I 

108TH CONGRESS 

1ST SESSION H. R. 1733

To amend XVIII and XIX of the Social Security Act to provide for a 

voluntary Medicare prescription medicine benefit, to provide greater access to affordable pharmaceuticals, to provide for substantial reductions 

in the cost of prescription drugs made available to Medicare beneficiaries, 

to amend the Internal Revenue Code of 1986 to disallow deductions 

for direct-to-consumer advertisement of prescription drugs, to amend 

the Federal Food, Drug, and Cosmetic Act to provide greater access 

to affordable pharmaceuticals and preserving access to safe affordable 

Canadian medicines, to amend the Federal Election Campaign Act of 

1971 to prohibit campaign contributions by chief executive officers of 

pharmaceutical companies, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 10, 2003

Mr. CROWLEY (for himself, Mr. ALLEN, Ms. KAPTUR, Mr. KILDEE, Mr. 

SANDERS, Mr. MCNULTY, and Mr. FROST) introduced the following bill; 

which was referred to the Committee on Energy and Commerce, and in 

addition to the Committees on Ways and Means, Veterans’ Affairs, and 

House Administration, for a period to be subsequently determined by the 

Speaker, in each case for consideration of such provisions as fall within 

the jurisdiction of the committee concerned 

A BILL

To amend XVIII and XIX of the Social Security Act to 

provide for a voluntary Medicare prescription medicine 

benefit, to provide greater access to affordable pharmaceuticals, to provide for substantial reductions in the 

cost of prescription drugs made available to Medicare 

beneficiaries, to amend the Internal Revenue Code of 

1986 to disallow deductions for direct-to-consumer adver-
2

•HR 1733 IH 

tisement of prescription drugs, to amend the Federal 

Food, Drug, and Cosmetic Act to provide greater access 

to affordable pharmaceuticals and preserving access to 

safe affordable Canadian medicines, to amend the Federal Election Campaign Act of 1971 to prohibit campaign 

contributions by chief executive officers of pharmaceutical companies, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Senior Bill of Rights Act of 2003’’. 

6 (b) TABLE OF CONTENTS.—The table of contents of 

7 this Act is as follows:

Sec. 1. Short title; table of contents. 

Sec. 2. Findings. 

Sec. 3. Purposes. 

TITLE I—MEDICARE PRESCRIPTION MEDICINE BENEFIT 

Sec. 101. Voluntary medicare outpatient prescription medicine program. 

Sec. 102. Provision of medicare outpatient prescription medicine coverage 

under the Medicare+Choice program. 

Sec. 103. Medigap revisions. 

Sec. 104. Transitional assistance for low income beneficiaries. 

TITLE II—REFORM IN PRESCRIPTION DRUG PRICES FOR 

SENIORS 

Subtitle A—Prescription Drug Fairness for Seniors 

Sec. 201. Short title. 

Sec. 202. Findings and purposes. 

Sec. 203. Participating manufacturers. 

Sec. 204. Special provision with respect to hospice programs. 

Sec. 205. Administration. 

Sec. 206. Reports to Congress regarding effectiveness of act. 

Sec. 207. Definitions. 

Sec. 208. Effective date. 

Subtitle B—Sense of Congress on cost disparity between identical prescription 

drugs sold in the United States, Canada, and Mexico 
3

•HR 1733 IH 

Sec. 211. Sense of Congress on cost disparity between identical prescription 

drugs sold in the United States, Canada, and Mexico. 

TITLE III—DISALLOWANCE OF DEDUCTION FOR DIRECT-TOCONSUMER ADVERTISEMENT OF PRESCRIPTION DRUGS. 

Sec. 301 DISALLOWANCE OF DEDUCTION FOR DIRECT-TO-CONSUMER ADVERTISEMENT OF PRESCRIPTION DRUGS. 

TITLE IV—GREATER ACCESS TO AFFORDABLE 

PHARMACEUTICALS 

Sec. 401. Short title. 

Sec. 402. Findings; purposes. 

Sec. 403. Accelerated generic drug competition. 

Sec. 404. Bioequivalence testing methods. 

Sec. 405. Citizen petitions. 

Sec. 406. Patent certification. 

Sec. 407. Patent information. 

Sec. 408. Report. 

TITLE V—NONDISCRIMINATION AGAINST IMPORTS OF 

PRESCRIPTION DRUGS. 

Sec. 501. Short title. 

Sec. 502. Findings. 

Sec. 503. Nondiscrimination against imports of prescription drugs. 

TITLE VI—REQUIREMENT FOR WRITTEN STATEMENT OF TOTAL 

COST OF RESEARCH FOR APPROVAL OF NEW DRUGS 

Sec. 601. Requirement for written statement of total cost of research for approval of new drugs. 

TITLE VII—PROHIBITION ON CERTAIN CAMPAIGN 

CONTRIBUTIONS 

Sec. 701. Prohibition on campaign contributions by chief executive officers of 

pharmaceutical companies. 

TITLE VIII—ADDITIONAL PROVISIONS 

Sec. 801. Repeal of February 2002 increase in copayments for medications furnished to veterans by the Department of Veterans Affairs. 

Sec. 802. Social security and medicare lock box.

1 SEC. 2. FINDINGS. 

2 The Congress makes the following findings: 

3 (1) Manufacturers of prescription drugs engage 

4 in price discrimination practices that compel many 

5 Americans to pay substantially more for prescription 

6 drugs than consumers in foreign nations. 
4

•HR 1733 IH 

1 (2) Individual Americans who buy their own 

2 prescription drugs often pay twice as much for pre3 scription drugs as consumers in foreign nations and 

4 the drug manufacturers’ most favored U.S. cus5 tomers. In some cases, older Americans pay 10 

6 times more for prescription drugs than such cus7 tomers. 

8 (3) The discriminatory pricing by major drug 

9 manufacturers sustains multi-billion profits but 

10 causes financial hardship and impairs the health and 

11 well-being of millions of older Americans. 

12 (4) Foreign nations and U.S. federally funded 

13 health care programs use purchasing power to ob14 tain prescription drugs at low prices. Medicare bene15 ficiaries are denied this benefit and cannot obtain 

16 their prescription drugs at the lower prices available 

17 to such nations and programs. 

18 (5) Medicare beneficiaries have high out-of19 pocket drug costs. Medicare beneficiaries average 

20 out-of-pocket drug costs was $860 for 2002.

21 (6) NAFTA trade laws must be interpreted and 

22 enforced to protect all NAFTA constituents from 

23 price gouging, barriers to entry, and unfair hurdles 

24 to goods. 
5

•HR 1733 IH 

1 SEC. 3. PURPOSES. 

2 The purposes of this Act are as follows: 

3 (1) To protect Americans from exceptionally 

4 high drug costs. 

5 (2) To make prescription drugs available to 

6 Americans at substantially reduced prices. 

7 (3) To facilitate pharmaceutical trade amongst 

8 NAFTA countries.

9 TITLE I—MEDICARE PRESCRIP10 TION MEDICINE BENEFIT 

11 SEC. 101. VOLUNTARY MEDICARE OUTPATIENT PRESCRIP12 TION MEDICINE PROGRAM. 

13 (a) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex14 cept as otherwise specifically provided, whenever in this 

15 title an amendment is expressed in terms of an amend16 ment to or repeal of a section or other provision, the ref17 erence shall be considered to be made to that section or 

18 other provision of the Social Security Act. 

19 (b) VOLUNTARY PRESCRIPTION MEDICINE BENEFIT

20 FOR THE AGED AND DISABLED.—Title XVIII (42 U.S.C. 

21 1395 et seq.) is amended—

22 (1) by redesignating section 1859 and part D 

23 as section 1858 and part E, respectively; and 

24 (2) by inserting after part C the following new 

25 part: 
6

•HR 1733 IH 

1 ‘‘PART D—VOLUNTARY PRESCRIPTION MEDICINE

2 BENEFIT FOR THE AGED AND DISABLED

3 ‘‘MEDICARE OUTPATIENT PRESCRIPTION MEDICINE

4 BENEFIT

5 ‘‘SEC. 1859. Subject to the succeeding provisions of 

6 this part, the voluntary prescription medicine benefit pro7 gram under this part provides the following: 

8 ‘‘(1) PREMIUM.—The monthly premium is $25. 

9 ‘‘(2) DEDUCTIBLE.—The annual deductible is 

10 $100. 

11 ‘‘(3) COINSURANCE.—The coinsurance is 20 

12 percent. 

13 ‘‘(4) OUT-OF-POCKET LIMIT.—The annual limit 

14 on out-of-pocket spending on covered medicines is 

15 $2,000. 

16 ‘‘NEGOTIATING FAIR PRICES WITH PHARMACEUTICAL

17 MANUFACTURERS

18 ‘‘SEC. 1859A. (a) AUTHORITY TO NEGOTIATE

19 PRICES WITH MANUFACTURERS.—The Secretary shall, 

20 consistent with the requirements of this part and the goals 

21 of providing quality care and containing costs under this 

22 part, negotiate contracts with manufacturers of covered 

23 outpatient prescription medicines that provide for the 

24 maximum prices that may be charged to individuals en25 rolled under this part by participating pharmacies for dis26 pensing such medicines to such individuals. 
7

•HR 1733 IH 

1 ‘‘(b) PROMOTION OF BREAKTHROUGH MEDICINES.—

2 In conducting negotiations with manufacturers under this 

3 part, the Secretary shall take into account the goal of pro4 moting the development of breakthrough medicines (as de5 fined in section 1859H(b)). 

6 ‘‘CONTRACT AUTHORITY

7 ‘‘SEC. 1859B. (a) CONTRACT AUTHORITY.—

8 ‘‘(1) IN GENERAL.—The Secretary is respon9 sible for the administration of this part and shall 

10 enter into contracts with appropriate pharmacy con11 tractors on a national or regional basis to administer 

12 the benefits under this part. 

13 ‘‘(2) PROCEDURES.—The Secretary shall estab14 lish procedures under which the Secretary—

15 ‘‘(A) accepts bids submitted by entities to 

16 serve as pharmacy contractors under this part 

17 in a region or on a national basis; 

18 ‘‘(B) awards contracts to such contractors 

19 to administer benefits under this part to eligible 

20 beneficiaries in the region or on a national 

21 basis; and 

22 ‘‘(C) provides for the termination (and 

23 nonrenewal) of a contract in the case of a con24 tractor’s failure to meet the requirements of the 

25 contract and this part. 
8

•HR 1733 IH 

1 ‘‘(3) COMPETITIVE PROCEDURES.—Competitive 

2 procedures (as defined in section 4(5) of the Office 

3 of Federal Procurement Policy Act (41 U.S.C. 

4 403(5))) shall be used to enter into contracts under 

5 this part. 

6 ‘‘(4) TERMS AND CONDITIONS.—Such contracts 

7 shall have such terms and conditions as the Sec8 retary shall specify and shall be for such terms (of 

9 at least 2 years, but not to exceed 5 years) as the 

10 Secretary shall specify consistent with this part. 

11 ‘‘(5) USE OF PHARMACY CONTRACTORS IN

12 PRICE NEGOTIATIONS.—Such contracts shall require 

13 the contractor involved to negotiate contracts with 

14 manufacturers that provide for maximum prices for 

15 covered outpatient prescription medicines that are 

16 lower than the maximum prices negotiated under 

17 section 1859A(a), if applicable. The price reductions 

18 shall be passed on to eligible beneficiaries and the 

19 Secretary shall hold the contractor accountable for 

20 meeting performance requirements with respect to 

21 price reductions and limiting price increases. 

22 ‘‘(6) AREA FOR CONTRACTS.—

23 ‘‘(A) REGIONAL BASIS.—

24 ‘‘(i) IN GENERAL.—Except as pro25 vided in clause (ii) and subject to subpara-
9

•HR 1733 IH 

1 graph (B), the contract entered into be2 tween the Secretary and a pharmacy con3 tractor shall require the contractor to ad4 minister the benefits under this part in a 

5 region determined by the Secretary under 

6 subparagraph (B) or on a national basis. 

7 ‘‘(ii) PARTIAL REGIONAL BASIS.—

8 ‘‘(I) IN GENERAL.—If deter9 mined appropriate by the Secretary, 

10 the Secretary may permit the benefits 

11 to be administered in a partial region 

12 determined appropriate by the Sec13 retary. 

14 ‘‘(II) REQUIREMENTS.—If the 

15 Secretary permits administration pur16 suant to subclause (I), the Secretary 

17 shall ensure that the partial region in 

18 which administration is effected is no 

19 smaller than a State and is at least 

20 the size of the commercial service area 

21 of the contractor for that area. 

22 ‘‘(B) DETERMINATION.—

23 ‘‘(i) IN GENERAL.—In determining re24 gions for contracts under this part, the 

25 Secretary shall—
10

•HR 1733 IH 

1 ‘‘(I) take into account the num2 ber of individuals enrolled under this 

3 part in an area in order to encourage 

4 participation by pharmacy contrac5 tors; and 

6 ‘‘(II) ensure that there are at 

7 least 10 different regions in the 

8 United States. 

9 ‘‘(ii) NO ADMINISTRATIVE OR JUDI10 CIAL REVIEW.—The determination of ad11 ministrative areas under this paragraph 

12 shall not be subject to administrative or ju13 dicial review. 

14 ‘‘(7) SUBMISSION OF BIDS.—

15 ‘‘(A) SUBMISSION.—

16 ‘‘(i) IN GENERAL.—Subject to sub17 paragraph (B), each entity desiring to 

18 serve as a pharmacy contractor under this 

19 part in an area shall submit a bid with re20 spect to such area to the Secretary at such 

21 time, in such manner, and accompanied by 

22 such information as the Secretary may rea23 sonably require. 

24 ‘‘(ii) BID THAT COVERS MULTIPLE

25 AREAS.—The Secretary shall permit an en-
11

•HR 1733 IH 

1 tity to submit a single bid for multiple 

2 areas if the bid is applicable to all such 

3 areas. 

4 ‘‘(B) REQUIRED INFORMATION.—The bids 

5 described in subparagraph (A) shall include—

6 ‘‘(i) a proposal for the estimated 

7 prices of covered outpatient prescription 

8 medicines and the projected annual in9 creases in such prices, including the addi10 tional reduction in price negotiated below 

11 the Secretary’s maximum price and dif12 ferentials between preferred and nonpre13 ferred prices, if applicable; 

14 ‘‘(ii) a statement regarding the 

15 amount that the entity will charge the Sec16 retary for administering the benefits under 

17 the contract; 

18 ‘‘(iii) a statement regarding whether 

19 the entity will reduce the applicable coin20 surance percentage pursuant to section 

21 1859E(a)(1)(A)(ii) and if so, the amount 

22 of such reduction and how such reduction 

23 is tied to the performance requirements de24 scribed in subsection (c)(4)(A)(ii);
12

•HR 1733 IH 

1 ‘‘(iv) a detailed description of the per2 formance requirements for which the ad3 ministrative fee of the entity will be subject 

4 to risk pursuant to subsection (c)(4)(A)(ii); 

5 ‘‘(v) a detailed description of access to 

6 pharmacy services provided by the entity, 

7 including information regarding whether 

8 the pharmacy contractor will use a pre9 ferred pharmacy network, and, if so, how 

10 the pharmacy contractor will ensure access 

11 to pharmacies that choose to be outside of 

12 that network, and whether there will be in13 creased cost-sharing for beneficiaries if 

14 they obtain medicines at such pharmacies; 

15 ‘‘(vi) a detailed description of the pro16 cedures and standards the entity will use 

17 for—

18 ‘‘(I) selecting preferred prescrip19 tion medicines; and 

20 ‘‘(II) determining when and how 

21 often the list of preferred prescription 

22 medicines should be modified; 

23 ‘‘(vii) a detailed description of any 

24 ownership or shared financial interests 

25 with pharmaceutical manufacturers, phar-
13

•HR 1733 IH 

1 macies, and other entities involved in the 

2 administration or delivery of benefits under 

3 this part as proposed in the bid; 

4 ‘‘(viii) a detailed description of the en5 tity’s estimated marketing and advertising 

6 expenditures related to enrolling and re7 taining eligible beneficiaries; and 

8 ‘‘(ix) such other information that the 

9 Secretary determines is necessary in order 

10 to carry out this part, including informa11 tion relating to the bidding process under 

12 this part. 

13 The procedures under clause (vi) shall include 

14 the use of a pharmaceutical and therapeutics 

15 committee the members of which include prac16 ticing pharmacists. 

17 ‘‘(8) AWARDING OF CONTRACTS.—

18 ‘‘(A) NUMBER OF CONTRACTS.—The Sec19 retary shall, consistent with the requirements of 

20 this part and the goals of providing quality care 

21 and of containing costs under this part, award 

22 in a competitive manner at least 2 contracts to 

23 administer benefits under this part in each area 

24 specified under paragraph (6), unless only 1 

25 pharmacy contractor submitting a bid meets the 
14

•HR 1733 IH 

1 minimum standards specified under this part 

2 and by the Secretary. 

3 ‘‘(B) DETERMINATION.—In determining 

4 which of the pharmacy contractors that sub5 mitted bids that meet the minimum standards 

6 specified under this part and by the Secretary 

7 to award a contract, the Secretary shall con8 sider the comparative merits of each bid, as de9 termined on the basis of relevant factors, with 

10 respect to—

11 ‘‘(i) how well the contractor meets 

12 such minimum standards; 

13 ‘‘(ii) the amount that the contractor 

14 will charge the Secretary for administering 

15 the benefits under the contract; 

16 ‘‘(iii) the performance standards es17 tablished under subsection (c)(2) and per18 formance requirements for which the ad19 ministrative fee of the entity will be subject 

20 to risk pursuant to subsection (c)(4)(A)(ii); 

21 ‘‘(iv) the proposed negotiated prices of 

22 covered outpatient medicines and annual 

23 increases in such prices; 
15

•HR 1733 IH 

1 ‘‘(v) factors relating to benefits, qual2 ity and performance, beneficiary cost-shar3 ing, and consumer satisfaction; 

4 ‘‘(vi) past performance and prior ex5 perience of the contractor in administering 

6 a prescription medicine benefit program; 

7 ‘‘(vii) effectiveness of the contractor 

8 in containing costs through pricing incen9 tives and utilization management; and 

10 ‘‘(viii) such other factors as the Sec11 retary deems necessary to evaluate the 

12 merits of each bid. 

13 ‘‘(C) EXCEPTION TO CONFLICT OF INTER14 EST RULES.—In awarding contracts with phar15 macy contractors under this part, the Secretary 

16 may waive conflict of interest laws generally ap17 plicable to Federal acquisitions (subject to such 

18 safeguards as the Secretary may find necessary 

19 to impose) in circumstances where the Sec20 retary finds that such waiver—

21 ‘‘(i) is not inconsistent with the—

22 ‘‘(I) purposes of the programs 

23 under this part; or 

24 ‘‘(II) best interests of bene25 ficiaries enrolled under this part; and 
16

•HR 1733 IH 

1 ‘‘(ii) permits a sufficient level of com2 petition for such contracts, promotes effi3 ciency of benefits administration, or other4 wise serves the objectives of the program 

5 under this part. 

6 ‘‘(D) NO ADMINISTRATIVE OR JUDICIAL

7 REVIEW.—The determination of the Secretary 

8 to award or not award a contract to a phar9 macy contractor under this part shall not be 

10 subject to administrative or judicial review. 

11 ‘‘(9) ACCESS TO BENEFITS IN CERTAIN

12 AREAS.—

13 ‘‘(A) AREAS NOT COVERED BY CON14 TRACTS.—The Secretary shall develop proce15 dures for the provision of covered outpatient 

16 prescription medicines under this part to each 

17 eligible beneficiary enrolled under this part that 

18 resides in an area that is not covered by any 

19 contract under this part. 

20 ‘‘(B) BENEFICIARIES RESIDING IN DIF21 FERENT LOCATIONS.—The Secretary shall de22 velop procedures to ensure that each eligible 

23 beneficiary enrolled under this part that resides 

24 in different areas in a year is provided the ben25 efits under this part throughout the entire year. 
17

•HR 1733 IH 

1 ‘‘(b) QUALITY, FINANCIAL, AND OTHER STANDARDS

2 AND PROGRAMS.—In consultation with appropriate phar3 macy contractors, pharmacists, and health care profes4 sionals with expertise in prescribing, dispensing, and the 

5 appropriate use of prescription medicines, the Secretary 

6 shall establish standards and programs for the administra7 tion of this part to ensure appropriate prescribing, dis8 pensing, and utilization of outpatient medicines under this 

9 part, to avoid adverse medicine reactions, and to contin10 ually reduce errors in the delivery of medically appropriate 

11 covered benefits. The Secretary shall not award a contract 

12 to a pharmacy contractor under this part unless the Sec13 retary finds that the contractor agrees to comply with 

14 such standards and programs and other terms and condi15 tions as the Secretary shall specify. The standards and 

16 programs under this subsection shall be applied to any ad17 ministrative agreements described in subsection (a) the 

18 Secretary enters into. Such standards and programs shall 

19 include the following: 

20 ‘‘(1) ACCESS.—

21 ‘‘(A) IN GENERAL.—The pharmacy con22 tractor shall ensure that covered outpatient pre23 scription medicines are accessible and conven24 ient to eligible beneficiaries enrolled under this 

25 part for whom benefits are administered by the 
18

•HR 1733 IH 

1 pharmacy contractor, including by offering the 

2 services 24 hours a day and 7 days a week for 

3 emergencies. 

4 ‘‘(B) ON-LINE REVIEW.—The pharmacy 

5 contractor shall provide for on-line prospective 

6 review available 24 hours a day and 7 days a 

7 week in order to evaluate each prescription for 

8 medicine therapy problems due to duplication, 

9 interaction, or incorrect dosage or duration of 

10 therapy. 

11 ‘‘(C) GUARANTEED ACCESS TO MEDICINES

12 IN RURAL AND HARD-TO-SERVE AREAS.—The 

13 Secretary shall ensure that all beneficiaries 

14 have guaranteed access to the full range of 

15 pharmaceuticals under this part, and shall give 

16 special attention to access, pharmacist coun17 seling, and delivery in rural and hard-to-serve 

18 areas, including through the use of incentives 

19 such as bonus payments to retail pharmacists 

20 in rural areas and extra payments to the phar21 macy contractor for the cost of rapid delivery of 

22 pharmaceuticals and any other actions nec23 essary. 

24 ‘‘(D) PREFERRED PHARMACY NET25 WORKS.—
19

•HR 1733 IH 

1 ‘‘(i) IN GENERAL.—If a pharmacy 

2 contractor uses a preferred pharmacy net3 work to deliver benefits under this part, 

4 such network shall meet minimum access 

5 standards established by the Secretary. 

6 ‘‘(ii) STANDARDS.—In establishing 

7 standards under clause (i), the Secretary 

8 shall take into account reasonable dis9 tances to pharmacy services in both urban 

10 and rural areas. 

11 ‘‘(E) ADHERENCE TO NEGOTIATED

12 PRICES.—The pharmacy contractor shall have 

13 in place procedures to assure compliance of 

14 pharmacies with the requirements of subsection 

15 (d)(3)(C) (relating to adherence to negotiated 

16 prices). 

17 ‘‘(F) CONTINUITY OF CARE.—

18 ‘‘(i) IN GENERAL.—The pharmacy 

19 contractor shall ensure that, in the case of 

20 an eligible beneficiary who loses coverage 

21 under this part with such entity under cir22 cumstances that would permit a special 

23 election period (as established by the Sec24 retary under section 1859C(b)(3)), the 

25 contractor will continue to provide cov-
20

•HR 1733 IH 

1 erage under this part to such beneficiary 

2 until the beneficiary enrolls and receives 

3 such coverage with another pharmacy con4 tractor under this part or, if eligible, with 

5 a Medicare+Choice organization. 

6 ‘‘(ii) LIMITED PERIOD.—In no event 

7 shall a pharmacy contractor be required to 

8 provide the extended coverage required 

9 under clause (i) beyond the date which is 

10 30 days after the coverage with such con11 tractor would have terminated but for this 

12 subparagraph. 

13 ‘‘(2) ENROLLEE GUIDELINES.—The pharmacy 

14 contractor shall, consistent with State law, apply 

15 guidelines for counseling enrollees regarding—

16 ‘‘(A) the proper use of covered outpatient 

17 prescription medicine: and 

18 ‘‘(B) interactions and contra-indications. 

19 ‘‘(3) EDUCATION.—The pharmacy contractor 

20 shall apply methods to identify and educate pro21 viders, pharmacists, and enrollees regarding—

22 ‘‘(A) instances or patterns concerning the 

23 unnecessary or inappropriate prescribing or dis24 pensing of covered outpatient prescription medi25 cines; 
21

•HR 1733 IH 

1 ‘‘(B) instances or patterns of substandard 

2 care; 

3 ‘‘(C) potential adverse reactions to covered 

4 outpatient prescription medicines; 

5 ‘‘(D) inappropriate use of antibiotics; 

6 ‘‘(E) appropriate use of generic products; 

7 and 

8 ‘‘(F) the importance of using covered out9 patient prescription medicines in accordance 

10 with the instruction of prescribing providers. 

11 ‘‘(4) COORDINATION.—The pharmacy con12 tractor shall coordinate with State prescription med13 icine programs, other pharmacy contractors, phar14 macies, and other relevant entities as necessary to 

15 ensure appropriate coordination of benefits with re16 spect to enrolled individuals when such individual is 

17 traveling outside the home service area, and under 

18 such other circumstances as the Secretary may 

19 specify. 

20 ‘‘(5) COST DATA.—

21 ‘‘(A) The pharmacy contractor shall make 

22 data on prescription medicine negotiated prices 

23 (including data on discounts) available to the 

24 Secretary. 
22

•HR 1733 IH 

1 ‘‘(B) The Secretary shall require, either di2 rectly or through a pharmacy contractor, that 

3 participating pharmacists, physicians, and man4 ufacturers—

5 ‘‘(i) maintain their prescription medi6 cine cost data (including data on dis7 counts) in a form and manner specified by 

8 the Secretary; 

9 ‘‘(ii) make such prescription medicine 

10 cost data available for review and audit by 

11 the Secretary; and 

12 ‘‘(iii) certify that the prescription 

13 medicine cost data are current, accurate, 

14 and complete, and reflect all discounts ob15 tained by the pharmacist or physician in 

16 the purchasing of covered outpatient pre17 scription medicines. 

18 Discounts referred to in subparagraphs (A) and (B) 

19 shall include all volume discounts, manufacturer re20 bates, prompt payment discounts, free goods, in-kind 

21 services, or any other thing of financial value pro22 vided explicitly or implicitly in exchange for the pur23 chase of a covered outpatient prescription medicine. 
23

•HR 1733 IH 

1 ‘‘(6) REPORTING.—The pharmacy contractor 

2 shall provide the Secretary with periodic reports 

3 on—

4 ‘‘(A) the contractor’s costs of admin5 istering this part; 

6 ‘‘(B) utilization of benefits under this part; 

7 ‘‘(C) marketing and advertising expendi8 tures related to enrolling and retaining individ9 uals under this part; and 

10 ‘‘(D) grievances and appeals. 

11 ‘‘(7) RECORDS AND AUDITS.—The pharmacy 

12 contractor shall maintain adequate records related to 

13 the administration of benefits under this part and 

14 afford the Secretary access to such records for au15 diting purposes. 

16 ‘‘(8) APPROVAL OF MARKETING MATERIAL AND

17 APPLICATION FORMS.—The pharmacy contractor 

18 shall comply with requirements of section 1851(h) 

19 (relating to marketing material and application 

20 forms) with respect to this part in the same manner 

21 as such requirements apply under part C, except 

22 that the provisions of paragraph (4)(A) of such sec23 tion shall not apply with respect to discounts or re24 bates provided in accordance with this part. 
24

•HR 1733 IH 

1 ‘‘(c) INCENTIVES FOR COST AND UTILIZATION MAN2 AGEMENT AND QUALITY IMPROVEMENT.—

3 ‘‘(1) IN GENERAL.—The Secretary shall include 

4 in a contract awarded under subsection (b) with a 

5 pharmacy contractor such incentives for cost and 

6 utilization management and quality improvement as 

7 the Secretary may deem appropriate. The contract 

8 may provide financial or other incentives to encour9 age greater savings to the program under this part. 

10 ‘‘(2) PERFORMANCE STANDARDS.—The Sec11 retary shall provide for performance standards 

12 (which may include monetary bonuses if the stand13 ards are met and penalties if the standards are not 

14 met), including standards relating to the time taken 

15 to answer member and pharmacy inquiries (written 

16 or by telephone), the accuracy of responses, claims 

17 processing accuracy, online system availability, ap18 peal procedure turnaround time, system availability, 

19 the accuracy and timeliness of reports, and level of 

20 beneficiary satisfaction. 

21 ‘‘(3) OTHER INCENTIVES.—Such incentives 

22 under this subsection may also include—

23 ‘‘(A) financial incentives under which sav24 ings derived from the substitution of generic 

25 and other preferred multi-source medicines in 
25

•HR 1733 IH 

1 lieu of nongeneric and nonpreferred medicines 

2 are made available to pharmacy contractors, 

3 pharmacies, beneficiaries, and the Federal 

4 Medicare Prescription Medicine Trust Fund; 

5 and 

6 ‘‘(B) any other incentive that the Secretary 

7 deems appropriate and likely to be effective in 

8 managing costs or utilization or improving qual9 ity that does not reduce the access of bene10 ficiaries to medically necessary covered out11 patient medicines. 

12 ‘‘(4) REQUIREMENTS FOR PROCEDURES.—

13 ‘‘(A) IN GENERAL.—The Secretary shall 

14 establish procedures for making payments to 

15 each pharmacy contractor with a contract under 

16 this part for the administration of the benefits 

17 under this part. The procedures shall provide 

18 for the following: 

19 ‘‘(i) ADMINISTRATIVE PAYMENT.—

20 Payment of administrative fees for such 

21 administration. 

22 ‘‘(ii) RISK REQUIREMENT.—An ad23 justment of a percentage (determined 

24 under subparagraph (B)) of the adminis25 trative fee payments made to a pharmacy 
26

•HR 1733 IH 

1 contractor to ensure that the contractor, in 

2 administering the benefits under this part, 

3 pursues performance requirements estab4 lished by the Secretary, including the fol5 lowing: 

6 ‘‘(I) QUALITY SERVICE.—The 

7 contractor provides eligible bene8 ficiaries for whom it administers bene9 fits with quality services, as measured 

10 by such factors as sustained pharmacy 

11 network access, timeliness and accu12 racy of service delivery in claims proc13 essing and card production, pharmacy 

14 and member service support access, 

15 and timely action with regard to ap16 peals and current beneficiary service 

17 surveys. 

18 ‘‘(II) QUALITY CLINICAL CARE.—

19 The contractor provides such bene20 ficiaries with quality clinical care, as 

21 measured by such factors as providing 

22 notification to such beneficiaries and 

23 to providers in order to prevent ad24 verse drug reactions and reduce medi25 cation errors and specific clinical sug-
27

•HR 1733 IH 

1 gestions to improve health and patient 

2 and prescriber education as appro3 priate. 

4 ‘‘(III) CONTROL OF MEDICARE

5 COSTS.—The contractor contains costs 

6 under this part to the Federal Medi7 care Prescription Medicine Trust 

8 Fund and enrollees, as measured by 

9 generic substitution rates, price dis10 counts, and other factors determined 

11 appropriate by the Secretary that do 

12 not reduce the access of beneficiaries 

13 to medically necessary covered out14 patient prescription medicines. 

15 ‘‘(B) PERCENTAGE OF PAYMENT TIED TO

16 RISK.—

17 ‘‘(i) IN GENERAL.—Subject to clause 

18 (ii), the Secretary shall determine the per19 centage of the administrative payments to 

20 a pharmacy contractor that will be tied to 

21 the performance requirements described in 

22 subparagraph (A)(ii). 

23 ‘‘(ii) LIMITATION ON RISK TO ENSURE

24 PROGRAM STABILITY.—In order to provide 

25 for program stability, the Secretary may 
28

•HR 1733 IH 

1 not establish a percentage to be adjusted 

2 under this paragraph at a level that jeop3 ardizes the ability of a pharmacy con4 tractor to administer the benefits under 

5 this part or administer such benefits in a 

6 quality manner. 

7 ‘‘(C) RISK ADJUSTMENT OF PAYMENTS

8 BASED ON ENROLLEES IN PLAN.—To the extent 

9 that a pharmacy contractor is at risk under this 

10 paragraph, the procedures established under 

11 this paragraph may include a methodology for 

12 risk adjusting the payments made to such con13 tractor based on the differences in actuarial 

14 risk of different enrollees being served if the 

15 Secretary determines such adjustments to be 

16 necessary and appropriate. 

17 ‘‘(d) AUTHORITY RELATING TO PHARMACY PARTICI18 PATION.—

19 ‘‘(1) IN GENERAL.—Subject to the succeeding 

20 provisions of this subsection, a pharmacy contractor 

21 may establish consistent with this part conditions for 

22 the participation of pharmacies, including conditions 

23 relating to quality (including reduction of medical 

24 errors) and technology. 
29

•HR 1733 IH 

1 ‘‘(2) AGREEMENTS WITH PHARMACIES.—Each 

2 pharmacy contractor shall enter into a participation 

3 agreement with any pharmacy that meets the re4 quirements of this subsection and section 1859E to 

5 furnish covered outpatient prescription medicines to 

6 individuals enrolled under this part. 

7 ‘‘(3) TERMS OF AGREEMENT.—An agreement 

8 under this subsection shall include the following 

9 terms and conditions: 

10 ‘‘(A) APPLICABLE REQUIREMENTS.—The 

11 pharmacy shall meet (and throughout the con12 tract period continue to meet) all applicable 

13 Federal requirements and State and local li14 censing requirements. 

15 ‘‘(B) ACCESS AND QUALITY STANDARDS.—

16 The pharmacy shall comply with such standards 

17 as the Secretary (and such a pharmacy con18 tractor) shall establish concerning the quality 

19 of, and enrolled individuals’ access to, phar20 macy services under this part. Such standards 

21 shall require the pharmacy—

22 ‘‘(i) not to refuse to dispense covered 

23 outpatient prescription medicines to any 

24 individual enrolled under this part; 
30

•HR 1733 IH 

1 ‘‘(ii) to keep patient records (includ2 ing records on expenses) for all covered 

3 outpatient prescription medicines dispensed 

4 to such enrolled individuals; 

5 ‘‘(iii) to submit information (in a 

6 manner specified by the Secretary to be 

7 necessary to administer this part) on all 

8 purchases of such medicines dispensed to 

9 such enrolled individuals; and 

10 ‘‘(iv) to comply with periodic audits to 

11 assure compliance with the requirements of 

12 this part and the accuracy of information 

13 submitted.

14 ‘‘(C) ADHERENCE TO NEGOTIATED

15 PRICES.—(i) The total charge for each medicine 

16 dispensed by the pharmacy to an enrolled indi17 vidual under this part, without regard to wheth18 er the individual is financially responsible for 

19 any or all of such charge, shall not exceed the 

20 price negotiated under section 1859A(a) or, if 

21 lower, negotiated under subsection (a)(5) (or, if 

22 less, the retail price for the medicine involved) 

23 with respect to such medicine plus a reasonable 

24 dispensing fee determined contractually with 

25 the pharmacy contractor. 
31

•HR 1733 IH 

1 ‘‘(ii) The pharmacy does not charge (or 

2 collect from) an enrolled individual an amount 

3 that exceeds the individual’s obligation (as de4 termined in accordance with the provisions of 

5 this part) of the applicable price described in 

6 clause (i). 

7 ‘‘(D) ADDITIONAL REQUIREMENTS.—The 

8 pharmacy shall meet such additional contract 

9 requirements as the applicable pharmacy con10 tractor specifies under this section. 

11 ‘‘(4) APPLICABILITY OF FRAUD AND ABUSE

12 PROVISIONS.—The provisions of section 1128 

13 through 1128C (relating to fraud and abuse) apply 

14 to pharmacies participating in the program under 

15 this part. 

16 ‘‘ELIGIBILITY; VOLUNTARY ENROLLMENT; COVERAGE

17 ‘‘SEC. 1859C. (a) ELIGIBILITY.—Each individual 

18 who is entitled to hospital insurance benefits under part 

19 A or is eligible to be enrolled in the medical insurance pro20 gram under part B is eligible to enroll in accordance with 

21 this section for outpatient prescription medicine benefits 

22 under this part. 

23 ‘‘(b) VOLUNTARY ENROLLMENT.—

24 ‘‘(1) IN GENERAL.—An individual may enroll 

25 under this part only in such manner and form as 

26 may be prescribed by regulations, and only during 
32

•HR 1733 IH 

1 an enrollment period prescribed in or under this sub2 section. 

3 ‘‘(2) INITIAL ENROLLMENT PERIOD.—

4 ‘‘(A) INDIVIDUALS CURRENTLY COV5 ERED.—In the case of an individual who satis6 fies subsection (a) as of November 1, 2005, the 

7 initial general enrollment period shall begin on 

8 August 1, 2005, and shall end on March 1, 

9 2006. 

10 ‘‘(B) INDIVIDUAL COVERED IN FUTURE.—

11 In the case of an individual who first satisfies 

12 subsection (a) on or after November 1, 2005, 

13 the individual’s initial enrollment period shall 

14 begin on the first day of the third month before 

15 the month in which such individual first satis16 fies such paragraph and shall end seven months 

17 later. The Secretary shall apply rules similar to 

18 the rule described in the second sentence of sec19 tion 1837(d). 

20 ‘‘(3) SPECIAL ENROLLMENT PERIODS (WITHOUT

21 PREMIUM PENALTY).—

22 ‘‘(A) EMPLOYER COVERAGE AT TIME OF

23 INITIAL GENERAL ENROLLMENT PERIOD.—In 

24 the case of an individual who—
33

•HR 1733 IH 

1 ‘‘(i) at the time the individual first 

2 satisfies subsection (a) is enrolled in a 

3 group health plan (including continuation 

4 coverage) that provides outpatient pre5 scription medicine coverage by reason of 

6 the individual’s (or the individual’s 

7 spouse’s) current (or, in the case of con8 tinuation coverage, former) employment 

9 status, and 

10 ‘‘(ii) has elected not to enroll (or to be 

11 deemed enrolled) under this subsection 

12 during the individual’s initial enrollment 

13 period, 

14 there shall be a special enrollment period of 6 

15 months beginning with the first month that in16 cludes the date of the individual’s (or individ17 ual’s spouse’s) retirement from or termination 

18 of current employment status with the employer 

19 that sponsors the plan, or, in the case of con20 tinuation coverage, that includes the date of 

21 termination of such coverage, or that includes 

22 the date the plan substantially terminates out23 patient prescription medicine coverage. 
34

•HR 1733 IH 

1 ‘‘(B) DROPPING OF RETIREE PRESCRIP2 TION MEDICINE COVERAGE.—In the case of an 

3 individual who—

4 ‘‘(i) at the time the individual first 

5 satisfies subsection (a) is enrolled in a 

6 group health plan that provides outpatient 

7 prescription medicine coverage other than 

8 by reason of the individual’s (or the indi9 vidual’s spouse’s) current employment; and 

10 ‘‘(ii) has elected not to enroll (or to be 

11 deemed enrolled) under this subsection 

12 during the individual’s initial enrollment 

13 period, 

14 there shall be a special enrollment period of 6 

15 months beginning with the first month that in16 cludes the date that the plan substantially ter17 minates outpatient prescription medicine cov18 erage and ending 6 months later. 

19 ‘‘(C) LOSS OF MEDICARE+CHOICE PRE20 SCRIPTION MEDICINE COVERAGE.—In the case 

21 of an individual who is enrolled under part C in 

22 a Medicare+Choice plan that provides prescrip23 tion medicine benefits, if such enrollment is ter24 minated because of the termination or reduction 

25 in service area of the plan, there shall be a spe-
35

•HR 1733 IH 

1 cial enrollment period of 6 months beginning 

2 with the first month that includes the date that 

3 such plan is terminated or such reduction oc4 curs and ending 6 months later. 

5 ‘‘(D) LOSS OF MEDICAID PRESCRIPTION

6 MEDICINE COVERAGE.—In the case of an indi7 vidual who—

8 ‘‘(i) satisfies subsection (a); 

9 ‘‘(ii) loses eligibility for benefits (that 

10 include benefits for prescription medicine) 

11 under a State plan after having been en12 rolled (or determined to be eligible) for 

13 such benefits under such plan; and 

14 ‘‘(iii) is not otherwise enrolled under 

15 this subsection at the time of such loss of 

16 eligibility, 

17 there shall be a special enrollment period speci18 fied by the Secretary of not less than 6 months 

19 beginning with the first month that includes the 

20 date that the individual loses such eligibility.

21 ‘‘(4) LATE ENROLLMENT WITH PREMIUM PEN22 ALTY.—The Secretary shall permit an individual 

23 who satisfies subsection (a) to enroll other than dur24 ing the initial enrollment period under paragraph (2) 

25 or a special enrollment period under paragraph (3). 
36

•HR 1733 IH 

1 But, in the case of such an enrollment, the amount 

2 of the monthly premium of the individual is subject 

3 to an increase under section 1859C(e)(1). 

4 ‘‘(5) INFORMATION.—

5 ‘‘(A) IN GENERAL.—The Secretary shall 

6 broadly distribute information to individuals 

7 who satisfy subsection (a) on the benefits pro8 vided under this part. The Secretary shall peri9 odically make available information on the cost 

10 differentials to enrollees for the use of generic 

11 medicines and other medicines. 

12 ‘‘(B) TOLL-FREE HOTLINE.—The Sec13 retary shall maintain a toll-free telephone hot14 line (which may be a hotline already used by 

15 the Secretary under this title) for purposes of 

16 providing assistance to beneficiaries in the pro17 gram under this part, including responding to 

18 questions concerning coverage, enrollment, ben19 efits, grievances and appeals procedures, and 

20 other aspects of such program. 

21 ‘‘(6) ENROLLEE DEFINED.—For purposes of 

22 this part, the term ‘enrollee’ means an individual en23 rolled for benefits under this part. 

24 ‘‘(c) COVERAGE PERIOD.—
37

•HR 1733 IH 

1 ‘‘(1) IN GENERAL.—The period during which 

2 an individual is entitled to benefits under this part 

3 (in this subsection referred to as the individual’s 

4 ‘coverage period’) shall begin on such a date as the 

5 Secretary shall establish consistent with the type of 

6 coverage rules described in subsections (a) and (e) 

7 of section 1838, except that in no case shall a cov8 erage period begin before January 1, 2006. No pay9 ments may be made under this part with respect to 

10 the expenses of an individual unless such expenses 

11 were incurred by such individual during a period 

12 which, with respect to the individual, is a coverage 

13 period. 

14 ‘‘(2) TERMINATION.—The Secretary shall pro15 vide for the application of provisions under this sub16 section similar to the provisions in section 1838(b). 

17 ‘‘(d) PROVISION OF BENEFITS TO

18 MEDICARE+CHOICE ENROLLEES.—In the case of an indi19 vidual who is enrolled under this part and is enrolled in 

20 a Medicare+Choice plan under part C, the individual shall 

21 be provided the benefits under this part through such plan 

22 and not through payment under this part. 

23 ‘‘(e) LATE ENROLLMENT PENALTIES; PAYMENT OF

24 PREMIUMS.—

25 ‘‘(1) LATE ENROLLMENT PENALTY.—
38

•HR 1733 IH 

1 ‘‘(A) IN GENERAL.—In the case of a late 

2 enrollment described in subsection (b)(4), sub3 ject to the succeeding provisions of this para4 graph, the Secretary shall establish procedures 

5 for increasing the amount of the monthly pre6 mium under this part applicable to such en7 rollee by an amount that the Secretary deter8 mines is actuarially sound for each such period. 

9 ‘‘(B) PERIODS TAKEN INTO ACCOUNT.—

10 For purposes of calculating any 12-month pe11 riod under subparagraph (A), there shall be 

12 taken into account months of lapsed coverage in 

13 a manner comparable to that applicable under 

14 the second sentence of section 1839(b). 

15 ‘‘(C) PERIODS NOT TAKEN INTO AC16 COUNT.—

17 ‘‘(i) IN GENERAL.—For purposes of 

18 calculating any 12-month period under 

19 subparagraph (A), subject to clause (ii), 

20 there shall not be taken into account 

21 months for which the enrollee can dem22 onstrate that the enrollee was covered 

23 under a group health plan that provides 

24 coverage of the cost of prescription medi25 cines whose actuarial value (as defined by 
39

•HR 1733 IH 

1 the Secretary) to the enrollee equals or ex2 ceeds the actuarial value of the benefits 

3 provided to an individual enrolled in the 

4 outpatient prescription medicine benefit 

5 program under this part. 

6 ‘‘(ii) APPLICATION.—This subpara7 graph shall only apply with respect to a 

8 coverage period the enrollment for which 

9 occurs before the end of the 60-day period 

10 that begins on the first day of the month 

11 which includes the date on which the plan 

12 terminates or reduces its service area (in a 

13 manner that results in termination of en14 rollment), ceases to provide, or reduces the 

15 value of the prescription medicine coverage 

16 under such plan to below the value of the 

17 coverage provided under the program 

18 under this part. 

19 ‘‘(2) INCORPORATION OF PREMIUM PAYMENT

20 AND GOVERNMENT CONTRIBUTIONS PROVISIONS.—

21 The provisions of sections 1840 and 1844(a)(1) shall 

22 apply to enrollees under this part in the same man23 ner as they apply to individuals 65 years of age or 

24 older enrolled under part B. For purposes of this 

25 subsection, any reference in a section referred to in 
40

•HR 1733 IH 

1 a previous subsection to the Federal Supplementary 

2 Medical Insurance Trust Fund is deemed a reference 

3 to the Federal Medicare Prescription Medicine Trust 

4 Fund. 

5 ‘‘(f) ELECTION OF PHARMACY CONTRACTOR TO AD6 MINISTER BENEFITS.—The Secretary shall establish a 

7 process whereby each individual enrolled under this part 

8 and residing in a region may elect the pharmacy con9 tractor that will administer the benefits under this part 

10 with respect to the individual. Such process shall permit 

11 the individual to make an initial election and to change 

12 such an election on at least an annual basis and under 

13 such other circumstances as the Secretary shall specify. 

14 ‘‘PROVISION OF, AND ENTITLEMENT TO, BENEFITS

15 ‘‘SEC. 1859D. (a) BENEFITS.—Subject to the suc16 ceeding provisions of this section, the benefits provided to 

17 an enrollee by the program under this part shall consist 

18 of the following:

19 ‘‘(1) COVERED OUTPATIENT PRESCRIPTION

20 MEDICINE BENEFITS.—Entitlement to have payment 

21 made on the individual’s behalf for covered out22 patient prescription medicines. 

23 ‘‘(2) LIMITATION ON COST-SHARING FOR PART

24 B OUTPATIENT PRESCRIPTION MEDICINES.—

25 ‘‘(A) IN GENERAL.—Once an enrollee has 

26 incurred aggregate countable cost-sharing (as 
41

•HR 1733 IH 

1 defined in subparagraph (B)) equal to the stop2 loss limit specified in subsection (c)(4) for ex3 penses in a year, entitlement to the elimination 

4 of cost-sharing otherwise applicable under part 

5 B for additional expenses incurred in the year 

6 for outpatient prescription medicines or 

7 biologicals for which payment is made under 

8 part B. 

9 ‘‘(B) COUNTABLE COST-SHARING DE10 FINED.—For purposes of this part, the term 

11 ‘countable cost-sharing’ means—

12 ‘‘(i) out-of-pocket expenses for out13 patient prescription medicines with respect 

14 to which benefits are payable under part 

15 B, and 

16 ‘‘(ii) cost-sharing under subsections 

17 (c)(3)(B) and (c)(3)(C)(i). 

18 ‘‘(b) COVERED OUTPATIENT PRESCRIPTION MEDI19 CINE DEFINED.—

20 ‘‘(1) IN GENERAL.—Except as provided in para21 graph (2), for purposes of this part the term ‘cov22 ered outpatient prescription medicine’ means any of 

23 the following products: 

24 ‘‘(A) A medicine which may be dispensed 

25 only upon prescription, and—
42

•HR 1733 IH 

1 ‘‘(i) which is approved for safety and 

2 effectiveness as a prescription medicine 

3 under section 505 of the Federal Food, 

4 Drug, and Cosmetic Act;

5 ‘‘(ii)(I) which was commercially used 

6 or sold in the United States before the 

7 date of enactment of the Drug Amend8 ments of 1962 or which is identical, simi9 lar, or related (within the meaning of sec10 tion 310.6(b)(1) of title 21 of the Code of 

11 Federal Regulations) to such a medicine, 

12 and (II) which has not been the subject of 

13 a final determination by the Secretary that 

14 it is a ‘new drug’ (within the meaning of 

15 section 201(p) of the Federal Food, Drug, 

16 and Cosmetic Act) or an action brought by 

17 the Secretary under section 301, 302(a), 

18 or 304(a) of such Act to enforce section 

19 502(f) or 505(a) of such Act; or 

20 ‘‘(iii)(I) which is described in section 

21 107(c)(3) of the Drug Amendments of 

22 1962 and for which the Secretary has de23 termined there is a compelling justification 

24 for its medical need, or is identical, simi25 lar, or related (within the meaning of sec-
43

•HR 1733 IH 

1 tion 310.6(b)(1) of title 21 of the Code of 

2 Federal Regulations) to such a medicine, 

3 and (II) for which the Secretary has not 

4 issued a notice of an opportunity for a 

5 hearing under section 505(e) of the Fed6 eral Food, Drug, and Cosmetic Act on a 

7 proposed order of the Secretary to with8 draw approval of an application for such 

9 medicine under such section because the 

10 Secretary has determined that the medi11 cine is less than effective for all conditions 

12 of use prescribed, recommended, or sug13 gested in its labeling. 

14 ‘‘(B) A biological product which—

15 ‘‘(i) may only be dispensed upon pre16 scription; 

17 ‘‘(ii) is licensed under section 351 of 

18 the Public Health Service Act; and 

19 ‘‘(iii) is produced at an establishment 

20 licensed under such section to produce 

21 such product. 

22 ‘‘(C) Insulin approved under appropriate 

23 Federal law, and needles, syringes, and dispos24 able pumps for the administration of such insu25 lin. 
44

•HR 1733 IH 

1 ‘‘(D) A prescribed medicine or biological 

2 product that would meet the requirements of 

3 subparagraph (A) or (B) but that is available 

4 over-the-counter in addition to being available 

5 upon prescription, but only if the particular 

6 dosage form or strength prescribed and re7 quired for the individual is not available over8 the-counter. 

9 ‘‘(E) Smoking cessation agents (as speci10 fied by the Secretary). 

11 ‘‘(2) EXCLUSION.—The term ‘covered out12 patient prescription medicine’ does not include—

13 ‘‘(A) medicines or classes of medicines, or 

14 their medical uses, which may be excluded from 

15 coverage or otherwise restricted under section 

16 1927(d)(2), other than subparagraph (E) there17 of (relating to smoking cessation agents), as the 

18 Secretary may specify and does not include 

19 such other medicines, classes, and uses as the 

20 Secretary may specify consistent with the goals 

21 of providing quality care and containing costs 

22 under this part; 

23 ‘‘(B) except as provided in paragraphs 

24 (1)(D) and (1)(E), any product which may be 
45

•HR 1733 IH 

1 distributed to individuals without a prescrip2 tion; 

3 ‘‘(C) any product when furnished as part 

4 of, or as incident to, a diagnostic service or any 

5 other item or service for which payment may be 

6 made under this title; or 

7 ‘‘(D) any product that is covered under 

8 part B of this title. 

9 ‘‘(c) PAYMENT OF BENEFITS.—

10 ‘‘(1) COVERED OUTPATIENT PRESCRIPTION

11 MEDICINES.—There shall be paid from the Federal 

12 Medicare Prescription Medicine Trust Fund, in the 

13 case of each enrollee who incurs expenses for medi14 cines with respect to which benefits are payable 

15 under this part under subsection (a)(1), amounts 

16 equal to the sum of—

17 ‘‘(A) the price for which the medicine is 

18 made available under this part (consistent with 

19 sections 1859A and 1859B), reduced by any 

20 applicable cost-sharing under paragraphs (2) 

21 and (3); and 

22 ‘‘(B) a reasonable dispensing fee.

23 The price under subparagraph (A) shall in no case 

24 exceed the retail price for the medicine involved. 
46

•HR 1733 IH 

1 ‘‘(2) DEDUCTIBLE.—The amount of payment 

2 under paragraph (1) for expenses incurred in a year, 

3 beginning with 2006, shall be reduced by an annual 

4 deductible equal to the amount specified in section 

5 1859(2) (subject to adjustment under paragraph 

6 (8)). Only expenses for countable cost-sharing (as 

7 defined in subsection (a)(2)(B)) shall be taken into 

8 account in applying this paragraph. 

9 ‘‘(3) COINSURANCE.—

10 ‘‘(A) IN GENERAL.—The amount of pay11 ment under paragraph (1) for expenses in12 curred in a year shall be further reduced (sub13 ject to the stop-loss limit under paragraph (4)) 

14 by coinsurance as provided under this para15 graph. 

16 ‘‘(B) PREFERRED MEDICINES.—The coin17 surance under this paragraph in the case of a 

18 preferred medicine (including a medicine treat19 ed as a preferred medicine under paragraph 

20 (5)), is equal to 20 percent of the price applica21 ble under paragraph (1)(A) (or such lower per22 centage as may be provided for under section 

23 1859E(a)(1)(A)(ii)). In this part, the term ‘pre24 ferred medicine’ means, with respect to medi25 cines classified within a therapeutic class, those 
47

•HR 1733 IH 

1 medicines which have been designated as a pre2 ferred medicine by the Secretary or the phar3 macy contractor involved with respect to that 

4 class and (in the case of a nongeneric medicine) 

5 with respect to which a contract has been nego6 tiated under this part. 

7 ‘‘(C) NONPREFERRED MEDICINES.—The 

8 coinsurance under this paragraph in the case of 

9 a nonpreferred medicine that is not treated as 

10 a preferred medicine under paragraph (5) is 

11 equal to the sum of—

12 ‘‘(i) 20 percent of the price for lowest 

13 price preferred medicine that is within the 

14 same therapeutic class; and 

15 ‘‘(ii) the amount by which—

16 ‘‘(I) the price at which the non17 preferred medicine is made available 

18 to the enrollee; exceeds 

19 ‘‘(II) the price of such lowest 

20 price preferred medicine. 

21 ‘‘(4) NO COINSURANCE ONCE OUT-OF-POCKET

22 EXPENDITURES EQUAL STOP-LOSS LIMIT.—Once an 

23 enrollee has incurred aggregate countable cost-shar24 ing under paragraph (3) (including cost-sharing 

25 under part B attributable to outpatient prescription 
48

•HR 1733 IH 

1 drugs or biologicals) equal to the amount specified 

2 in section 1859(4) (subject to adjustment under 

3 paragraph (8)) for expenses in a year—

4 ‘‘(A) there shall be no coinsurance under 

5 paragraph (3) for additional expenses incurred 

6 in the year involved; and 

7 ‘‘(B) there shall be no coinsurance under 

8 part B for additional expenses incurred in the 

9 year involved for outpatient prescription drugs 

10 and biologicals. 

11 ‘‘(5) APPEALS RIGHTS RELATING TO COVERAGE

12 OF NONPREFERRED MEDICINES.—

13 ‘‘(A) PROCEDURES REGARDING THE DE14 TERMINATION OF MEDICINES THAT ARE MEDI15 CALLY NECESSARY.—Each pharmacy contractor 

16 shall have in place procedures on a case-by-case 

17 basis to treat a nonpreferred medicine as a pre18 ferred medicine under this part if the preferred 

19 medicine is determined to be not as effective for 

20 the enrollee or to have significant adverse effect 

21 on the enrollee. Such procedures shall require 

22 that such determinations are based on profes23 sional medical judgment, the medical condition 

24 of the enrollee, and other medical evidence. 
49

•HR 1733 IH 

1 ‘‘(B) PROCEDURES REGARDING DENIALS

2 OF CARE.—Such contractor shall have in place 

3 procedures to ensure—

4 ‘‘(i) a timely internal review for reso5 lution of denials of coverage (in whole or 

6 in part and including those regarding the 

7 coverage of nonpreferred medicines) in ac8 cordance with the medical exigencies of the 

9 case and a timely resolution of complaints, 

10 by enrollees in the plan, or by providers, 

11 pharmacists, and other individuals acting 

12 on behalf of each such enrollee (with the 

13 enrollee’s consent) in accordance with re14 quirements (as established by the Sec15 retary) that are comparable to such re16 quirements for Medicare+Choice organiza17 tions under part C; 

18 ‘‘(ii) that the entity complies in a 

19 timely manner with requirements estab20 lished by the Secretary that (I) provide for 

21 an external review by an independent enti22 ty selected by the Secretary of denials of 

23 coverage described in clause (i) not re24 solved in the favor of the beneficiary (or 

25 other complainant) under the process de-
50

•HR 1733 IH 

1 scribed in such clause and (II) are com2 parable to the external review requirements 

3 established for Medicare+Choice organiza4 tions under part C; and 

5 ‘‘(iii) that enrollees are provided with 

6 information regarding the appeals proce7 dures under this part at the time of enroll8 ment with a pharmacy contractor under 

9 this part and upon request thereafter. 

10 ‘‘(6) TRANSFER OF FUNDS TO COVER COSTS OF

11 PART B PRESCRIPTION MEDICINE CATASTROPHIC

12 BENEFIT.—With respect to benefits described in 

13 subsection (a)(2), there shall transferred from the 

14 Federal Medicare Prescription Medicine Trust Fund 

15 to the Federal Supplementary Medical Insurance 

16 Trust Fund amounts equivalent to the elimination of 

17 cost-sharing described in such subsection. 

18 ‘‘(7) PERMITTING APPLICATION UNDER PART B

19 OF NEGOTIATED PRICES.—For purposes of making 

20 payment under part B for medicines that would be 

21 covered outpatient prescription medicines but for the 

22 exclusion under subparagraph (B) or (C) of sub23 section (b)(2), the Secretary may elect to apply the 

24 payment basis used for payment of covered out25 patient prescription medicines under this part in-
51

•HR 1733 IH 

1 stead of the payment basis otherwise used under 

2 such part, if it results in a lower cost to the pro3 gram. 

4 ‘‘(8) INFLATION ADJUSTMENT.—

5 ‘‘(A) IN GENERAL.—With respect to ex6 penses incurred in a year after 2006—

7 ‘‘(i) the deductible under paragraph 

8 (2) is equal to the deductible determined 

9 under such paragraph (or this subpara10 graph) for the previous year increased by 

11 the percentage increase in per capita pro12 gram expenditures (as estimated in ad13 vance for the year involved under subpara14 graph (B)); and 

15 ‘‘(ii) the stop-loss limit under para16 graph (3) is equal to the stop-loss limit de17 termined under such paragraph (or this 

18 subparagraph) for the previous year in19 creased by such percentage increase. 

20 The Secretary shall adjust such percentage in21 crease in subsequent years to take into account 

22 misestimations made of the per capita program 

23 expenditures under clauses (i) and (ii) in pre24 vious years. Any increase under this subpara-
52

•HR 1733 IH 

1 graph that is not a multiple of $10 shall be 

2 rounded to the nearest multiple of $10. 

3 ‘‘(B) ESTIMATION OF INCREASE IN PER

4 CAPITA PROGRAM EXPENDITURES.—The Sec5 retary shall before the beginning of each year 

6 (beginning with 2007) estimate the percentage 

7 increase in average per capita aggregate ex8 penditures from the Federal Medicare Prescrip9 tion Medicine Trust Fund for the year involved 

10 compared to the previous year. 

11 ‘‘(C) RECONCILIATION.—The Secretary 

12 shall also compute (beginning with 2008) the 

13 actual percentage increase in such aggregate 

14 expenditures in order to provide for reconcili15 ation of deductibles, stop-loss limits, and pre16 miums under the second sentence of subpara17 graph (A) and under section 1859D(d)(2). 

18 ‘‘(d) AMOUNT OF PREMIUMS.—

19 ‘‘(1) MONTHLY PREMIUM RATE IN 2006.—The 

20 monthly premium rate in 2006 for prescription med21 icine benefits under this part is the amount specified 

22 in section 1859(1). 

23 ‘‘(2) INFLATION ADJUSTMENT FOR SUBSE24 QUENT YEARS.—The monthly premium rate for a 

25 year after 2006 for prescription medicine benefits 
53

•HR 1733 IH 

1 under this part is equal to the monthly premium 

2 rate for the previous year under this subsection in3 creased by the percentage increase in per capita pro4 gram expenditures (as estimated in advance for the 

5 year involved under subsection (c)(8)(B)). The Sec6 retary shall adjust such percentage in subsequent 

7 years to take into account misestimations made of 

8 the per capita program expenditures under the pre9 vious sentence in previous years. Any increase under 

10 this paragraph that is not a multiple of $1 shall be 

11 rounded to the nearest multiple of $1. 

12 ‘‘ADMINISTRATION; QUALITY ASSURANCE

13 ‘‘SEC. 1859E. (a) RULES RELATING TO PROVISION

14 OF BENEFITS.—

15 ‘‘(1) PROVISION OF BENEFITS.—

16 ‘‘(A) IN GENERAL.—In providing benefits 

17 under this part, the Secretary (directly or 

18 through the contracts with pharmacy contrac19 tors) shall employ mechanisms to provide bene20 fits appropriately and efficiently, and those 

21 mechanisms may include—

22 ‘‘(i) the use of—

23 ‘‘(I) price negotiations (con24 sistent with subsection (b)); 

25 ‘‘(II) reduced coinsurance (below 

26 20 percent) to encourage the utiliza-
54

•HR 1733 IH 

1 tion of appropriate preferred medi2 cines; and 

3 ‘‘(III) methods to reduce medica4 tion errors and encourage appropriate 

5 use of medications; and 

6 ‘‘(ii) permitting pharmacy contractors, 

7 as approved by the Secretary, to make ex8 ceptions to section 1859D(c)(3)(C) (relat9 ing to cost-sharing for non-preferred medi10 cines) to secure best prices for enrollees so 

11 long as the payment amount under section 

12 1859D(c)(1) does not equal zero. 

13 ‘‘(B) CONSTRUCTION.—Nothing in this 

14 subsection shall be construed to prevent the 

15 Secretary (directly or through the contracts 

16 with pharmacy contractors) from using incen17 tives to encourage enrollees to select generic or 

18 other cost-effective medicines, so long as—

19 ‘‘(i) such incentives are designed not 

20 to result in any increase in the aggregate 

21 expenditures under the Federal Medicare 

22 Prescription Medicine Trust Fund; and 

23 ‘‘(ii) a beneficiary’s coinsurance shall 

24 be no greater than 20 percent in the case 

25 of a preferred medicine (including a non-
55

•HR 1733 IH 

1 preferred medicine treated as a preferred 

2 medicine under section 1859D(c)(5)). 

3 ‘‘(2) CONSTRUCTION.—Nothing in this part 

4 shall preclude the Secretary or a pharmacy con5 tractor from—

6 ‘‘(A) educating prescribing providers, phar7 macists, and enrollees about medical and cost 

8 benefits of preferred medicines; 

9 ‘‘(B) requesting prescribing providers to 

10 consider a preferred medicine prior to dis11 pensing of a nonpreferred medicine, as long as 

12 such request does not unduly delay the provi13 sion of the medicine; 

14 ‘‘(C) using mechanisms to encourage en15 rollees under this part to select cost-effective 

16 medicines or less costly means of receiving or 

17 administering medicines, including the use of 

18 therapeutic interchange programs, disease man19 agement programs, and notification to the bene20 ficiary that a more affordable generic medicine 

21 equivalent was not selected by the prescribing 

22 provider and a statement of the lost cost sav23 ings to the beneficiary; 

24 ‘‘(D) using price negotiations to achieve re25 duced prices on covered outpatient prescription 
56

•HR 1733 IH 

1 medicines, including new medicines, medicines 

2 for which there are few therapeutic alternatives, 

3 and medicines of particular clinical importance 

4 to individuals enrolled under this part; and 

5 ‘‘(E) utilizing information on medicine 

6 prices of OECD countries and of other payors 

7 in the United States in the negotiation of prices 

8 under this part. 

9 ‘‘(b) PRICE NEGOTIATIONS PROCESS.—

10 ‘‘(1) REQUIREMENTS WITH RESPECT TO PRE11 FERRED MEDICINES.—Negotiations of contracts with 

12 manufacturers with respect to covered outpatient 

13 prescription medicines under this part shall be con14 ducted in a manner so that—

15 ‘‘(A) there is at least a contract for a med16 icine within each therapeutic class (as defined 

17 by the Secretary in consultation with such 

18 Medicare Prescription Medicine Advisory Com19 mittee); 

20 ‘‘(B) if there is more than 1 medicine 

21 available in a therapeutic class, there are con22 tracts for at least 2 medicines within such class 

23 unless determined clinically inappropriate in ac24 cordance with standards established by the Sec25 retary; and 
57

•HR 1733 IH 

1 ‘‘(C) if there are more than 2 medicines 

2 available in a therapeutic class, there is a con3 tract for at least 2 medicines within such class 

4 and a contract for generic medicine substitute 

5 if available unless determined clinically inappro6 priate in accordance with standards established 

7 by the Secretary. 

8 ‘‘(2) ESTABLISHMENT OF THERAPEUTIC CLASS9 ES.—The Secretary, in consultation with the Medi10 care Prescription Medicine Advisory Committee (es11 tablished under section 1859H), shall establish for 

12 purposes of this part therapeutic classes and assign 

13 to such classes covered outpatient prescription medi14 cines. 

15 ‘‘(3) DISCLOSURE CONCERNING PREFERRED

16 MEDICINES.—The Secretary shall provide, through 

17 pharmacy contractors or otherwise, for—

18 ‘‘(A) disclosure to current and prospective 

19 enrollees and to participating providers and 

20 pharmacies in each service area a list of the 

21 preferred medicines and differences in applica22 ble cost-sharing between such medicines and 

23 nonpreferred medicines; and 

24 ‘‘(B) advance disclosure to current enroll25 ees and to participating providers and phar-
58

•HR 1733 IH 

1 macies in each service area of changes to any 

2 such list of preferred medicines and differences 

3 in applicable cost-sharing. 

4 ‘‘(4) NO REVIEW.—The Secretary’s establish5 ment of therapeutic classes and the assignment of 

6 medicines to such classes and the Secretary’s deter7 mination of what is a breakthrough medicine are not 

8 subject to administrative or judicial review. 

9 ‘‘(c) CONFIDENTIALITY.—The Secretary shall ensure 

10 that the confidentiality of individually identifiable health 

11 information relating to the provision of benefits under this 

12 part is protected, consistent with the standards for the 

13 privacy of such information promulgated by the Secretary 

14 under the Health Insurance Portability and Accountability 

15 Act of 1996, or any subsequent comprehensive and more 

16 protective set of confidentiality standards enacted into law 

17 or promulgated by the Secretary. Nothing in this sub18 section shall be construed as preventing the coordination 

19 of data with a State prescription medicine program so long 

20 as such program has in place confidentiality standards 

21 that are equal to or exceed the standards used by the Sec22 retary. 

23 ‘‘(d) FRAUD AND ABUSE SAFEGUARDS.—The Sec24 retary, through the Office of the Inspector General, is au25 thorized and directed to issue regulations establishing ap-
59

•HR 1733 IH 

1 propriate safeguards to prevent fraud and abuse under 

2 this part. Such safeguards, at a minimum, should include 

3 compliance programs, certification data, audits, and rec4 ordkeeping practices. In developing such regulations, the 

5 Secretary shall consult with the Attorney General and 

6 other law enforcement and regulatory agencies. 

7 ‘‘FEDERAL MEDICARE PRESCRIPTION MEDICINE TRUST

8 FUND

9 ‘‘SEC. 1859F. (a) ESTABLISHMENT.—There is here10 by created on the books of the Treasury of the United 

11 States a trust fund to be known as the ‘Federal Medicare 

12 Prescription Medicine Trust Fund’ (in this section re13 ferred to as the ‘Trust Fund’). The Trust Fund shall con14 sist of such gifts and bequests as may be made as provided 

15 in section 201(i)(1), and such amounts as may be depos16 ited in, or appropriated to, such fund as provided in this 

17 part. 

18 ‘‘(b) APPLICATION OF SMI TRUST FUND PROVI19 SIONS.—The provisions of subsections (b) through (i) of 

20 section 1841 shall apply to this part and the Trust Fund 

21 in the same manner as they apply to part B and the Fed22 eral Supplementary Medical Insurance Trust Fund, re23 spectively. 
60

•HR 1733 IH 

1 ‘‘COMPENSATION FOR EMPLOYERS COVERING RETIREE

2 MEDICINE COSTS

3 ‘‘SEC. 1859G. (a) IN GENERAL.—In the case of an 

4 individual who is eligible to be enrolled under this part 

5 and is a participant or beneficiary under a group health 

6 plan that provides outpatient prescription medicine cov7 erage to retirees the actuarial value of which is not less 

8 than the actuarial value of the coverage provided under 

9 this part, the Secretary shall make payments to such plan 

10 subject to the provisions of this section. Such payments 

11 shall be treated as payments under this part for purposes 

12 of sections 1859F and 1859C(e)(2). In applying the pre13 vious sentence with respect to section 1859C(e)(2), the 

14 amount of the Government contribution referred to in sec15 tion 1844(a)(1)(A) is deemed to be equal to the aggregate 

16 amount of the payments made under this section. 

17 ‘‘(b) REQUIREMENTS.—To receive payment under 

18 this section, a group health plan shall comply with the fol19 lowing requirements: 

20 ‘‘(1) COMPLIANCE WITH REQUIREMENTS.—The 

21 group health plan shall comply with the require22 ments of this Act and other reasonable, necessary, 

23 and related requirements that are needed to admin24 ister this section, as determined by the Secretary.
61

•HR 1733 IH 

1 ‘‘(2) ANNUAL ASSURANCES AND NOTICE BE2 FORE TERMINATION.—The sponsor of the plan 

3 shall—

4 ‘‘(A) annually attest, and provide such as5 surances as the Secretary may require, that the 

6 coverage offered under the group health plan 

7 meets the requirements of this section and will 

8 continue to meet such requirements for the du9 ration of the sponsor’s participation in the pro10 gram under this section; and 

11 ‘‘(B) guarantee that it will give notice to 

12 the Secretary and covered enrollees—

13 ‘‘(i) at least 120 days before termi14 nating its plan, and 

15 ‘‘(ii) immediately upon determining 

16 that the actuarial value of the prescription 

17 medicine benefit under the plan falls below 

18 the actuarial value required under sub19 section (a). 

20 ‘‘(3) BENEFICIARY INFORMATION.—The spon21 sor of the plan shall report to the Secretary, for 

22 each calendar quarter for which it seeks a payment 

23 under this section, the names and social security 

24 numbers of all enrollees described in subsection (a) 

25 covered under such plan during such quarter and 
62

•HR 1733 IH 

1 the dates (if less than the full quarter) during which 

2 each such individual was covered. 

3 ‘‘(4) AUDITS.—The sponsor or plan seeking 

4 payment under this section shall agree to maintain, 

5 and to afford the Secretary access to, such records 

6 as the Secretary may require for purposes of audits 

7 and other oversight activities necessary to ensure the 

8 adequacy of prescription medicine coverage, the ac9 curacy of payments made, and such other matters as 

10 may be appropriate. 

11 ‘‘(c) PAYMENT.—

12 ‘‘(1) IN GENERAL.—The sponsor of a group 

13 health plan that meets the requirements of sub14 section (b) with respect to a quarter in a calendar 

15 year shall be entitled to have payment made on a 

16 quarterly basis of the amount specified in paragraph 

17 (2) for each individual described in subsection (a) 

18 who during the quarter is covered under the plan 

19 and was not enrolled in the insurance program 

20 under this part. 

21 ‘‘(2) AMOUNT OF PAYMENT.—

22 ‘‘(A) IN GENERAL.—The amount of the 

23 payment for a quarter shall approximate, for 

each such covered individual, 2 24 ⁄3 of the sum of 

25 the monthly Government contribution amounts 
63

•HR 1733 IH 

1 (computed under subparagraph (B)) for each of 

2 the 3 months in the quarter. 

3 ‘‘(B) COMPUTATION OF MONTHLY GOV4 ERNMENT CONTRIBUTION AMOUNT.—For pur5 poses of subparagraph (A), the monthly Gov6 ernment contribution amount for a month in a 

7 year is equal to the amount by which—

‘‘(i) 1 8 ⁄12 of the average per capita ag9 gregate expenditures, as estimated under 

10 section 1859D(c)(8) for the year involved; 

11 exceeds 

12 ‘‘(ii) the monthly premium rate under 

13 section 1859D(d) for the month involved. 

14 ‘‘MEDICARE PRESCRIPTION MEDICINE ADVISORY

15 COMMITTEE

16 ‘‘SEC. 1859H. (a) ESTABLISHMENT OF COM17 MITTEE.—There is established a Medicare Prescription 

18 Medicine Advisory Committee (in this section referred to 

19 as the ‘Committee’). 

20 ‘‘(b) FUNCTIONS OF COMMITTEE.—The Committee 

21 shall advise the Secretary on policies related to— 

22 ‘‘(1) the development of guidelines for the im23 plementation and administration of the outpatient 

24 prescription medicine benefit program under this 

25 part; and 

26 ‘‘(2) the development of—
64

•HR 1733 IH 

1 ‘‘(A) standards required of pharmacy con2 tractors under section 1859D(c)(5) for deter3 mining if a medicine is as effective for an en4 rollee or has a significant adverse effect on an 

5 enrollee under this part; 

6 ‘‘(B) standards for—

7 ‘‘(i) defining therapeutic classes; 

8 ‘‘(ii) adding new therapeutic classes; 

9 ‘‘(iii) assigning to such classes covered 

10 outpatient prescription medicines; and 

11 ‘‘(iv) identifying breakthrough medi12 cines; 

13 ‘‘(C) procedures to evaluate the bids sub14 mitted by pharmacy contractors under this 

15 part; 

16 ‘‘(D) procedures for negotiations, and 

17 standards for entering into contracts, with 

18 manufacturers, including identifying medicines 

19 or classes of medicines where Secretarial nego20 tiation is most likely to yield savings under this 

21 part significantly above those that which could 

22 be achieved by a pharmacy contractor; and 

23 ‘‘(E) procedures to ensure that pharmacy 

24 contractors with a contract under this part are 
65

•HR 1733 IH 

1 in compliance with the requirements under this 

2 part. 

3 For purposes of this part, a medicine is a ‘breakthrough 

4 medicine’ if the Secretary, in consultation with the Com5 mittee, determines it is a new product that will make a 

6 significant and major improvement by reducing physical 

7 or mental illness, reducing mortality, or reducing dis8 ability, and that no other product is available to bene9 ficiaries that achieves similar results for the same condi10 tion. The Committee may consider cost-effectiveness in es11 tablishing standards for defining therapeutic classes and 

12 assigning drugs to such classes under subparagraph (B). 

13 ‘‘(c) STRUCTURE AND MEMBERSHIP OF THE COM14 MITTEE.—

15 ‘‘(1) STRUCTURE.—The Committee shall be 

16 composed of 19 members who shall be appointed by 

17 the Secretary. 

18 ‘‘(2) MEMBERSHIP.—

19 ‘‘(A) IN GENERAL.—The members of the 

20 Committee shall be chosen on the basis of their 

21 integrity, impartiality, and good judgment, and 

22 shall be individuals who are, by reason of their 

23 education, experience, and attainments, excep24 tionally qualified to perform the duties of mem25 bers of the Committee. 
66

•HR 1733 IH 

1 ‘‘(B) SPECIFIC MEMBERS.—Of the mem2 bers appointed under paragraph (1)—

3 ‘‘(i) 5 shall be chosen to represent 

4 practicing physicians, 2 of whom shall be 

5 gerontologists;

6 ‘‘(ii) 2 shall be chosen to represent 

7 practicing nurse practitioners; 

8 ‘‘(iii) 4 shall be chosen to represent 

9 practicing pharmacists; 

10 ‘‘(iv) 1 shall be chosen to represent 

11 the Centers for Medicare & Medicaid Serv12 ices; 

13 ‘‘(v) 4 shall be chosen to represent ac14 tuaries, pharmacoeconomists, researchers, 

15 and other appropriate experts; 

16 ‘‘(vi) 1 shall be chosen to represent 

17 emerging medicine technologies; 

18 ‘‘(vii) 1 shall be chosen to represent 

19 the Food and Drug Administration; and 

20 ‘‘(viii) 1 shall be chosen to represent 

21 individuals enrolled under this part. 

22 ‘‘(d) TERMS OF APPOINTMENT.—Each member of 

23 the Committee shall serve for a term determined appro24 priate by the Secretary. The terms of service of the mem25 bers initially appointed shall begin on January 1, 2005. 
67

•HR 1733 IH 

1 ‘‘(e) CHAIRPERSON.—The Secretary shall designate 

2 a member of the Committee as Chairperson. The term as 

3 Chairperson shall be for a 1-year period. 

4 ‘‘(f) COMMITTEE PERSONNEL MATTERS.—

5 ‘‘(1) MEMBERS.—

6 ‘‘(A) COMPENSATION.—Each member of 

7 the Committee who is not an officer or em8 ployee of the Federal Government shall be com9 pensated at a rate equal to the daily equivalent 

10 of the annual rate of basic pay prescribed for 

11 level IV of the Executive Schedule under section 

12 5315 of title 5, United States Code, for each 

13 day (including travel time) during which such 

14 member is engaged in the performance of the 

15 duties of the Committee. All members of the 

16 Committee who are officers or employees of the 

17 United States shall serve without compensation 

18 in addition to that received for their services as 

19 officers or employees of the United States. 

20 ‘‘(B) TRAVEL EXPENSES.—The members 

21 of the Committee shall be allowed travel ex22 penses, including per diem in lieu of subsist23 ence, at rates authorized for employees of agen24 cies under subchapter I of chapter 57 of title 5, 

25 United States Code, while away from their 
68

•HR 1733 IH 

1 homes or regular places of business in the per2 formance of services for the Committee. 

3 ‘‘(2) STAFF.—The Committee may appoint 

4 such personnel as the Committee considers appro5 priate. 

6 ‘‘(g) OPERATION OF THE COMMITTEE.—

7 ‘‘(1) MEETINGS.—The Committee shall meet at 

8 the call of the Chairperson (after consultation with 

9 the other members of the Committee) not less often 

10 than quarterly to consider a specific agenda of 

11 issues, as determined by the Chairperson after such 

12 consultation. 

13 ‘‘(2) QUORUM.—Ten members of the Com14 mittee shall constitute a quorum for purposes of 

15 conducting business. 

16 ‘‘(h) FEDERAL ADVISORY COMMITTEE ACT.—Section 

17 14 of the Federal Advisory Committee Act (5 U.S.C. 

18 App.) shall not apply to the Committee. 

19 ‘‘(i) TRANSFER OF PERSONNEL, RESOURCES, AND

20 ASSETS.—For purposes of carrying out its duties, the Sec21 retary and the Committee may provide for the transfer 

22 to the Committee of such civil service personnel in the em23 ploy of the Department of Health and Human Services 

24 (including the Centers for Medicare & Medicaid Services), 
69

•HR 1733 IH 

1 and such resources and assets of the Department used in 

2 carrying out this title, as the Committee requires. 

3 ‘‘(j) AUTHORIZATION OF APPROPRIATIONS.—There 

4 are authorized to be appropriated such sums as may be 

5 necessary to carry out the purposes of this section.’’. 

6 (c) APPLICATION OF GENERAL EXCLUSIONS FROM

7 COVERAGE.—

8 (1) APPLICATION TO PART D.—Section 1862(a) 

9 (42 U.S.C. 1395y(a)) is amended in the matter pre10 ceding paragraph (1) by striking ‘‘part A or part B’’ 

11 and inserting ‘‘part A, B, or D’’. 

12 (2) PRESCRIPTION MEDICINES NOT EXCLUDED

13 FROM COVERAGE IF APPROPRIATELY PRESCRIBED.—

14 Section 1862(a)(1) (42 U.S.C. 1395y(a)(1)) is 

15 amended—

16 (A) in subparagraph (H), by striking 

17 ‘‘and’’ at the end; 

18 (B) in subparagraph (I), by striking the 

19 semicolon at the end and inserting ‘‘, and’’; and 

20 (C) by adding at the end the following new 

21 subparagraph: 

22 ‘‘(J) in the case of prescription medicines 

23 covered under part D, which are not prescribed 

24 in accordance with such part;’’. 
70

•HR 1733 IH 

1 (d) CONFORMING AMENDMENTS.—(1) Part C of title 

2 XVIII is amended—

3 (A) in section 1851(a)(2)(B) (42 U.S.C. 

4 1395w–21(a)(2)(B)), by striking ‘‘1859(b)(3)’’ and 

5 inserting ‘‘1858(b)(3)’’; 

6 (B) in section 1851(a)(2)(C) (42 U.S.C. 

7 1395w–21(a)(2)(C)), by striking ‘‘1859(b)(2)’’ and 

8 inserting ‘‘1858(b)(2)’’; 

9 (C) in section 1852(a)(1) (42 U.S.C. 1395w–

10 22(a)(1)), by striking ‘‘1859(b)(3)’’ and inserting 

11 ‘‘1858(b)(3)’’; 

12 (D) in section 1852(a)(3)(B)(ii) (42 U.S.C. 

13 1395w–22(a)(3)(B)(ii)), by striking 

14 ‘‘1859(b)(2)(B)’’ and inserting ‘‘1858(b)(2)(B)’’; 

15 (E) in section 1853(a)(1)(A) (42 U.S.C. 

16 1395w–23(a)(1)(A)), by striking ‘‘1859(e)(4)’’ and 

17 inserting ‘‘1858(e)(4)’’; and 

18 (F) in section 1853(a)(3)(D) (42 U.S.C. 

19 1395w–23(a)(3)(D)), by striking ‘‘1859(e)(4)’’ and 

20 inserting ‘‘1858(e)(4)’’. 

21 (2) Section 1171(a)(5)(D) (42 U.S.C. 

22 1320d(a)(5)(D)) is amended by striking ‘‘or (C)’’ and in23 serting ‘‘(C), or (D)’’.
71

•HR 1733 IH 

1 SEC. 102. PROVISION OF MEDICARE OUTPATIENT PRE2 SCRIPTION MEDICINE COVERAGE UNDER 

3 THE MEDICARE+CHOICE PROGRAM. 

4 (a) REQUIRING AVAILABILITY OF AN ACTUARIALLY

5 EQUIVALENT PRESCRIPTION MEDICINE BENEFIT.—Sec6 tion 1851 (42 U.S.C. 1395w–21) is amended by adding 

7 at the end the following new subsection: 

8 ‘‘(j) AVAILABILITY OF PRESCRIPTION MEDICINE

9 BENEFITS.—

10 ‘‘(1) IN GENERAL.—Notwithstanding any other 

11 provision of this part, each Medicare+Choice organi12 zation that makes available a Medicare+Choice plan 

13 described in section 1851(a)(2)(A) shall make avail14 able such a plan that offers coverage of covered out15 patient prescription medicines that is at least actu16 arially equivalent to the benefits provided under part 

17 D. Information respecting such benefits shall be 

18 made available in the same manner as information 

19 on other benefits provided under this part is made 

20 available. Nothing in this paragraph shall be con21 strued as requiring the offering of such coverage 

22 separate from coverage that includes benefits under 

23 parts A and B. 

24 ‘‘(2) TREATMENT OF PRESCRIPTION MEDICINE

25 ENROLLEES.—In the case of a Medicare+Choice eli26 gible individual who is enrolled under part D, the 
72

•HR 1733 IH 

1 benefits described in paragraph (1) shall be treated 

2 in the same manner as benefits described in part B 

3 for purposes of coverage and payment and any ref4 erence in this part to the Federal Supplementary 

5 Medical Insurance Trust Fund shall be deemed, with 

6 respect to such benefits, to be a reference to the 

7 Federal Medicare Prescription Medicine Trust 

8 Fund.’’. 

9 (b) APPLICATION OF QUALITY STANDARDS.—Section 

10 1852(e)(2)(A) (42 U.S.C. 1395w–22(e)(2)(A)) is amend11 ed—

12 (1) by striking ‘‘and’’ at the end of clause (xi); 

13 (2) by striking the period at the end of clause 

14 (xii) and inserting ‘‘, and’’; and 

15 (3) by adding at the end the following new 

16 clause: 

17 ‘‘(xiii) comply with the standards, and 

18 apply the programs, under section 

19 1859B(b) for covered outpatient prescrip20 tion medicines under the plan.’’. 

21 (c) PAYMENT SEPARATE FROM PAYMENT FOR PART

22 A AND B BENEFITS.—Section 1853 (42 U.S.C. 1395w–

23 23) is amended—

24 (1) in subsection (a)(1)(A), by striking ‘‘and 

25 (i)’’ and inserting ‘‘(i), and (j)’’; and 
73

•HR 1733 IH 

1 (2) by adding at the end the following new sub2 section: 

3 ‘‘(j) PAYMENT FOR PRESCRIPTION MEDICINE COV4 ERAGE OPTION.—

5 ‘‘(1) IN GENERAL.—In the case of a 

6 Medicare+Choice plan that provides prescription 

7 medicine benefits described in section 1851(j)(1), 

8 the amount of payment otherwise made to the 

9 Medicare+Choice organization offering the plan 

10 shall be increased by the amount described in para11 graph (2). Such payments shall be made in the same 

12 manner and time as the amount otherwise paid, but 

13 such amount shall be payable from the Federal 

14 Medicare Prescription Medicine Trust Fund. 

15 ‘‘(2) AMOUNT.—The amount described in this 

16 paragraph is the monthly Government contribution 

17 amount computed under section 1859G(c)(2)(B), 

18 but subject to adjustment under paragraph (3). 

19 Such amount shall be uniform geographically and 

20 shall not vary based on the Medicare+Choice pay21 ment area involved. 

22 ‘‘(3) RISK ADJUSTMENT.—The Secretary shall 

23 establish a methodology for the adjustment of the 

24 payment amount under this subsection in a manner 

25 that takes into account the relative risks for use of 
74

•HR 1733 IH 

1 outpatient prescription medicines by 

2 Medicare+Choice enrollees. Such methodology shall 

3 be designed in a manner so that the total payments 

4 under this title (including part D) are not changed 

5 as a result of the application of such methodology.’’. 

6 (d) SEPARATE APPLICATION OF ADJUSTED COMMU7 NITY RATE (ACR).—Section 1854 (42 U.S.C. 1395w–24) 

8 is amended by adding at the end the following: 

9 ‘‘(i) APPLICATION TO PRESCRIPTION MEDICINE COV10 ERAGE.—The Secretary shall apply the previous provisions 

11 of this section (including the computation of the adjusted 

12 community rate) separately with respect to prescription 

13 medicine benefits described in section 1851(j)(1).’’. 

14 (f) CONFORMING AMENDMENTS.—

15 (1) Section 1851 (42 U.S.C. 1395w–21) is 

16 amended—

17 (A) in subsection (a)(1)(A), by striking 

18 ‘‘parts A and B’’ and inserting ‘‘parts A, B, 

19 and D’’; and 

20 (B) in subsection (i) by inserting ‘‘(and, if 

21 applicable, part D)’’ after ‘‘parts A and B’’. 

22 (2) Section 1852(a)(1)(A) (42 U.S.C. 1395w–

23 22(a)(1)(A)) is amended by inserting ‘‘(and under 

24 part D to individuals also enrolled under such part)’’ 

25 after ‘‘parts A and B’’.
75

•HR 1733 IH 

1 (3) Section 1852(d)(1) (42 U.S.C. 1395w–

2 22(d)(1)) is amended—

3 (A) by striking ‘‘and’’ at the end of sub4 paragraph (D); 

5 (B) by striking the period at the end of 

6 subparagraph (E) and inserting ‘‘; and’’; and 

7 (C) by adding at the end the following: 

8 ‘‘(F) the plan for part D benefits guaran9 tees coverage of any specifically named pre10 scription medicine for an enrollee to the extent 

11 that it would be required to be covered under 

12 part D. 

13 In carrying out subparagraph (F), a 

14 Medicare+Choice organization has the same author15 ity to enter into contracts with respect to coverage 

16 of preferred medicines as the Secretary has under 

17 part D, but subject to an independent contractor ap18 peal or other appeal process that would be applicable 

19 to determinations by such a pharmacy contractor 

20 consistent with section 1859D(c)(5).’’. 

21 (e) LIMITATION ON COST-SHARING.—Section 

22 1854(e) (42 U.S.C. 1395w–24(e)) is amended by adding 

23 at the end the following new paragraph:

24 ‘‘(5) LIMITATION ON COST-SHARING.—In no 

25 event may a Medicare+Choice organization include 
76

•HR 1733 IH 

1 a requirement that an enrollee pay cost-sharing in 

2 excess of the cost-sharing otherwise permitted under 

3 part D.’’. 

4 SEC. 103. MEDIGAP REVISIONS. 

5 (a) REQUIRED COVERAGE OF COVERED OUTPATIENT

6 PRESCRIPTION MEDICINES.—Section 1882(p)(2)(B) (42 

7 U.S.C. 1395ss(p)(2)(B)) is amended by inserting before 

8 ‘‘and’’ at the end the following: ‘‘including a requirement 

9 that an appropriate number of policies provide coverage 

10 of medicines which complements but does not duplicate 

11 the medicine benefits that beneficiaries are otherwise eligi12 ble for benefits under part D of this title (with the Sec13 retary and the National Association of Insurance Commis14 sioners determining the appropriate level of medicine ben15 efits that each benefit package must provide and ensuring 

16 that policies providing such coverage are affordable for 

17 beneficiaries;’’. 

18 (b) EFFECTIVE DATE.—The amendment made by 

19 subsection (a) shall take effect on January 1, 2006. 

20 (c) TRANSITION PROVISIONS.—

21 (1) IN GENERAL.—If the Secretary of Health 

22 and Human Services identifies a State as requiring 

23 a change to its statutes or regulations to conform its 

24 regulatory program to the amendments made by this 

25 section, the State regulatory program shall not be 
77

•HR 1733 IH 

1 considered to be out of compliance with the require2 ments of section 1882 of the Social Security Act due 

3 solely to failure to make such change until the date 

4 specified in paragraph (4). 

5 (2) NAIC STANDARDS.—If, within 9 months 

6 after the date of enactment of this Act, the National 

7 Association of Insurance Commissioners (in this 

8 subsection referred to as the ‘‘NAIC’’) modifies its 

9 NAIC Model Regulation relating to section 1882 of 

10 the Social Security Act (referred to in such section 

11 as the 1991 NAIC Model Regulation, as subse12 quently modified) to conform to the amendments 

13 made by this section, such revised regulation incor14 porating the modifications shall be considered to be 

15 the applicable NAIC model regulation (including the 

16 revised NAIC model regulation and the 1991 NAIC 

17 Model Regulation) for the purposes of such section. 

18 (3) SECRETARY STANDARDS.—If the NAIC 

19 does not make the modifications described in para20 graph (2) within the period specified in such para21 graph, the Secretary of Health and Human Services 

22 shall make the modifications described in such para23 graph and such revised regulation incorporating the 

24 modifications shall be considered to be the appro25 priate regulation for the purposes of such section. 
78

•HR 1733 IH 

1 (4) DATE SPECIFIED.—

2 (A) IN GENERAL.—Subject to subpara3 graph (B), the date specified in this paragraph 

4 for a State is the earlier of—

5 (i) the date the State changes its stat6 utes or regulations to conform its regu7 latory program to the changes made by 

8 this section; or 

9 (ii) 1 year after the date the NAIC or 

10 the Secretary first makes the modifications 

11 under paragraph (2) or (3), respectively. 

12 (B) ADDITIONAL LEGISLATIVE ACTION RE13 QUIRED.—In the case of a State which the Sec14 retary identifies as—

15 (i) requiring State legislation (other 

16 than legislation appropriating funds) to 

17 conform its regulatory program to the 

18 changes made in this section; but 

19 (ii) having a legislature which is not 

20 scheduled to meet in 2004 in a legislative 

21 session in which such legislation may be 

22 considered; 

23 the date specified in this paragraph is the first 

24 day of the first calendar quarter beginning after 

25 the close of the first legislative session of the 
79

•HR 1733 IH 

1 State legislature that begins on or after Janu2 ary 1, 2004. For purposes of the previous sen3 tence, in the case of a State that has a 2-year 

4 legislative session, each year of such session 

5 shall be deemed to be a separate regular session 

6 of the State legislature.

7 SEC. 104. TRANSITIONAL ASSISTANCE FOR LOW INCOME 

8 BENEFICIARIES. 

9 (a) QMB COVERAGE OF PREMIUMS AND COST-SHAR10 ING.—Section 1905(p)(3) (42 U.S.C. 1396d(p)(3)) is 

11 amended—

12 (1) in subparagraph (A)—

13 (A) by striking ‘‘and’’ at the end of clause 

14 (i), 

15 (B) by adding ‘‘and’’ at the end of clause 

16 (ii), and 

17 (C) by adding at the end the following new 

18 clause: 

19 ‘‘(iii) premiums under section 1859D(d).’’; 

20 (2) in subparagraph (B), by inserting ‘‘and sec21 tion 1859D(c)(3)(B) and 1859D(c)(3)(C)(i)’’ after 

22 ‘‘1813’’; and 

23 (3) in subparagraph (C), by striking ‘‘and sec24 tion 1833(b)’’ and inserting ‘‘, section 1833(b), and 

25 section 1859D(c)(2)’’. 
80

•HR 1733 IH 

1 (b) EXPANDED SLMB ELIGIBILITY.—Section 

2 1902(a)(10)(E) (42 U.S.C. 1396a(a)(10)(E)) is amend3 ed—

4 (1) by striking ‘‘and’’ at the end of clause (iii); 

5 (2) by adding ‘‘and’’ at the end of clause (iv); 

6 and 

7 (3) by adding at the end the following new 

8 clause: 

9 ‘‘(v)(I) for making medical assistance 

10 available for medicare cost-sharing described in 

11 section 1905(p)(3)(A)(iii) and medicare cost12 sharing described in section 1905(p)(3)(B) and 

13 section 1905(p)(3)(C) but only insofar as it re14 lates to benefits provided under part D of title 

15 XVIII, subject to section 1905(p)(4), for indi16 viduals (other than qualified medicare bene17 ficiaries) who are enrolled under part D of title 

18 XVIII and are described in section 

19 1905(p)(1)(B) or would be so described but for 

20 the fact that their income exceeds 100 percent, 

21 but is less than 150 percent, of the official pov22 erty line (referred to in such section) for a fam23 ily of the size involved; 

24 ‘‘(II) subject to section 1905(p)(4), for in25 dividuals (other than qualified medicare bene-
81

•HR 1733 IH 

1 ficiaries and individuals described in subclause 

2 (I)) who are enrolled under part D of title 

3 XVIII and would be described in section 

4 1905(p)(1)(B) but for the fact that their in5 come exceeds 150 percent, but is less than 175 

6 percent, of the official poverty line (referred to 

7 in such section) for a family of the size in8 volved, for making medical assistance available 

9 for medicare cost-sharing described in section 

10 1905(p)(3)(A)(iii) and medicare cost-sharing 

11 described in section 1905(p)(3)(B) and section 

12 1905(p)(3)(C) but only insofar as it relates to 

13 benefits provided under part D of title XVIII, 

14 and the assistance for medicare cost-sharing de15 scribed in section 1905(p)(3)(A)(iii) is reduced 

16 (on a sliding scale based on income) from 100 

17 percent to 0 percent as the income increases 

18 from 150 percent to 175 percent of such pov19 erty line;’’. 

20 (c) FEDERAL FINANCING.—The third sentence of 

21 section 1905(b) (42 U.S.C. 1396d(b)) is amended by in22 serting before the period at the end the following: ‘‘and 

23 with respect to amounts expended that are attributable to 

24 section 1902(a)(10)(E)(v) (other than for individuals de25 scribed in section 1905(p)(1)(B))’’. 
82

•HR 1733 IH 

1 (d) TREATMENT OF TERRITORIES.—

2 (1) IN GENERAL.—Section 1905(p) (42 U.S.C. 

3 1396d(p)) is amended—

4 (A) by redesignating paragraphs (5) and 

5 (6) as paragraphs (6) and (7), respectively; and 

6 (B) by inserting after paragraph (4) the 

7 following new paragraph: 

8 ‘‘(5)(A) In the case of a State, other than the 50 

9 States and the District of Columbia—

10 ‘‘(i) the provisions of paragraph (3) insofar as 

11 they relate to section 1859D and the provisions of 

12 section 1902(a)(10)(E)(v) shall not apply to resi13 dents of such State; and 

14 ‘‘(ii) if the State establishes a plan described in 

15 subparagraph (B) (for providing medical assistance 

16 with respect to the provision of prescription medi17 cines to medicare beneficiaries), the amount other18 wise determined under section 1108(f) (as increased 

19 under section 1108(g)) for the State shall be in20 creased by the amount specified in subparagraph 

21 (C). 

22 ‘‘(B) The plan described in this subparagraph is a 

23 plan that—

24 ‘‘(i) provides medical assistance with respect to 

25 the provision of covered outpatient medicines (as de-
83

•HR 1733 IH 

1 fined in section 1859D(b)) to low-income medicare 

2 beneficiaries; and 

3 ‘‘(ii) assures that additional amounts received 

4 by the State that are attributable to the operation 

5 of this paragraph are used only for such assistance. 

6 ‘‘(C)(i) The amount specified in this subparagraph 

7 for a State for a year is equal to the product of—

8 ‘‘(I) the aggregate amount specified in clause 

9 (ii); and 

10 ‘‘(II) the amount specified in section 1108(g)(1) 

11 for that State, divided by the sum of the amounts 

12 specified in such section for all such States. 

13 ‘‘(ii) The aggregate amount specified in this clause 

14 for—

15 ‘‘(I) 2006, is equal to $25,000,000; or 

16 ‘‘(II) a subsequent year, is equal to the aggre17 gate amount specified in this clause for the previous 

18 year increased by annual percentage increase speci19 fied in section 1859D(c)(8)(B) for the year involved. 

20 ‘‘(D) The Secretary shall submit to Congress a report 

21 on the application of this paragraph and may include in 

22 the report such recommendations as the Secretary deems 

23 appropriate.’’. 

24 (2) CONFORMING AMENDMENT.—Section 

25 1108(f) (42 U.S.C. 1308(f)) is amended by inserting 
84

•HR 1733 IH 

1 ‘‘and section 1905(p)(5)(A)(ii)’’ after ‘‘Subject to 

2 subsection (g)’’.

3 (e) APPLICATION OF COST-SHARING.—Section 

4 1902(n)(2) (42 U.S.C. 1396a(n)(2)) is amended by add5 ing at the end the following: ‘‘The previous sentence shall 

6 not apply to medicare cost-sharing relating to benefits 

7 under part D of title XVIII.’’. 

8 (f) EFFECTIVE DATE.—The amendments made by 

9 this section apply to medical assistance for premiums and 

10 cost-sharing incurred on or after January 1, 2006, with 

11 regard to whether regulations to implement such amend12 ments are promulgated by such date. 

13 TITLE II—REFORM IN PRESCRIP14 TION DRUG PRICES FOR SEN15 IORS 

16 Subtitle A—Prescription Drug 

17 Fairness for Seniors 

18 SEC. 201. SHORT TITLE. 

19 This subtitle may be cited as the ‘‘Prescription Drug 

20 Fairness for Seniors Act of 2003’’. 

21 SEC. 202. FINDINGS AND PURPOSES. 

22 (a) FINDINGS.—The Congress makes the following 

23 findings: 

24 (1) Manufacturers of prescription drugs engage 

25 in price discrimination practices that compel many 
85

•HR 1733 IH 

1 older Americans to pay substantially more for pre2 scription drugs than consumers in foreign nations 

3 and the drug manufacturers’ most favored U.S. cus4 tomers, such as health insurers, health maintenance 

5 organizations, and the Federal Government. 

6 (2) Older Americans who buy their own pre7 scription drugs often pay twice as much for prescrip8 tion drugs as consumers in foreign nations and the 

9 drug manufacturers’ most favored U.S. customers. 

10 In some cases, older Americans pay 10 times more 

11 for prescription drugs than such customers. 

12 (3) The discriminatory pricing by major drug 

13 manufacturers sustains their high profits (for exam14 ple, $27,300,000,000 in 1999), but causes financial 

15 hardship and impairs the health and well-being of 

16 millions of older Americans. Many older Americans 

17 are forced to choose between buying their food and 

18 buying their medicines.

19 (4) Foreign nations and U.S. federally funded 

20 health care programs use purchasing power to ob21 tain prescription drugs at low prices. Medicare bene22 ficiaries are denied this benefit and cannot obtain 

23 their prescription drugs at the lower prices available 

24 to such nations and programs. 
86

•HR 1733 IH 

1 (5) Implementation of the policy set forth in 

2 this Act will reduce prices for brand name prescrip3 tion drugs for many Medicare beneficiaries by an av4 erage of 40 percent. 

5 (6) In addition to substantially lowering the 

6 costs of prescription drugs for older Americans, im7 plementation of the policy set forth in this Act will 

8 significantly improve the health and well-being of 

9 older Americans and lower the costs to the Federal 

10 taxpayer of the Medicare program. 

11 (7) Older Americans who are terminally ill and 

12 receiving hospice care services represent some of the 

13 most vulnerable individuals in our nation. Making 

14 prescription drugs available to Medicare beneficiaries 

15 under the care of Medicare-certified hospices will as16 sist in extending the benefits of lower prescription 

17 drug prices to those most vulnerable and in need. 

18 (b) PURPOSE.—The purpose of this Act is to protect 

19 Medicare beneficiaries from discriminatory pricing by drug 

20 manufacturers and to make prescription drugs available 

21 to Medicare beneficiaries at substantially reduced prices. 

22 SEC. 203. PARTICIPATING MANUFACTURERS. 

23 (a) IN GENERAL.—Each participating manufacturer 

24 of a covered outpatient drug shall make available for pur25 chase by each pharmacy such covered outpatient drug in 
87

•HR 1733 IH 

1 the amount described in subsection (b) at the price de2 scribed in subsection (c). 

3 (b) DESCRIPTION OF AMOUNT OF DRUGS.—The 

4 amount of a covered outpatient drug that a participating 

5 manufacturer shall make available for purchase by a phar6 macy is an amount equal to the aggregate amount of the 

7 covered outpatient drug sold or distributed by the phar8 macy to Medicare beneficiaries. 

9 (c) DESCRIPTION OF PRICE.—The price at which a 

10 participating manufacturer shall make a covered out11 patient drug available for purchase by a pharmacy is a 

12 price no greater than the manufacturer’s average foreign 

13 price. 

14 (d) ENFORCEMENT.—The United States shall debar 

15 a manufacturer of drugs or biologicals that does not com16 ply with the provisions of this Act. 

17 SEC. 204. SPECIAL PROVISION WITH RESPECT TO HOSPICE 

18 PROGRAMS. 

19 For purposes of determining the amount of a covered 

20 outpatient drug that a participating manufacturer shall 

21 make available for purchase by a pharmacy under section 

22 203, there shall be included in the calculation of such 

23 amount the amount of the covered outpatient drug sold 

24 or distributed by a pharmacy to a hospice program. In 

25 calculating such amount, only amounts of the covered out-
88

•HR 1733 IH 

1 patient drug furnished to a Medicare beneficiary enrolled 

2 in the hospice program shall be included. 

3 SEC. 205. ADMINISTRATION. 

4 The Secretary shall issue such regulations as may be 

5 necessary to implement this subtitle. 

6 SEC. 206. REPORTS TO CONGRESS REGARDING EFFECTIVE7 NESS OF ACT. 

8 (a) IN GENERAL.—Not later than 2 years after the 

9 date of the enactment of this Act, and annually thereafter, 

10 the Secretary shall report to the Congress regarding the 

11 effectiveness of this Act in—

12 (1) protecting Medicare beneficiaries from dis13 criminatory pricing by drug manufacturers, and 

14 (2) making prescription drugs available to 

15 Medicare beneficiaries at substantially reduced 

16 prices. 

17 (b) CONSULTATION.—In preparing such reports, the 

18 Secretary shall consult with public health experts, affected 

19 industries, organizations representing consumers and 

20 older Americans, and other interested persons. 

21 (c) RECOMMENDATIONS.—The Secretary shall in22 clude in such reports any recommendations the Secretary 

23 considers appropriate for changes in this Act to further 

24 reduce the cost of covered outpatient drugs to Medicare 

25 beneficiaries. 
89

•HR 1733 IH 

1 SEC. 207. DEFINITIONS. 

2 In this subtitle: 

3 (1) AVERAGE FOREIGN PRICE.—

4 (A) IN GENERAL.—The term ‘‘average for5 eign price’’ means, with respect to a covered 

6 outpatient drug, the average price that the 

7 manufacturer of the drug realizes on the sale of 

8 drugs with the same active ingredient or ingre9 dients that are consumed in covered foreign na10 tions, taking into account—

11 (i) any rebate, contract term or condi12 tion, or other arrangement (whether with 

13 the purchaser or other persons) that has 

14 the effect of reducing the amount realized 

15 by the manufacturer on the sale of the 

16 drugs; and 

17 (ii) adjustments for any differences in 

18 dosage, formulation, or other relevant 

19 characteristics of the drugs. 

20 (B) EXEMPT TRANSACTIONS.—The Sec21 retary may, by regulation, exempt from the cal22 culation of the average foreign price of a drug 

23 those prices realized by a manufacturer in 

24 transactions that are entered into for charitable 

25 purposes, for research purposes, or under other 

26 unusual circumstances, if the Secretary deter-
90

•HR 1733 IH 

1 mines that the exemption is in the public inter2 est and is consistent with the purposes of this 

3 Act. 

4 (2) COVERED FOREIGN NATION.—The term 

5 ‘‘covered foreign nation’ means Canada, France, 

6 Germany, Italy, Japan, and the United Kingdom. 

7 (3) COVERED OUTPATIENT DRUG.—The term 

8 ‘‘covered outpatient drug’’ has the meaning given 

9 that term in section 1927(k)(2) of the Social Secu10 rity Act (42 U.S.C. 1396r–8(k)(2)). 

11 (4) DEBAR.—The term ‘‘debar’’ means to ex12 clude, pursuant to established administrative proce13 dures, from Government contracting and subcon14 tracting for a specified period of time commensurate 

15 with the seriousness of the failure or offense or the 

16 inadequacy of performance.

17 (5) HOSPICE PROGRAM.—The term ‘‘hospice 

18 program’’ has the meaning given that term under 

19 section 1861(dd)(2) of the Social Security Act (42 

20 U.S.C. 1395x(dd)(2)). 

21 (6) MEDICARE BENEFICIARY.—The term 

22 ‘‘Medicare beneficiary’’ means an individual entitled 

23 to benefits under part A of title XVIII of the Social 

24 Security Act or enrolled under part B of such title, 

25 or both. 
91

•HR 1733 IH 

1 (7) PARTICIPATING MANUFACTURER.—The 

2 term ‘‘participating manufacturer’’ means any man3 ufacturer of drugs or biologicals that, on or after the 

4 date of the enactment of this Act, enters into a con5 tract or agreement with the United States for the 

6 sale or distribution of covered outpatient drugs to 

7 the United States. 

8 (8) SECRETARY.—The term ‘‘Secretary’’ means 

9 the Secretary of Health and Human Services. 

10 SEC. 208. EFFECTIVE DATE. 

11 The Secretary shall implement this Act as expedi12 tiously as practicable and in a manner consistent with the 

13 obligations of the United States. 

14 Subtitle B—Sense of Congress on 

15 cost disparity between identical 

16 prescription drugs sold in the 

17 United States, Canada, and Mex18 ico 

19 SEC. 211. SENSE OF CONGRESS ON COST DISPARITY BE20 TWEEN IDENTICAL PRESCRIPTION DRUGS 

21 SOLD IN THE UNITED STATES, CANADA, AND 

22 MEXICO. 

23 (a) FINDINGS.—The Congress makes the following 

24 findings: 
92

•HR 1733 IH 

1 (1) The Comptroller General of the United 

2 States has found that a consumer in the United 

3 States pays on average one-third more for a pre4 scription drug than a consumer pays for the same 

5 drug in another country. 

6 (2) According to the Comptroller General, costs 

7 for prescription drugs between 1993 and 1998 in8 creased an average of 12.4 percent per year as com9 pared to an increase of 5 percent per year for health 

10 care expenditures in general. 

11 (3) Currently one-third of senior citizens in the 

12 United States are without prescription drug insur13 ance, and these individuals pay on average 15 per14 cent more for a prescription than do citizens with 

15 prescription drug insurance coverage. 

16 (4) It is difficult for many Americans, including 

17 senior citizens, to afford the prescription drugs that 

18 they need to stay healthy. 

19 (5) Many senior citizens in the United States 

20 leave the country and go to Canada or Mexico to 

21 buy prescription drugs that are developed, manufac22 tured, and approved in the United States in order to 

23 buy such drugs at lower prices than such drugs are 

24 sold for in the United States. 
93

•HR 1733 IH 

1 (6) The United States has made a strong com2 mitment to supporting the research and development 

3 of new drugs through taxpayer-supported funding of 

4 the National Institutes of Health, through the re5 search and development tax credit, and through 

6 other means. 

7 (7) The development of new drugs is important 

8 because the use of such drugs enables people to live 

9 longer and lead healthier, more productive lives. 

10 (8) Citizens of other countries should pay a 

11 portion of the research and development costs for 

12 new drugs, or their fair share of such costs, rather 

13 than just reap the benefits of such drugs. 

14 (9) Many State governments are undertaking a 

15 variety of plans to address the needs of citizens who 

16 lack affordable drug coverage. 

17 (b) SENSE OF CONGRESS.—It is the sense of the 

18 Congress that the cost disparity between identical pre19 scription drugs sold in the United States, Canada, and 

20 Mexico should be reduced or eliminated. 
94

•HR 1733 IH 

1 TITLE III—DISALLOWANCE OF 

2 DEDUCTION FOR DIRECT-TO3 CONSUMER ADVERTISEMENT 

4 OF PRESCRIPTION DRUGS. 

5 SEC. 301 DISALLOWANCE OF DEDUCTION FOR DIRECT-TO6 CONSUMER ADVERTISEMENT OF PRESCRIP7 TION DRUGS. 

8 (a) IN GENERAL.—Part IX of subchapter B of chap9 ter 1 of the Internal Revenue Code of 1986 (relating to 

10 items not deductible) is amended by adding at the end 

11 the following new section: 

12 ‘‘SEC. 280I. DIRECT-TO-CONSUMER ADVERTISEMENT OF 

13 PRESCRIPTION DRUGS. 

14 ‘‘No deduction shall be allowed under this chapter for 

15 any amount paid or incurred for a direct-to-consumer ad16 vertisement of a prescription drug.’’. 

17 (b) CLERICAL AMENDMENT.—The table of sections 

18 for part IX of subchapter B of chapter 1 of such Code 

19 is amended by adding at the end thereof the following new 

20 item:

‘‘Sec. 280I. Direct-to-consumer advertisement of prescription 

drugs.’’.

21 (c) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply to amounts paid or incurred after 

23 December 31, 2002. 
95

•HR 1733 IH 

1 TITLE IV—GREATER ACCESS TO 

2 AFFORDABLE PHARMA3 CEUTICALS 

4 SEC. 401. SHORT TITLE. 

5 This title may be cited as the ‘‘Greater Access to Af6 fordable Pharmaceuticals Act of 2003’’. 

7 SEC. 402. FINDINGS; PURPOSES. 

8 (a) FINDINGS.—Congress finds that—

9 (1) prescription drug costs are increasing at an 

10 alarming rate and are a major worry of American 

11 families and senior citizens;

12 (2) enhancing competition between generic drug 

13 manufacturers and brand-name manufacturers can 

14 significantly reduce prescription drug costs for 

15 American families; 

16 (3) the pharmaceutical market has become in17 creasingly competitive during the last decade be18 cause of the increasing availability and accessibility 

19 of generic pharmaceuticals, but competition must be 

20 further stimulated and strengthened; 

21 (4) the Federal Trade Commission has discov22 ered that there are increasing opportunities for drug 

23 companies owning patents on brand-name drugs and 

24 generic drug companies to enter into private finan25 cial deals in a manner that could restrain trade and 
96

•HR 1733 IH 

1 greatly reduce competition and increase prescription 

2 drug costs for consumers; 

3 (5) generic pharmaceuticals are approved by the 

4 Food and Drug Administration on the basis of sci5 entific testing and other information establishing 

6 that pharmaceuticals are therapeutically equivalent 

7 to brand-name pharmaceuticals, ensuring consumers 

8 a safe, efficacious, and cost-effective alternative to 

9 brand-name innovator pharmaceuticals; 

10 (6) the Congressional Budget Office estimates 

11 that—

12 (A) the use of generic pharmaceuticals for 

13 brand-name pharmaceuticals could save pur14 chasers of pharmaceuticals between 

15 $8,000,000,000 and $10,000,000,000 each 

16 year; and 

17 (B) generic pharmaceuticals cost between 

18 25 percent and 60 percent less than brand19 name pharmaceuticals, resulting in an esti20 mated average savings of $15 to $30 on each 

21 prescription; 

22 (7) generic pharmaceuticals are widely accepted 

23 by consumers and the medical profession, as the 

24 market share held by generic pharmaceuticals com25 pared to brand-name pharmaceuticals has more than 
97

•HR 1733 IH 

1 doubled during the last decade, from approximately 

2 19 percent to 43 percent, according to the Congres3 sional Budget Office; 

4 (8) expanding access to generic pharmaceuticals 

5 can help consumers, especially senior citizens and 

6 the uninsured, have access to more affordable pre7 scription drugs; 

8 (9) Congress should ensure that measures are 

9 taken to effectuate the amendments made by the 

10 Drug Price Competition and Patent Term Restora11 tion Act of 1984 (98 Stat. 1585) (referred to in this 

12 section as the ‘‘Hatch-Waxman Act’’) to make ge13 neric drugs more accessible, and thus reduce health 

14 care costs; and 

15 (10) it would be in the public interest if patents 

16 on drugs for which applications are approved under 

17 section 505(c) of the Federal Food, Drug, and Cos18 metic Act (21 U.S.C. 355(c)) were extended only 

19 through the patent extension procedure provided 

20 under the Hatch-Waxman Act rather than through 

21 the attachment of riders to bills in Congress. 

22 (b) PURPOSES.—The purposes of this title are—

23 (1) to increase competition, thereby helping all 

24 Americans, especially seniors and the uninsured, to 

25 have access to more affordable medication; and 
98

•HR 1733 IH 

1 (2) to ensure fair marketplace practices and 

2 deter pharmaceutical companies (including generic 

3 companies) from engaging in anticompetitive action 

4 or actions that tend to unfairly restrain trade. 

5 SEC. 403. ACCELERATED GENERIC DRUG COMPETITION. 

6 (a) IN GENERAL.—Section 505(j)(5) of the Federal 

7 Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)(5)) is 

8 amended—

9 (1) in subparagraph (B)(iv), by striking sub10 clause (II) and inserting the following: 

11 ‘‘(II) the earlier of—

12 ‘‘(aa) the date of a final decision of a 

13 court in an action described in clause (iii) 

14 (from which no appeal can or has been 

15 taken); or 

16 ‘‘(bb) the date of a settlement order 

17 or consent decree signed by a Federal 

18 judge that enters a final judgment and in19 cludes a finding that the patents that are 

20 the subject of the certification are invalid 

21 or not infringed;’’; 

22 (2) by redesignating subparagraphs (C) and 

23 (D) as subparagraphs (E) and (F), respectively; and 

24 (3) by inserting after subparagraph (B) the fol25 lowing: 
99

•HR 1733 IH 

1 ‘‘(C) FORFEITURE OF 180-DAY PERIOD.—

2 ‘‘(i) IN GENERAL.—The 180-day pe3 riod described in subparagraph (B)(iv) 

4 shall be forfeited by the previous applicant 

5 and become available to the next applicant 

6 submitting an application containing a cer7 tification described in paragraph 

8 (2)(A)(vii)(IV) if—

9 ‘‘(I) the previous applicant fails 

10 to market the drug within 90 days 

11 after the date on which the approval 

12 of the application for the drug is 

13 made effective under subparagraph 

14 (B)(iii); 

15 ‘‘(II) the previous applicant with16 draws the application; 

17 ‘‘(III) the previous applicant 

18 amends the certification from a cer19 tification under subclause (IV) to a 

20 certification under paragraph 

21 (2)(A)(vii)(III), either voluntarily or 

22 as a result of a settlement or defeat in 

23 patent litigation; 

24 ‘‘(IV) the previous applicant fails 

25 to get tentative approval of the appli-
100

•HR 1733 IH 

1 cation within 30 months after the 

2 date on which the application is filed, 

3 unless the failure is caused by—

4 ‘‘(aa) a change in the re5 quirements for tentative approval 

6 of the application imposed after 

7 the date on which the application 

8 was filed; or 

9 ‘‘(bb) other extraordinary or 

10 unusual circumstances, as deter11 mined by the Secretary; 

12 ‘‘(V) in a case in which, after the 

13 date on which the previous application 

14 was submitted under this subsection, 

15 new patent information is submitted 

16 for the drug under subsection (c)(2) 

17 for a patent for which certification is 

18 required under paragraph 

19 (2)(A)(vii)(IV), the previous applicant 

20 fails to challenge the patent that is 

21 the subject of the information within 

22 60 days after the date on which the 

23 patent information is submitted; or 

24 ‘‘(VI) the previous applicant is 

25 determined by the Secretary, after a 
101

•HR 1733 IH 

1 fair and sufficient hearing and in con2 sultation with the Federal Trade 

3 Commission, to have engaged in anti4 competitive or collusive conduct, or 

5 any other conduct intended to unfairly 

6 monopolize the commercial manufac7 turing of the drug of the application. 

8 ‘‘(ii) AVAILABILITY.—The 180-day pe9 riod described in subparagraph (B)(iv) 

10 shall be available only to—

11 ‘‘(I) the previous applicant sub12 mitting an application for a drug 

13 under this subsection containing a 

14 certification described in paragraph 

15 (2)(A)(vii)(IV) with respect to any 

16 patent; or 

17 ‘‘(II) under clause (i), the next 

18 applicant submitting an application 

19 for a drug under this subsection con20 taining such a certification with re21 spect to any patent; 

22 even if an application has been submitted 

23 for the drug under this subsection con24 taining such a certification with respect to 

25 a different patent. 
102

•HR 1733 IH 

1 ‘‘(iii) APPLICABILITY.—The 180-day 

2 period described in subparagraph (B)(iv) 

3 shall apply only if—

4 ‘‘(I) the application contains a 

5 certification described in paragraph 

6 (2)(A)(vii)(IV); and 

7 ‘‘(II) an action is brought for in8 fringement of a patent that is the 

9 subject of the certification or the ap10 plicant brings an action (not later 

11 than 50 days after the date on which 

12 the notice provided under paragraph 

13 (2)(B)(ii) was received), against the 

14 holder of the approved application for 

15 the listed drug.’’. 

16 (b) EFFECTIVE DATE.—The amendment made by 

17 this section shall be effective only with respect to an appli18 cation filed under section 505(j) of the Federal Food, 

19 Drug, and Cosmetic Act (21 U.S.C. 355(j)) for a listed 

20 drug for which no certification under section 

21 505(j)(2)(A)(vii)(IV) of that Act was made before the date 

22 of the enactment of this Act. 

23 SEC. 404. BIOEQUIVALENCE TESTING METHODS. 

24 Section 505(j)(8)(B) of the Federal Food, Drug, and 

25 Cosmetic Act (21 U.S.C. 355(j)(8)(B)) is amended—
103

•HR 1733 IH 

1 (1) in clause (i), by striking ‘‘or’’ at the end; 

2 (2) in clause (ii), by striking the period at the 

3 end and inserting ‘‘; or’’; and 

4 (3) by adding at the end the following: 

5 ‘‘(iii)(I) clauses (i) and (ii) are not applica6 ble, as determined by the Secretary; 

7 ‘‘(II) the effects of the drug and the listed 

8 drug do not show a significant difference based 

9 on tests (other than tests that assess rate and 

10 extent of absorption), including—

11 ‘‘(aa) a bioequivalence study with a 

12 pharmacodynamic endpoint; 

13 ‘‘(bb) a bioequivalence study with a 

14 clinical endpoint; 

15 ‘‘(cc) in vitro methods; or 

16 ‘‘(dd) any other methodology that 

17 demonstrates that no significant dif18 ferences in therapeutic effects of active in19 gredients are expected; and 

20 ‘‘(III) limited confirmatory studies to sup21 plement the bioequivalence testing are consid22 ered necessary by the Secretary.’’. 

23 SEC. 405. CITIZEN PETITIONS. 

24 Section 505(j)(5) of the Federal Food, Drug, and 

25 Cosmetic Act (21 U.S.C. 355(j)(5)) (as amended by sec-
104

•HR 1733 IH 

1 tion 403(a)) is amended by inserting after subparagraph 

2 (C) the following: 

3 ‘‘(D) CITIZEN PETITIONS.—

4 ‘‘(i) IN GENERAL.—Notwithstanding 

5 any other provision of law, any petition 

6 submitted under section 10.30 of title 21, 

7 Code of Federal Regulations (or any suc8 cessor regulation), shall include a state9 ment that to the best knowledge and belief 

10 of the petitioner, the petition—

11 ‘‘(I) includes all information and 

12 views on which the petitioner relies; 

13 ‘‘(II) is well grounded in fact and 

14 is warranted by law (including regula15 tions); 

16 ‘‘(III) is not submitted for any 

17 improper purpose, such as to harass 

18 or cause unnecessary delay; 

19 ‘‘(IV) does not contain a materi20 ally false, misleading, or fraudulent 

21 statement that the petitioner has 

22 knowingly and willingly included; and 

23 ‘‘(V) includes all representative 

24 data and information known to the 
105

•HR 1733 IH 

1 petitioner that is favorable or unfavor2 able to the petition. 

3 ‘‘(ii) APPLICABILITY OF CRIMINAL

4 PROVISION.—Section 1001 of title 18, 

5 United States Code, shall apply to a per6 son that submits a petition under section 

7 10.30 of title 21, Code of Federal Regula8 tions (or any successor regulation). 

9 ‘‘(iii) INVESTIGATIONS.—

10 ‘‘(I) IN GENERAL.—The Federal 

11 Trade Commission shall investigate, 

12 on receipt of a complaint or upon its 

13 own initiative, any petition submitted 

14 under section 10.30 of title 21, Code 

15 of Federal Regulations (or any suc16 cessor regulation), that may have been 

17 submitted for an improper purpose, 

18 such as to delay competition or agen19 cy action. 

20 ‘‘(II) REFERRAL.—If the Com21 mission finds that a petitioner has en22 gaged in conduct that may be illegal, 

23 the Commission shall refer the peti24 tion to the Antitrust Division of the 
106

•HR 1733 IH 

1 Department of Justice for further ac2 tion. 

3 ‘‘(iv) NOTICE OF RECEIPT OF CONSID4 ERATION.—

5 ‘‘(I) IN GENERAL.—A person 

6 that submits a petition under section 

7 10.30 of title 21, Code of Federal 

8 Regulations (or any successor regula9 tion), shall provide a written notice to 

10 the Federal Trade Commission if the 

11 person receives any consideration for 

12 submitting the petition. 

13 ‘‘(II) A notice under subclause 

14 (I) shall include—

15 ‘‘(aa) the name of the per16 son or entity that provided the 

17 consideration; 

18 ‘‘(bb) the dollar value of the 

19 consideration, if provided in cash, 

20 or a description of such consider21 ation; 

22 ‘‘(cc) the date on which the 

23 consideration was provided; and 
107

•HR 1733 IH 

1 ‘‘(dd) any other information 

2 that the Commission requires to 

3 be disclosed.’’. 

4 SEC. 406. PATENT CERTIFICATION. 

5 (a) ABBREVIATED NEW DRUG APPLICATIONS.—Sec6 tion 505(j)(5) of the Federal Food, Drug, and Cosmetic 

7 Act (21 U.S.C. 355(j)(5)) (as amended by section 

8 403(a)(2)) is amended—

9 (1) in subparagraph (B), by striking clause (iii) 

10 and inserting the following: 

11 ‘‘(iii) CERTIFICATION THAT PATENT

12 IS INVALID OR WILL NOT BE INFRINGED.—

13 ‘‘(I) IN GENERAL.—Except as 

14 provided in subclauses (II) and (III), 

15 if the applicant made a certification 

16 described in paragraph 

17 (2)(A)(vii)(IV), the approval shall be 

18 made effective on the expiration of 45 

19 days after the date on which the no20 tice provided under paragraph 

21 (2)(B)(ii) was received. 

22 ‘‘(II) ACTION FOR PATENT IN23 FRINGEMENT.—If an action is 

24 brought for infringement of a patent 

25 that is the subject of the certification 
108

•HR 1733 IH 

1 before the expiration of the 45-day pe2 riod beginning on the date on which 

3 the notice provided under paragraph 

4 (2)(B)(ii) was received, the approval 

5 shall be made effective on the expira6 tion of the 45-day period unless the 

7 court grants a preliminary injunction 

8 prohibiting the applicant from engag9 ing in the commercial manufacture or 

10 sale of the drug until the court de11 cides the issues of patent validity and 

12 infringement. 

13 ‘‘(III) PATENT INVALID OR NOT

14 INFRINGED.—If the court decides that 

15 the patent is invalid or was not in16 fringed, the approval shall be made ef17 fective on the date of the court deci18 sion. 

19 ‘‘(IV) PATENT INFRINGED.—If 

20 the court decides that the patent was 

21 infringed, the approval shall be made 

22 effective on such date as the court or23 ders under section 271(e)(4)(A) of 

24 title 35, United States Code. 
109

•HR 1733 IH 

1 ‘‘(V) PROCEDURE.—In an action 

2 described in subclause (II)—

3 ‘‘(aa) each of the parties 

4 shall reasonably cooperate in ex5 pediting the action; 

6 ‘‘(bb) until the expiration of 

7 45 days after the date the notice 

8 provided under paragraph 

9 (2)(B)(i) was received, no civil 

10 action may be brought under sec11 tion 2201 of title 28, United 

12 States Code, for a declaratory 

13 judgment with respect to the pat14 ent, except as provided in sub15 paragraph (H); and

16 ‘‘(cc) any such civil action 

17 shall be brought in the judicial 

18 district in which the defendant 

19 has its principal place of business 

20 or a regular and established place 

21 of business.’’; and 

22 (2) by adding at the end the following: 

23 ‘‘(G) CIVIL ACTION FOR DECLARATORY

24 JUDGMENT.—A person that files an abbreviated 

25 application for a new drug under this para-
110

•HR 1733 IH 

1 graph may bring a civil action against the hold2 er of an approved application for a listed drug 

3 for a declaratory judgment to determine wheth4 er the patent that claims the listed drug or a 

5 method of using the drug is invalid or will not 

6 be infringed. 

7 ‘‘(H) CIVIL ACTION TO DETERMINE LEGAL

8 STATUS.—Notwithstanding any other provision 

9 of law, if information on a patent for a listed 

10 drug has been published under subsection (c)(2) 

11 for at least 1 year after the date on which an 

12 abbreviated application for approval of a new 

13 drug was filed under this subsection in relation 

14 to the listed drug, the person that filed the ab15 breviated application or the holder of the ap16 proved application for the listed drug may im17 mediately bring a civil action to determine the 

18 legal status of the patent for the listed drug.’’. 

19 (b) NEW DRUG APPLICATIONS.—Section 505(c)(3) 

20 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 

21 355(c)(3)) is amended by striking subparagraph (C) and 

22 inserting the following: 

23 ‘‘(C) CERTIFICATION THAT PATENT IS IN24 VALID OR WILL NOT BE INFRINGED.—
111

•HR 1733 IH 

1 ‘‘(i) IN GENERAL.—Except as pro2 vided in clauses (ii) and (iii), if the appli3 cant made a certification described in sub4 section (b)(2)(A)(iv), the approval shall be 

5 made effective on the expiration of 45 days 

6 after the date on which the notice provided 

7 under subsection (b)(3)(B) was received. 

8 ‘‘(ii) ACTION BROUGHT BEFORE EXPI9 RATION OF 45 DAYS.—If an action is 

10 brought for infringement of a patent that 

11 is the subject of the certification before the 

12 expiration of the 45-day period beginning 

13 on the date the notice provided under sub14 section (b)(3)(B) was received, the ap15 proval shall be made effective on the expi16 ration of the 45-day period unless the 

17 court grants a preliminary injunction pro18 hibiting the applicant from engaging in the 

19 commercial manufacture or sale of the 

20 drug until the court decides the issues of 

21 patent validity and infringement. 

22 ‘‘(iii) PATENT INVALID OR NOT IN23 FRINGED.—If the court decides that the 

24 patent is invalid or not infringed, the ap-
112

•HR 1733 IH 

1 proval shall be made effective on the date 

2 of the court decision. 

3 ‘‘(iv) PATENT INFRINGED.—If the 

4 court decides that the patent has been in5 fringed, the approval may be made effec6 tive on such date as the court orders under 

7 section 271(e)(4)(A) of title 35, United 

8 States Code. 

9 ‘‘(v) PROCEDURE.—In an action de10 scribed in clause (ii)—

11 ‘‘(I) each of the parties shall rea12 sonably cooperate in expediting the 

13 action; 

14 ‘‘(II) until the expiration of 45 

15 days after the date the notice provided 

16 under subsection (b)(3)(B) was re17 ceived, no civil action may be brought 

18 under section 2201 of title 28, United 

19 States Code, for a declaratory judg20 ment with respect to the patent, ex21 cept as provided in subsection 

22 (j)(5)(H); and 

23 ‘‘(III) any such civil action shall 

24 be brought in the judicial district 

25 where the defendant has its principal 
113

•HR 1733 IH 

1 place of business or a regular and es2 tablished place of business.’’. 

3 (c) EFFECTIVE DATE.—The amendments made by 

4 this section shall not apply to an application submitted 

5 under section 505 of the Federal Food, Drug, and Cos6 metic Act (21 U.S.C. 355) before the date of the enact7 ment of this Act. 

8 SEC. 407. PATENT INFORMATION. 

9 Section 505 of the Federal Food, Drug, and Cosmetic 

10 Act (21 U.S.C. 355) is amended—

11 (1) in subsection (b), by striking ‘‘(b)(1) Any 

12 person’’ and all that follows through paragraph (1) 

13 and inserting the following: 

14 ‘‘(b) APPLICATIONS.—

15 ‘‘(1) IN GENERAL.—

16 ‘‘(A) FILING.—Any person may file with 

17 the Secretary an application with respect to any 

18 drug subject to subsection (a). 

19 ‘‘(B) CONTENTS.—A person that files an 

20 application shall submit to the Secretary as a 

21 part of the application with respect to a drug—

22 ‘‘(i) full reports of investigations that 

23 have been made to show whether or not 

24 such drug is safe for use and whether the 

25 drug is effective in use; 
114

•HR 1733 IH 

1 ‘‘(ii) a full list of the articles used as 

2 components of the drug; 

3 ‘‘(iii) a full statement of the composi4 tion of the drug; 

5 ‘‘(iv) a full description of the methods 

6 used in, and the facilities and controls 

7 used for, the manufacture, processing, and 

8 packing of the drug; 

9 ‘‘(v) such samples of the drug and of 

10 the articles used as components of the 

11 drug as the Secretary may require; and 

12 ‘‘(vi) specimens of the labeling pro13 posed to be used for the drug. 

14 ‘‘(C) PATENT INFORMATION.—

15 ‘‘(i) IN GENERAL.—The applicant 

16 shall file with the application the patent 

17 number and expiration date of any patent 

18 that claims a drug or method of using a 

19 drug and with respect to which a claim of 

20 patent infringement could reasonably be 

21 asserted if a person not licensed by the 

22 owner engaged in the manufacture, use, or 

23 sale of the drug for which the applicant 

24 submitted the application. 
115

•HR 1733 IH 

1 ‘‘(ii) AMENDMENT OF APPLICATION.—

2 If an application is filed with respect to a 

3 drug and a patent as described in clause 

4 (i) is issued after the filing date but before 

5 approval of the application, the applicant 

6 shall amend the application to include the 

7 information required by clause (i). 

8 ‘‘(iii) PUBLICATION OF INFORMA9 TION.—On approval of the application, the 

10 Secretary shall publish information sub11 mitted under clauses (i) and (ii). 

12 ‘‘(D) GUIDANCE.—The Secretary shall, in 

13 consultation with the Director of the National 

14 Institutes of Health and with representatives of 

15 the drug manufacturing industry, review and 

16 develop guidance, as appropriate, on the inclu17 sion of women and minorities in clinical trials 

18 required by subparagraph (B)(i).’’; and 

19 (2) in paragraph (2)(A)—

20 (A) by striking ‘‘which claims’’ the first 

21 place it appears and all that follows through 

22 ‘‘subsection and’’; and 

23 (B) by striking ‘‘subsection (c)—’’ and in24 serting ‘‘and with respect to which a claim of 

25 patent infringement could reasonably be as-
116

•HR 1733 IH 

1 serted if a person not licensed by the owner en2 gaged in the manufacture, use, or sale of the 

3 drug for which the investigations were con4 ducted—’’; 

5 (3) in the first sentence of subsection (c)(2)—

6 (A) by inserting ‘‘such patent information’’ 

7 after ‘‘shall file’’; and

8 (B) by striking ‘‘Secretary,’’ and all that 

9 follows and inserting ‘‘Secretary.’’; 

10 (4) in subsection (j)(2)(vii), by striking ‘‘which 

11 claims the listed drug’’ and all that follows through 

12 ‘‘under this subsection and’’ and inserting ‘‘for the 

13 listed drug referred to in clause (i)’’; and 

14 (5) by adding at the end the following: 

15 ‘‘(o) PATENT INFORMATION.—

16 ‘‘(1) APPLICABILITY.—This subsection applies 

17 to a holder of an approved application under sub18 section (c) that files a patent—

19 ‘‘(A) that claims, with regard to a drug of 

20 the application, a drug or method of using a 

21 drug; and 

22 ‘‘(B) for which a claim of patent infringe23 ment could reasonably be asserted if a person 

24 not licensed by the owner engaged in the manu-
117

•HR 1733 IH 

1 facture, use, or sale of the drug, after the date 

2 of approval of the application. 

3 ‘‘(2) CERTIFICATION.—A holder of a patent de4 scribed in paragraph (1) shall—

5 ‘‘(A) inform the Secretary of the filing of 

6 the patent; and 

7 ‘‘(B) certify that the information is a com8 plete and accurate listing of all such patents. 

9 ‘‘(3) SECRETARY.—The Secretary shall list the 

10 information provided under paragraph (2) in accord11 ance with subsection (j)(7).’’. 

12 SEC. 408. REPORT. 

13 (a) IN GENERAL.—Not later than the date that is 

14 5 years after the date of the enactment of this Act, the 

15 Federal Trade Commission shall submit to Congress a re16 port describing the extent to which implementation of the 

17 amendments made by this title—

18 (1) has enabled products to come to market in 

19 a fair and expeditious manner, consistent with the 

20 rights of patent owners under intellectual property 

21 law; and 

22 (2) has promoted lower prices of drugs and 

23 greater access to drugs through price competition. 
118

•HR 1733 IH 

1 (b) AUTHORIZATION OF APPROPRIATIONS.—There is 

2 authorized to be appropriated to carry out this section 

3 $5,000,000. 

4 TITLE V—NONDISCRIMINATION 

5 AGAINST IMPORTS OF PRE6 SCRIPTION DRUGS. 

7 SEC. 501. SHORT TITLE. 

8 This title may be cited as the ‘‘Preserving Access to 

9 Safe Affordable Canadian Medicines Act of 2003’’. 

10 SEC. 502. FINDINGS. 

11 The Congress makes the following findings: 

12 (1) Prescription drug manufacturers charge 

13 substantially more for their products in the United 

14 States than in Canada. 

15 (2) Many Americans cannot afford the higher 

16 U.S. prices and are forced to either go without their 

17 needed medications or sacrifice other necessities of 

18 life in order to afford them. 

19 (3) Increasingly, Americans have turned to the 

20 Canadian market to purchase their needed medica21 tions at substantially lower prices and the Food and 

22 Drug Administration now estimates that two million 

23 parcels containing prescription drugs enter the U.S. 

24 for personal use each year. 
119

•HR 1733 IH 

1 (4) The Congressional Research Service has 

2 confirmed that Canada has a drug approval and dis3 tribution system comparable to that of the United 

4 States. 

5 (5) Drug manufacturers are trying to cut off 

6 the supply of prescription drugs accessed by U.S. 

7 consumers on the Canadian market in blatant dis8 regard of the health consequences for Americans. 

9 SEC. 503. NONDISCRIMINATION AGAINST IMPORTS OF PRE10 SCRIPTION DRUGS. 

11 (a) IN GENERAL.—Chapter VIII of the Federal 

12 Food, Drug, and Cosmetic Act (21 U.S.C. 381 et seq.) 

13 is amended—

14 (1) in section 801(d)(1), by striking ‘‘section 

15 804,’’ and inserting ‘‘sections 804 and 805,’’; and

16 (2) by adding at the end the following: 

17 ‘‘PROHIBITION AGAINST DISCRIMINATION AGAINST

18 IMPORTS

19 ‘‘SEC. 805. (a) REGULATIONS.—The Secretary, after 

20 consultation with the United States Trade Representative 

21 and the Commissioner of Customs, shall promulgate regu22 lations prohibiting manufacturers of prescription medica23 tions from taking actions that discriminate against, or 

24 cause other persons to discriminate against, United States 

25 consumers regarding the purchase of prescription medica26 tions from Canadian pharmacies. 
120

•HR 1733 IH 

1 ‘‘(b) NONDISCRIMINATION.—No manufacturer of a 

2 prescription medication may take actions that discrimi3 nate against, or cause other persons to discriminate 

4 against, United States consumers regarding the purchase 

5 of a prescription medication from Canadian pharmacies. 

6 ‘‘(c) DEFINITION.—For purposes of this section, the 

7 term ‘discrimination’ means a contract provision, a limita8 tion on supply, or other measure which has the effect of 

9 providing U.S. consumers access to prescription medica10 tions on terms or conditions that are less favorable than 

11 the terms or conditions provided to any foreign purchaser 

12 of such products, or otherwise has the effect of restricting 

13 or reducing access by United States consumers to a pre14 scription medication from Canadian pharmacies.’’. 

15 (b) PROHIBITED ACT.—Section 301 of the Federal 

16 Food, Drug, and Cosmetic Act (21 U.S.C. 331) is amend17 ed by adding at the end the following: 

18 ‘‘(hh) Discrimination by a manufacturer in violation 

19 of section 805.’’. 

20 (c) CIVIL PENALTIES.—Section 303 of the Federal 

21 Food, Drug, and Cosmetic Act (21 U.S.C. 333) is amend22 ed by adding at the end the following subsection: 

23 ‘‘(h)(1) Any manufacturer of a prescription medica24 tion that knowingly violates section 805(b) shall be liable 
121

•HR 1733 IH 

1 to the United States for a civil penalty in an amount not 

2 to exceed $1,000,000. 

3 ‘‘(2) Paragraphs (3) through (5) of subsection (g) 

4 apply with respect to a civil penalty under paragraph (1) 

5 of this subsection to the same extent and in the same man6 ner as such paragraphs (3) through (5) apply with respect 

7 to a civil penalty under paragraph (1) or (2) of subsection 

8 (g).’’. 

9 TITLE VI—REQUIREMENT FOR 

10 WRITTEN STATEMENT OF 

11 TOTAL COST OF RESEARCH 

12 FOR APPROVAL OF NEW 

13 DRUGS 

14 SEC. 601. REQUIREMENT FOR WRITTEN STATEMENT OF 

15 TOTAL COST OF RESEARCH FOR APPROVAL 

16 OF NEW DRUGS. 

17 Notwithstanding any other provision of law, the Com18 missioner of Food and Drugs may not approve any appli19 cation for a new drug submitted on or after the date of 

20 the enactment of this Act by an entity that does not, be21 fore completion of the approval process, provide to the 

22 Secretary of Health and Human Services a written state23 ment specifying the total cost of research and development 

24 with respect to such drug, by stage of drug development, 
122

•HR 1733 IH 

1 including a separate statement specifying the portion paid 

2 with Federal funds and the portion paid with State funds. 

3 TITLE VII—PROHIBITION ON 

4 CERTAIN CAMPAIGN CON5 TRIBUTIONS 

6 SEC. 701. PROHIBITION ON CAMPAIGN CONTRIBUTIONS BY 

7 CHIEF EXECUTIVE OFFICERS OF PHARMA8 CEUTICAL COMPANIES. 

9 Section 315 of Federal Election Campaign Act of 

10 1971 (2 U.S.C. 441a) is amended by adding at the end 

11 the following new subsection: 

12 ‘‘(k) PROHIBITION ON CAMPAIGN CONTRIBUTIONS

13 BY CHIEF EXECUTIVE OFFICERS OF PHARMACEUTICAL

14 COMPANIES.—No individual who is a chief executive offi15 cer of a pharmaceutical company may make a contribution 

16 to a political party or candidate.’’. 

17 TITLE VIII—ADDITIONAL 

18 PROVISIONS 

19 SEC. 801. REPEAL OF FEBRUARY 2002 INCREASE IN COPAY20 MENTS FOR MEDICATIONS FURNISHED TO 

21 VETERANS BY THE DEPARTMENT OF VET22 ERANS AFFAIRS. 

23 (a) RESCISSION OF INCREASE IN VETERANS MEDICA24 TION COPAYMENT.—The February 2002 veterans medica25 tion copayment increase is hereby rescinded. The copay-
123

•HR 1733 IH 

1 ment amount for purposes of section 1722A(a) of title 38, 

2 United States Code, is reinstated as $2, effective as of 

3 the date of the enactment of this Act. 

4 (b) FEBRUARY 2002 VETERANS MEDICATION CO5 PAYMENT INCREASE DEFINED.—For purposes of sub6 section (a), the term ‘‘February 2002 veterans medication 

7 copayment increase’’ means the increase in the copayment 

8 amount in effect under section 1722A(a) of title 38, 

9 United States Code, that was effective on February 4, 

10 2002, in accordance with an announcement by the Sec11 retary of Veterans Affairs of December 6, 2001, pursuant 

12 to a direction from the President. 

13 SEC. 802. SOCIAL SECURITY AND MEDICARE LOCK BOX. 

14 All Social Security and Medicare funds shall be 

15 walled off into a lock box that may not be raided for new 

16 programs or tax cuts for the rich.

Æ