable beneficiary is enrolled in;
*** (ii) if the PDP sponsor of the prescription drug plan or the MA organization offering the MA-PD plan does not use a formulary, for which benefits are available under the prescription drug plan or MA-PD plan that the applicable beneficiary is enrolled in; or
*** (iii) is provided through an exception or appeal.
** (3) APPLICABLE NUMBER OF CALENDAR DAYS- The term `applicable number of calendar days' means--
*** (A) with respect to claims for reimbursement submitted electronically, 14 days; and
*** (B) with respect to claims for reimbursement submitted otherwise, 30 days.
** (4) DISCOUNTED PRICE-
*** (A) IN GENERAL- The term `discounted price' means 50 percent of the negotiated price of the applicable drug of a manufacturer.
*** (B) CLARIFICATION- Nothing in this section shall be construed as affecting the responsibility of an applicable beneficiary for payment of a dispensing fee for an applicable drug.
*** (C) SPECIAL CASE FOR CERTAIN CLAIMS- In the case where the entire amount of the negotiated price of an individual claim for an applicable drug with respect to an applicable beneficiary does not fall at or above the initial coverage limit under section 1860D-2(b)(3) and below the annual out-of-pocket threshold specified in section 1860D-2(b)(4)(B) for the year, the manufacturer of the applicable drug shall provide the discounted price under this section on only the portion of the negotiated price of the applicable drug that falls at or above such initial coverage limit and below such annual out-of-pocket threshold.
** (5) MANUFACTURER- The term `manufacturer' means any entity which is engaged in the production, preparation, propagation, compounding, conversion, or processing of prescription drug products, either directly or indirectly by extraction from substances of natural origin, or independently by means of chemical synthesis, or by a combination of extraction and chemical synthesis. Such term does not include a wholesale distributor of drugs or a retail pharmacy licensed under State law.
** (6) NEGOTIATED PRICE- The term `negotiated price' has the meaning given such term in section 423.100 of title 42, Code of Federal Regulations (as in effect on the date of enactment of this section), except that such negotiated price shall not include any dispensing fee for the applicable drug.
** (7) QUALIFIED RETIREE PRESCRIPTION DRUG PLAN- The term `qualified retiree prescription drug plan' has the meaning given such term in section 1860D-22(a)(2).'.
* (c) Inclusion in Incurred Costs-
** (1) IN GENERAL- Section 1860D-2(b)(4) of the Social Security Act (42 U.S.C. 1395w-102(b)(4)) is amended--
*** (A) in subparagraph (C), in the matter preceding clause (i), by striking `In applying' and inserting `Except as provided in subparagraph (E), in applying'; and
*** (B) by adding at the end the following new subparagraph:
*** (E) INCLUSION OF COSTS OF APPLICABLE DRUGS UNDER MEDICARE COVERAGE GAP DISCOUNT PROGRAM- In applying subparagraph (A), incurred costs shall include the negotiated price (as defined in paragraph (6) of section 1860D-14A(g)) of an applicable drug (as defined in paragraph (2) of such section) of a manufacturer that is furnished to an applicable beneficiary (as defined in paragraph (1) of such section) under the Medicare coverage gap discount program under section 1860D-14A, regardless of whether part of such costs were paid by a manufacturer under such program.'.
** (2) EFFECTIVE DATE- The amendments made by this subsection shall apply to costs incurred on or after July 1, 2010.
* (d) Conforming Amendment Permitting Prescription Drug Discounts-
** (1) IN GENERAL- Section 1128B(b)(3) of the Social Security Act (42 U.S.C. 1320a-7b(b)(3)) is amended--
*** (A) by striking `and' at the end of subparagraph (G);
*** (B) in the subparagraph (H) added by section 237(d) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Public Law 108-173; 117 Stat. 2213)--
**** (i) by moving such subparagraph 2 ems to the left; and
**** (ii) by striking the period at the end and inserting a semicolon;
*** (C) in the subparagraph (H) added by section 431(a) of such Act (117 Stat. 2287)--
**** (i) by redesignating such subparagraph as subparagraph (I);
**** (ii) by moving such subparagraph 2 ems to the left; and
**** (iii) by striking the period at the end and inserting `; and'; and
*** (D) by adding at the end the following new subparagraph:
*** (J) a discount in the price of an applicable drug (as defined in paragraph (2) of section 1860D-14A(g)) of a manufacturer that is furnished to an applicable beneficiary (as defined in paragraph (1) of such section) under the Medicare coverage gap discount program under section 1860D-14A.'.
** (2) CONFORMING AMENDMENT TO DEFINITION OF BEST PRICE UNDER MEDICAID- Section 1927(c)(1)(C)(i)(VI) of the Social Security Act (42 U.S.C. 1396r-8(c)(1)(C)(i)(VI)) is amended by inserting `, or any discounts provided by manufacturers under the Medicare coverage gap discount program under section 1860D-14A' before the period at the end.
** (3) EFFECTIVE DATE- The amendments made by this subsection shall apply to drugs dispensed on or after July 1, 2010.

### SEC. 3302. IMPROVEMENT IN DETERMINATION OF MEDICARE PART D LOW-INCOME BENCHMARK PREMIUM.

* (a) In General- Section 1860D-14(b)(2)(B)(iii) of the Social Security Act (42 U.S.C. 1395w-114(b)(2)(B)(iii)) is amended by inserting `, determined without regard to any reduction in such premium as a result of any beneficiary rebate under section 1854(b)(1)(C) or bonus payment under section 1853(n)' before the period at the end.
* (b) Effective Date- The amendment made by subsection (a) shall apply to premiums for months beginning on or after January 1, 2011.

### SEC. 3303. VOLUNTARY DE MINIMIS POLICY FOR SUBSIDY ELIGIBLE INDIVIDUALS UNDER PRESCRIPTION DRUG PLANS AND MA-PD PLANS.

* (a) In General- Section 1860D-14(a) of the Social Security Act (42 U.S.C. 1395w-114(a)) is amended by adding at the end the following new paragraph:
** (5) WAIVER OF DE MINIMIS PREMIUMS- The Secretary shall, under procedures established by the Secretary, permit a prescription drug plan or an MA-PD plan to waive the monthly beneficiary premium for a subsidy eligible individual if the amount of such premium is de minimis. If such premium is waived under the plan, the Secretary shall not reassign subsidy eligible individuals enrolled in the plan to other plans based on the fact that the monthly beneficiary premium under the plan was greater than the low-income benchmark premium amount.'.
* (b) Authorizing the Secretary To Auto-enroll Subsidy Eligible Individuals in Plans That Waive De Minimis Premiums- Section 1860D-1(b)(1) of the Social Security Act (42 U.S.C. 1395w-101(b)(1)) is amended--
** (1) in subparagraph (C), by inserting `except as provided in subparagraph (D),' after `shall include,'
** (2) by adding at the end the following new subparagraph:
*** (D) SPECIAL RULE FOR PLANS THAT WAIVE DE MINIMIS PREMIUMS- The process established under subparagraph (A) may include, in the case of a part D eligible individual who is a subsidy eligible individual (as defined in section 1860D-14(a)(3)) who has failed to enroll in a prescription drug plan or an MA-PD plan, for the enrollment in a prescription drug plan or MA-PD plan that has waived the monthly beneficiary premium for such subsidy eligible individual under section 1860D-14(a)(5). If there is more than one such plan available, the Secretary shall enroll such an individual under the preceding sentence on a random basis among all such plans in the PDP region. Nothing in the previous sentence shall prevent such an individual from declining or changing such enrollment.'.
* (c) Effective Date- The amendments made by this subsection shall apply to premiums for months, and enrollments for plan years, beginning on or after January 1, 2011.

### SEC. 3304. SPECIAL RULE FOR WIDOWS AND WIDOWERS REGARDING ELIGIBILITY FOR LOW-INCOME ASSISTANCE.

* (a) In General- Section 1860D-14(a)(3)(B) of the Social Security Act (42 U.S.C. 1395w-114(a)(3)(B)) is amended by adding at the end the following new clause:
**** (vi) SPECIAL RULE FOR WIDOWS AND WIDOWERS- Notwithstanding the preceding provisions of this subparagraph, in the case of an individual whose spouse dies during the effective period for a determination or redetermination that has been made under this subparagraph, such effective period shall be extended through the date that is 1 year after the date on which the determination or redetermination would (but for the application of this clause) otherwise cease to be effective.'.
* (b) Effective Date- The amendment made by subsection (a) shall take effect on January 1, 2011.

### SEC. 3305. IMPROVED INFORMATION FOR SUBSIDY ELIGIBLE INDIVIDUALS REASSIGNED TO PRESCRIPTION DRUG PLANS AND MA-PD PLANS.

* Section 1860D-14 of the Social Security Act (42 U.S.C. 1395w-114) is amended--
** (1) by redesignating subsection (d) as subsection (e); and
** (2) by inserting after subsection (c) the following new subsection:
* (d) Facilitation of Reassignments- Beginning not later than January 1, 2011, the Secretary shall, in the case of a subsidy eligible individual who is enrolled in one prescription drug plan and is subsequently reassigned by the Secretary to a new prescription drug plan, provide the individual, within 30 days of such reassignment, with--
** (1) information on formulary differences between the individual's former plan and the plan to which the individual is reassigned with respect to the individual's drug regimens; and
** (2) a description of the individual's right to request a coverage determination, exception, or reconsideration under section 1860D-4(g), bring an appeal under section 1860D-4(h), or resolve a grievance under section 1860D-4(f).'.

### SEC. 3306. FUNDING OUTREACH AND ASSISTANCE FOR LOW-INCOME PROGRAMS.

* (a) Additional Funding for State Health Insurance Programs- Subsection (a)(1)(B) of section 119 of the Medicare Improvements for Patients and Providers Act of 2008 (42 U.S.C. 1395b-3 note) is amended by striking `(42 U.S.C. 1395w-23(f))' and all that follows through the period at the end and inserting `(42 U.S.C. 1395w-23(f)), to the Centers for Medicare & Medicaid Services Program Management Account--
**** (i) for fiscal year 2009, of $7,500,000; and
**** (ii) for the period of fiscal years 2010 through 2012, of $15,000,000.
*** Amounts appropriated under this subparagraph shall remain available until expended.'.
* (b) Additional Funding for Area Agencies on Aging- Subsection (b)(1)(B) of such section 119 is amended by striking `(42 U.S.C. 1395w-23(f))' and all that follows through the period at the end and inserting `(42 U.S.C. 1395w-23(f)), to the Administration on Aging--
**** (i) for fiscal year 2009, of $7,500,000; and
**** (ii) for the period of fiscal years 2010 through 2012, of $15,000,000.
*** Amounts appropriated under this subparagraph shall remain available until expended.'.
* (c) Additional Funding for Aging and Disability Resource Centers- Subsection (c)(1)(B) of such section 119 is amended by striking `(42 U.S.C. 1395w-23(f))' and all that follows through the period at the end and inserting `(42 U.S.C. 1395w-23(f)), to the Administration on Aging--
**** (i) for fiscal year 2009, of $5,000,000; and
**** (ii) for the period of fiscal years 2010 through 2012, of $10,000,000.
*** Amounts appropriated under this subparagraph shall remain available until expended.'.
* (d) Additional Funding for Contract With the National Center for Benefits and Outreach Enrollment- Subsection (d)(2) of such section 119 is amended by striking `(42 U.S.C. 1395w-23(f))' and all that follows through the period at the end and inserting `(42 U.S.C. 1395w-23(f)), to the Administration on Aging--
**** (i) for fiscal year 2009, of $5,000,000; and
**** (ii) for the period of fiscal years 2010 through 2012, of $5,000,000.
*** Amounts appropriated under this subparagraph shall remain available until expended.'.
* (e) Secretarial Authority To Enlist Support in Conducting Certain Outreach Activities- Such section 119 is amended by adding at the end the following new subsection:
* (g) Secretarial Authority To Enlist Support in Conducting Certain Outreach Activities- The Secretary may request that an entity awarded a grant under this section support the conduct of outreach activities aimed at preventing disease and promoting wellness. Notwithstanding any other provision of this section, an entity may use a grant awarded under this subsection to support the conduct of activities described in the preceding sentence.'.

### SEC. 3307. IMPROVING FORMULARY REQUIREMENTS FOR PRESCRIPTION DRUG PLANS AND MA-PD PLANS WITH RESPECT TO CERTAIN CATEGORIES OR CLASSES OF DRUGS.

* (a) Improving Formulary Requirements- Section 1860D-4(b)(3)(G) of the Social Security Act is amended to read as follows:
*** (G) REQUIRED INCLUSION OF DRUGS IN CERTAIN CATEGORIES AND CLASSES-
**** (i) FORMULARY REQUIREMENTS-
***** (I) IN GENERAL- Subject to subclause (II), a PDP sponsor offering a prescription drug plan shall be required to include all covered part D drugs in the categories and classes identified by the Secretary under clause (ii)(I).
***** (II) EXCEPTIONS- The Secretary may establish exceptions that permit a PDP sponsor offering a prescription drug plan to exclude from its formulary a particular covered part D drug in a category or class that is otherwise required to be included in the formulary under subclause (I) (or to otherwise limit access to such a drug, including through prior authorization or utilization management).
**** (ii) IDENTIFICATION OF DRUGS IN CERTAIN CATEGORIES AND CLASSES-
***** (I) IN GENERAL- Subject to clause (iv), the Secretary shall identify, as appropriate, categories and classes of drugs for which the Secretary determines are of clinical concern.
***** (II) CRITERIA- The Secretary shall use criteria established by the Secretary in making any determination under subclause (I).
**** (iii) IMPLEMENTATION- The Secretary shall establish the criteria under clause (ii)(II) and any exceptions under clause (i)(II) through the promulgation of a regulation which includes a public notice and comment period.
**** (iv) REQUIREMENT FOR CERTAIN CATEGORIES AND CLASSES UNTIL CRITERIA ESTABLISHED- Until such time as the Secretary establishes the criteria under clause (ii)(II) the following categories and classes of drugs shall be identified under clause (ii)(I):
***** (I) Anticonvulsants.
***** (II) Antidepressants.
***** (III) Antineoplastics.
***** (IV) Antipsychotics.
***** (V) Antiretrovirals.
***** (VI) Immunosuppressants for the treatment of transplant rejection.'.
* (b) Effective Date- The amendments made by this section shall apply to plan year 2011 and subsequent plan years.

### SEC. 3308. REDUCING PART D PREMIUM SUBSIDY FOR HIGH-INCOME BENEFICIARIES.

* (a) Income-Related Increase in Part D Premium-
** (1) IN GENERAL- Section 1860D-13(a) of the Social Security Act (42 U.S.C. 1395w-113(a)) is amended by adding at the end the following new paragraph:
** (7) INCREASE IN BASE BENEFICIARY PREMIUM BASED ON INCOME-
*** (A) IN GENERAL- In the case of an individual whose modified adjusted gross income exceeds the threshold amount applicable under paragraph (2) of section 1839(i) (including application of paragraph (5) of such section) for the calendar year, the monthly amount of the beneficiary premium applicable under this section for a month after December 2010 shall be increased by the monthly adjustment amount specified in subparagraph (B).
*** (B) MONTHLY ADJUSTMENT AMOUNT- The monthly adjustment amount specified in this subparagraph for an individual for a month in a year is equal to the product of--
**** (i) the quotient obtained by dividing--
***** (I) the applicable percentage determined under paragraph (3)(C) of section 1839(i) (including application of paragraph (5) of such section) for the individual for the calendar year reduced by 25.5 percent; by
***** (II) 25.5 percent; and
**** (ii) the base beneficiary premium (as computed under paragraph (2)).
*** (C) MODIFIED ADJUSTED GROSS INCOME- For purposes of this paragraph, the term `modified adjusted gross income' has the meaning given such term in subparagraph (A) of section 1839(i)(4), determined for the taxable year applicable under subparagraphs (B) and (C) of such section.
*** (D) DETERMINATION BY COMMISSIONER OF SOCIAL SECURITY- The Commissioner of Social Security shall make any determination necessary to carry out the income-related increase in the base beneficiary premium under this paragraph.
*** (E) PROCEDURES TO ASSURE CORRECT INCOME-RELATED INCREASE IN BASE BENEFICIARY PREMIUM-
**** (i) DISCLOSURE OF BASE BENEFICIARY PREMIUM- Not later than September 15 of each year beginning with 2010, the Secretary shall disclose to the Commissioner of Social Security the amount of the base beneficiary premium (as computed under paragraph (2)) for the purpose of carrying out the income-related increase in the base beneficiary premium under this paragraph with respect to the following year.
**** (ii) ADDITIONAL DISCLOSURE- Not later than October 15 of each year beginning with 2010, the Secretary shall disclose to the Commissioner of Social Security the following information for the purpose of carrying out the income-related increase in the base beneficiary premium under this paragraph with respect to the following year:
***** (I) The modified adjusted gross income threshold applicable under paragraph (2) of section 1839(i) (including application of paragraph (5) of such section).
***** (II) The applicable percentage determined under paragraph (3)(C) of section 1839(i) (including application of paragraph (5) of such section).
***** (III) The monthly adjustment amount specified in subparagraph (B).
***** (IV) Any other information the Commissioner of Social Security determines necessary to carry out the income-related increase in the base beneficiary premium under this paragraph.
*** (F) RULE OF CONSTRUCTION- The formula used to determine the monthly adjustment amount specified under subparagraph (B) shall only be used for the purpose of determining such monthly adjustment amount under such subparagraph.'.
** (2) COLLECTION OF MONTHLY ADJUSTMENT AMOUNT- Section 1860D-13(c) of the Social Security Act (42 U.S.C. 1395w-113(c)) is amended--
*** (A) in paragraph (1), by striking `(2) and (3)' and inserting `(2), (3), and (4)'; and
*** (B) by adding at the end the following new paragraph:
** (4) COLLECTION OF MONTHLY ADJUSTMENT AMOUNT-
*** (A) IN GENERAL- Notwithstanding any provision of this subsection or section 1854(d)(2), subject to subparagraph (B), the amount of the income-related increase in the base beneficiary premium for an individual for a month (as determined under subsection (a)(7)) shall be paid through withholding from benefit payments in the manner provided under section 1840.
*** (B) AGREEMENTS- In the case where the monthly benefit payments of an individual that are withheld under subparagraph (A) are insufficient to pay the amount described in such subparagraph, the Commissioner of Social Security shall enter into agreements with the Secretary, the Director of the Office of Personnel Management, and the Railroad Retirement Board as necessary in order to allow other agencies to collect the amount described in subparagraph (A) that was not withheld under such subparagraph.'.
* (b) Conforming Amendments-
** (1) MEDICARE- Section 1860D-13(a)(1) of the Social Security Act (42 U.S.C. 1395w-113(a)(1)) is amended--
*** (A) by redesignating subparagraph (F) as subparagraph (G);
*** (B) in subparagraph (G), as redesignated by subparagraph (A), by striking `(D) and (E)' and inserting `(D), (E), and (F)'; and
*** (C) by inserting after subparagraph (E) the following new subparagraph:
*** (F) INCREASE BASED ON INCOME- The monthly beneficiary premium shall be increased pursuant to paragraph (7).'.
** (2) INTERNAL REVENUE CODE- Section 6103(l)(20) of the Internal Revenue Code of 1986 (relating to disclosure of return information to carry out Medicare part B premium subsidy adjustment) is amended--
*** (A) in the heading, by inserting `AND PART D BASE BENEFICIARY PREMIUM INCREASE' after `PART B PREMIUM SUBSIDY ADJUSTMENT';
*** (B) in subparagraph (A)--
**** (i) in the matter preceding clause (i), by inserting `or increase under section 1860D-13(a)(7)' after `1839(i)'; and
**** (ii) in clause (vii), by inserting after `subsection (i) of such section' the following: `or increase under section 1860D-13(a)(7) of such Act'; and
*** (C) in subparagraph (B)--
**** (i) by striking `Return information' and inserting the following:
**** (i) IN GENERAL- Return information';
**** (ii) by inserting `or increase under such section 1860D-13(a)(7)' before the period at the end;
**** (iii) as amended by clause (i), by inserting `or for the purpose of resolving taxpayer appeals with respect to any such premium adjustment or increase' before the period at the end; and
**** (iv) by adding at the end the following new clause:
**** (ii) DISCLOSURE TO OTHER AGENCIES- Officers, employees, and contractors of the Social Security Administration may disclose--
***** (I) the taxpayer identity information and the amount of the premium subsidy adjustment or premium increase with respect to a taxpayer described in subparagraph (A) to officers, employees, and contractors of the Centers for Medicare and Medicaid Services, to the extent that such disclosure is necessary for the collection of the premium subsidy amount or the increased premium amount,
***** (II) the taxpayer identity information and the amount of the premium subsidy adjustment or the increased premium amount with respect to a taxpayer described in subparagraph (A) to officers and employees of the Office of Personnel Management and the Railroad Retirement Board, to the extent that such disclosure is necessary for the collection of the premium subsidy amount or the increased premium amount,
***** (III) return information with respect to a taxpayer described in subparagraph (A) to officers and employees of the Department of Health and Human Services to the extent necessary to resolve administrative appeals of such premium subsidy adjustment or increased premium, and
***** (IV) return information with respect to a taxpayer described in subparagraph (A) to officers and employees of the Department of Justice for use in judicial proceedings to the extent necessary to carry out the purposes described in clause (i).'.

### SEC. 3309. ELIMINATION OF COST SHARING FOR CERTAIN DUAL ELIGIBLE INDIVIDUALS.

* Section 1860D-14(a)(1)(D)(i) of the Social Security Act (42 U.S.C. 1395w-114(a)(1)(D)(i)) is amended by inserting `or, effective on a date specified by the Secretary (but in no case earlier than January 1, 2012), who would be such an institutionalized individual or couple, if the full-benefit dual eligible individual were not receiving services under a home and community-based waiver authorized for a State under section 1115 or subsection (c) or (d) of section 1915 or under a State plan amendment under subsection (i) of such section or services provided through enrollment in a medicaid managed care organization with a contract under section 1903(m) or under section 1932' after `1902(q)(1)(B))'.

### SEC. 3310. REDUCING WASTEFUL DISPENSING OF OUTPATIENT PRESCRIPTION DRUGS IN LONG-TERM CARE FACILITIES UNDER PRESCRIPTION DRUG PLANS AND MA-PD PLANS.

* (a) In General- Section 1860D-4(c) of the Social Security Act (42 U.S.C. 1395w-104(c)) is amended by adding at the end the following new paragraph:
** (3) REDUCING WASTEFUL DISPENSING OF OUTPATIENT PRESCRIPTION DRUGS IN LONG-TERM CARE FACILITIES- The Secretary shall require PDP sponsors of prescription drug plans to utilize specific, uniform dispensing techniques, as determined by the Secretary, in consultation with relevant stakeholders (including representatives of nursing facilities, residents of nursing facilities, pharmacists, the pharmacy industry (including retail and long-term care pharmacy), prescription drug plans, MA-PD plans, and any other stakeholders the Secretary determines appropriate), such as weekly, daily, or automated dose dispensing, when dispensing covered part D drugs to enrollees who reside in a long-term care facility in order to reduce waste associated with 30-day fills.'.
* (b) Effective Date- The amendment made by subsection (a) shall apply to plan years beginning on or after January 1, 2012.

### SEC. 3311. IMPROVED MEDICARE PRESCRIPTION DRUG PLAN AND MA-PD PLAN COMPLAINT SYSTEM.

* (a) In General- The Secretary shall develop and maintain a complaint system, that is widely known and easy to use, to collect and maintain information on MA-PD plan and prescription drug plan complaints that are received (including by telephone, letter, e-mail, or any other means) by the Secretary (including by a regional office of the Department of Health and Human Services, the Medicare Beneficiary Ombudsman, a subcontractor, a carrier, a fiscal intermediary, and a Medicare administrative contractor under section 1874A of the Social Security Act (42 U.S.C. 1395kk)) through the date on which the complaint is resolved. The system shall be able to report and initiate appropriate interventions and monitoring based on substantial complaints and to guide quality improvement.
* (b) Model Electronic Complaint Form- The Secretary shall develop a model electronic complaint form to be used for reporting plan complaints under the system. Such form shall be prominently displayed on the front page of the Medicare.gov Internet website and on the Internet website of the Medicare Beneficiary Ombudsman.
* (c) Annual Reports by the Secretary- The Secretary shall submit to Congress annual reports on the system. Such reports shall include an analysis of the number and types of complaints reported in the system, geographic variations in such complaints, the timeliness of agency or plan responses to such complaints, and the resolution of such complaints.
* (d) Definitions- In this section:
** (1) MA-PD PLAN- The term `MA-PD plan' has the meaning given such term in section 1860D-41(a)(9) of such Act (42 U.S.C. 1395w-151(a)(9)).
** (2) PRESCRIPTION DRUG PLAN- The term `prescription drug plan' has the meaning given such term in section 1860D-41(a)(14) of such Act (42 U.S.C. 1395w-151(a)(14)).
** (3) SECRETARY- The term `Secretary' means the Secretary of Health and Human Services.
** (4) SYSTEM- The term `system' means the plan complaint system developed and maintained under subsection (a).

### SEC. 3312. UNIFORM EXCEPTIONS AND APPEALS PROCESS FOR PRESCRIPTION DRUG PLANS AND MA-PD PLANS.

* (a) In General- Section 1860D-4(b)(3) of the Social Security Act (42 U.S.C. 1395w-104(b)(3)) is amended by adding at the end the following new subparagraph:
*** (H) USE OF SINGLE, UNIFORM EXCEPTIONS AND APPEALS PROCESS- Notwithstanding any other provision of this part, each PDP sponsor of a prescription drug plan shall--
**** (i) use a single, uniform exceptions and appeals process (including, to the extent the Secretary determines feasible, a single, uniform model form for use under such process) with respect to the determination of prescription drug coverage for an enrollee under the plan; and
**** (ii) provide instant access to such process by enrollees through a toll-free telephone number and an Internet website.'.
* (b) Effective Date- The amendment made by subsection (a) shall apply to exceptions and appeals on or after January 1, 2012.

### SEC. 3313. OFFICE OF THE INSPECTOR GENERAL STUDIES AND REPORTS.

* (a) Study and Annual Report on Part D Formularies' Inclusion of Drugs Commonly Used by Dual Eligibles-
** (1) STUDY- The Inspector General of the Department of Health and Human Services shall conduct a study of the extent to which formularies used by prescription drug plans and MA-PD plans under part D include drugs commonly used by full-benefit dual eligible individuals (as defined in section 1935(c)(6) of the Social Security Act (42 U.S.C. 1396u-5(c)(6))).
** (2) ANNUAL REPORTS- Not later than July 1 of each year (beginning with 2011), the Inspector General shall submit to Congress a report on the study conducted under paragraph (1), together with such recommendations as the Inspector General determines appropriate.
* (b) Study and Report on Prescription Drug Prices Under Medicare Part D and Medicaid-
** (1) STUDY-
*** (A) IN GENERAL- The Inspector General of the Department of Health and Human Services shall conduct a study on prices for covered part D drugs under the Medicare prescription drug program under part D of title XVIII of the Social Security Act and for covered outpatient drugs under title XIX. Such study shall include the following:
**** (i) A comparison, with respect to the 200 most frequently dispensed covered part D drugs under such program and covered outpatient drugs under such title (as determined by the Inspector General based on volume and expenditures), of--
***** (I) the prices paid for covered part D drugs by PDP sponsors of prescription drug plans and Medicare Advantage organizations offering MA-PD plans; and
***** (II) the prices paid for covered outpatient drugs by a State plan under title XIX.
**** (ii) An assessment of--
***** (I) the financial impact of any discrepancies in such prices on the Federal Government; and
***** (II) the financial impact of any such discrepancies on enrollees under part D or individuals eligible for medical assistance under a State plan under title XIX.
*** (B) PRICE- For purposes of subparagraph (A), the price of a covered part D drug or a covered outpatient drug shall include any rebate or discount under such program or such title, respectively, including any negotiated price concession described in section 1860D-2(d)(1)(B) of the Social Security Act (42 U.S.C. 1395w-102(d)(1)(B)) or rebate under an agreement under section 1927 of the Social Security Act (42 U.S.C. 1396r-8).
*** (C) AUTHORITY TO COLLECT ANY NECESSARY INFORMATION- Notwithstanding any other provision of law, the Inspector General of the Department of Health and Human Services shall be able to collect any information related to the prices of covered part D drugs under such program and covered outpatient drugs under such title XIX necessary to carry out the comparison under subparagraph (A).
** (2) REPORT-
*** (A) IN GENERAL- Not later than October 1, 2011, subject to subparagraph (B), the Inspector General shall submit to Congress a report containing the results of the study conducted under paragraph (1), together with recommendations for such legislation and administrative action as the Inspector General determines appropriate.
*** (B) LIMITATION ON INFORMATION CONTAINED IN REPORT- The report submitted under subparagraph (A) shall not include any information that the Inspector General determines is proprietary or is likely to negatively impact the ability of a PDP sponsor or a State plan under title XIX to negotiate prices for covered part D drugs or covered outpatient drugs, respectively.
** (3) DEFINITIONS- In this section:
*** (A) COVERED PART D DRUG- The term `covered part D drug' has the meaning given such term in section 1860D-2(e) of the Social Security Act (42 U.S.C. 1395w-102(e)).
*** (B) COVERED OUTPATIENT DRUG- The term `covered outpatient drug' has the meaning given such term in section 1927(k) of such Act (42 U.S.C. 1396r(k)).
*** (C) MA-PD PLAN- The term `MA-PD plan' has the meaning given such term in section 1860D-41(a)(9) of such Act (42 U.S.C. 1395w-151(a)(9)).
*** (D) MEDICARE ADVANTAGE ORGANIZATION- The term `Medicare Advantage organization' has the meaning given such term in section 1859(a)(1) of such Act (42 U.S.C. 1395w-28)(a)(1)).
*** (E) PDP SPONSOR- The term `PDP sponsor' has the meaning given such term in section 1860D-41(a)(13) of such Act (42 U.S.C. 1395w-151(a)(13)).
*** (F) PRESCRIPTION DRUG PLAN- The term `prescription drug plan' has the meaning given such term in section 1860D-41(a)(14) of such Act (42 U.S.C. 1395w-151(a)(14)).

### SEC. 3314. INCLUDING COSTS INCURRED BY AIDS DRUG ASSISTANCE PROGRAMS AND INDIAN HEALTH SERVICE IN PROVIDING PRESCRIPTION DRUGS TOWARD THE ANNUAL OUT-OF-POCKET THRESHOLD UNDER PART D.

* (a) In General- Section 1860D-2(b)(4)(C) of the Social Security Act (42 U.S.C. 1395w-102(b)(4)(C)) is amended--
** (1) in clause (i), by striking `and' at the end;
** (2) in clause (ii)--
*** (A) by striking `such costs shall be treated as incurred only if' and inserting `subject to clause (iii), such costs shall be treated as incurred only if';
*** (B) by striking `, under section 1860D-14, or under a State Pharmaceutical Assistance Program'; and
*** (C) by striking the period at the end and inserting `; and'; and
** (3) by inserting after clause (ii) the following new clause:
**** (iii) such costs shall be treated as incurred and shall not be considered to be reimbursed under clause (ii) if such costs are borne or paid--
***** (I) under section 1860D-14;
***** (II) under a State Pharmaceutical Assistance Program;
***** (III) by the Indian Health Service, an Indian tribe or tribal organization, or an urban Indian organization (as defined in section 4 of the Indian Health Care Improvement Act); or
***** (IV) under an AIDS Drug Assistance Program under part B of title XXVI of the Public Health Service Act.'.
* (b) Effective Date- The amendments made by subsection (a) shall apply to costs incurred on or after January 1, 2011.

### SEC. 3315. IMMEDIATE REDUCTION IN COVERAGE GAP IN 2010.

* Section 1860D-2(b) of the Social Security Act (42 U.S.C. 1395w-102(b)) is amended--
** (1) in paragraph (3)(A), by striking `paragraph (4)' and inserting `paragraphs (4) and (7)'; and
** (2) by adding at the end the following new paragraph:
** (7) INCREASE IN INITIAL COVERAGE LIMIT IN 2010-
*** (A) IN GENERAL- For the plan year beginning on January 1, 2010, the initial coverage limit described in paragraph (3)(B) otherwise applicable shall be increased by $500.
*** (B) APPLICATION- In applying subparagraph (A)--
**** (i) except as otherwise provided in this subparagraph, there shall be no change in the premiums, bids, or any other parameters under this part or part C;
**** (ii) costs that would be treated as incurred costs for purposes of applying paragraph (4) but for the application of subparagraph (A) shall continue to be treated as incurred costs;
**** (iii) the Secretary shall establish procedures, which may include a reconciliation process, to fully reimburse PDP sponsors with respect to prescription drug plans and MA organizations with respect to MA-PD plans for the reduction in beneficiary cost sharing associated with the application of subparagraph (A);
**** (iv) the Secretary shall develop an estimate of the additional increased costs attributable to the application of this paragraph for increased drug utilization and financing and administrative costs and shall use such estimate to adjust payments to PDP sponsors with respect to prescription drug plans under this part and MA organizations with respect to MA-PD plans under part C; and
**** (v) the Secretary shall establish procedures for retroactive reimbursement of part D eligible individuals who are covered under such a plan for costs which are incurred before the date of initial implementation of subparagraph (A) and which would be reimbursed under such a plan if such implementation occurred as of January 1, 2010.
*** (C) NO EFFECT ON SUBSEQUENT YEARS- The increase under subparagraph (A) shall only apply with respect to the plan year beginning on January 1, 2010, and the initial coverage limit for plan years beginning on or after January 1, 2011, shall be determined as if subparagraph (A) had never applied.'.