I 

108TH CONGRESS 

1ST SESSION H. R. 194

To amend title XVIII of the Social Security Act with respect to reform 

of payment for drugs and biologicals under the Medicare Program. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 7, 2003

Mr. STARK introduced the following bill; which was referred to the Committee 

on Energy and Commerce, and in addition to the Committee on Ways 

and Means, 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 title XVIII of the Social Security Act with respect 

to reform of payment for drugs and biologicals under 

the Medicare Program.

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. 

4 This Act may be cited as the ‘‘Medicare Market Ac5 quisition Drug Price Act of 2003’’.
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1 SEC. 2. REFORM OF PAYMENT FOR DRUGS AND 

2 BIOLOGICALS UNDER THE MEDICARE PRO3 GRAM. 

4 (a) PAYMENT REFORM.—

5 (1) IN GENERAL.—Section 1842(o) of the So6 cial Security Act (42 U.S.C. 1395u(o)) is amended 

7 to read as follows: 

8 ‘‘(o) PAYMENT FOR DRUGS AND BIOLOGICALS.—

9 ‘‘(1) GENERAL RULE.—If a physician’s, sup10 plier’s, or any other person’s bill or request for pay11 ment for services includes a charge for a drug or bi12 ological for which payment may be made under this 

13 part and the drug or biological is not paid on a cost 

14 or prospective payment basis as otherwise provided 

15 in this part, the amount payable for the drug or bio16 logical shall be based on the following: 

17 ‘‘(A) MULTI-SOURCE (GENERIC) DRUGS.—

18 In the case of a drug or biological that meets 

19 the requirements for a multi-source drug under 

20 subclauses (I) and (II) of section 

21 1927(k)(7)(A)(i), 105 percent of the volume22 weighted median average acquisition price for 

23 any drug or biological covered under the same 

24 medicare HCPCS code. 

25 ‘‘(B) SINGLE SOURCE (BRAND) DRUGS AND

26 BIOLOGICALS.—In the case of a drug or biologi-
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1 cal that meets the requirements for a single 

2 source drug under section 1927(k)(7)(A)(iv), 

3 105 percent of the average acquisition price for 

4 the drug or biological. 

5 ‘‘(C) ACCESS EXCEPTION.—The Secretary 

6 may modify the rate otherwise applicable in 

7 order to assure access to necessary drugs and 

8 biologicals in the case of sole community pro9 viders in rural and other areas where the pro10 viders are not reasonably able to obtain the 

11 drugs and biologicals at the payment rates oth12 erwise applicable. Such modification shall not 

13 result in a change of more than 15 percent of 

14 the rate otherwise applicable. 

15 ‘‘(D) DATA-RELATED EXCEPTION.—If the 

16 Secretary determines that there is insufficient 

17 data available with respect to compute an aver18 age acquisition price for a drug or biological for 

19 a quarter or that, because of a significant 

20 change in price from quarter-to-quarter, the 

21 available data on the average acquisition price 

22 does not accurately reflect the actual, current 

23 acquisition cost for the drug or biological, the 

24 Secretary may substitute for the quarters in-
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1 volved an appropriate payment for the drug or 

2 biological for such average acquisition price. 

3 ‘‘(E) APPLICATION OF NDC CODES.—If the 

4 Secretary determines that it is appropriate to 

5 provide for payment under this subsection using 

6 national drug code (NDC) instead of HCPCS 

7 codes, in applying subparagraph (A) the ref8 erence to the same HCPCS code shall be 

9 deemed a reference to the appropriate national 

10 drug codes for those drugs or biologicals that 

11 are therapeutically and pharmaceutically equiv12 alent and bioequivalent (as defined for purposes 

13 of section 1927(k)(7)(A)). 

14 ‘‘(2) DEFINITION OF AVERAGE ACQUISITION

15 PRICE.—

16 ‘‘(A) IN GENERAL.—For purposes of this 

17 subsection, the term ‘average acquisition price’ 

18 means, with respect to a drug or biological and 

19 with respect to each dosage form and strength 

20 of the drug or biological product (without re21 gard to any special packaging, labeling, or iden22 tifiers on the dosage form or product or pack23 age), the average of all final sales prices 

24 charged by the manufacturer of the drug or bio25 logical product in the United States, excluding 
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1 sales exempt from inclusion in the calculation of 

2 best price under section 1927(c)(1)(C) (other 

3 than under clause (ii)(III) of such section) and 

4 excluding sales subject to a rebate under section 

5 1927, as reported under paragraph (3). 

6 ‘‘(B) NET PRICE.—Such average acquisi7 tion price shall be calculated net of all of the 

8 following (as estimated by the Secretary): 

9 ‘‘(i) Volume discounts. 

10 ‘‘(ii) Prompt pay discounts and cash 

11 discounts. 

12 ‘‘(iii) Charge-backs. 

13 ‘‘(iv) Short-dated product discounts 

14 (for spoilage and other factors). 

15 ‘‘(v) Free goods and services. 

16 ‘‘(vi) Rebates. 

17 ‘‘(vii) All other price concessions pro18 vided by the drug manufacturer. 

19 The Secretary may make subsequent adjust20 ments in such average acquisition price to take 

21 into account updated information and dif22 ferences between the price previously estimated 

23 and the actual average acquisition price. 
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1 ‘‘(C) WEIGHTING.—The average of all 

2 final sales prices described in subparagraph (A) 

3 shall be determined by dividing—

4 ‘‘(i) the sum of all final prices charged 

5 by the manufacturer (net of the adjust6 ments made under subparagraph (B)) for 

7 sales in the period involved that are in8 cluded in subparagraph (A) for the drug or 

9 biological, by 

10 ‘‘(ii) the total number of units of such 

11 sales in the period. 

12 ‘‘(D) DISTRIBUTION OF REPORTS.—The 

13 Secretary shall promptly distribute applicable 

14 payment rates under this subsection to carriers 

15 and fiscal intermediaries and other contractors 

16 that make payment for drugs and biologicals 

17 under this section in order to apply a uniform 

18 reimbursement rate under this section. 

19 ‘‘(3) PRICE REPORTING REQUIREMENT.—

20 ‘‘(A) IN GENERAL.—As a condition for 

21 payment for any drug or biological of a manu22 facturer under this subsection, the manufac23 turer of the drug or biological shall—

24 ‘‘(i) report, on a quarterly basis, to 

25 the Secretary (or the Secretary’s designee)
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1 the manufacturer’s average acquisition 

2 price and the information required under 

3 subparagraph (C) for all drugs and 

4 biologicals of the manufacturer by national 

5 drug code (NDC); 

6 ‘‘(ii) maintain such records (in written 

7 or electronic form) regarding such sales 

8 and prices for all such drugs and 

9 biologicals as may be necessary to audit 

10 the information so reported or required to 

11 be reported; and 

12 ‘‘(iii) provide the Secretary with ac13 cess to such records in order to permit the 

14 Secretary to audit information so reported 

15 or required to be reported. 

16 ‘‘(B) PENALTIES.—The provisions of sec17 tion 1927(b)(3)(C) shall apply with respect to 

18 the reporting of information under subpara19 graph (A) in the same manner as it applies to 

20 the reporting of information under section 

21 1927(b)(3)(A), except that the reference in 

22 clause (i) of such section to $10,000 is deemed 

23 a reference to $100,000 and any reference to a 

24 suspension of an agreement is deemed a ref25 erence to a suspension of payment for the drug 
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1 or biological involved under this part. The Sec2 retary shall promptly refer to the Inspector 

3 General of the Department of Health and 

4 Human Services and, if appropriate, to appro5 priate officials in the Department of Justice 

6 cases in which the Secretary becomes aware of 

7 a false price representation made in the infor8 mation submitted under this paragraph. 

9 ‘‘(C) FORM OF REPORTING.—Information 

10 required to be reported under subparagraph 

11 (A)(i) shall be reported in a form and manner 

12 specified by the Secretary. The information re13 quired to be reported shall include the identi14 fication of the generic name of the drug or bio15 logical and its brand name (if any), the national 

16 drug code (NDC) and the HCPCS code as17 signed to the drug or biological, the dosage 

18 form, strength, volume, and package size in19 volved. The information for a quarter shall be 

20 submitted not later than 30 days after the end 

21 of the quarter. The information shall be accom22 panied by a written and signed certification by 

23 an officer of the manufacturer attesting to the 

24 accuracy of the information reported. Such in25 formation shall include updated information on 
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1 the net price realized (taking into account re2 bates and other amounts affecting net price), 

3 regardless of the period for which such a rebate 

4 or other adjustment in net price might have 

5 been earned. 

6 ‘‘(D) AUDITING.—The Secretary shall 

7 audit on a periodic basis information reported 

8 or required to be reported under this para9 graph. The Secretary may conduct such inde10 pendent price gathering activities, such as sur11 veys and review of published catalog informa12 tion or other transactional information, as may 

13 be appropriate to verify the accuracy of the in14 formation reported. 

15 ‘‘(4) DISPENSING FEE.—If payment for a drug 

16 or biological is made to a licensed pharmacy ap17 proved to dispense drugs or biologicals under this 

18 part, the Secretary shall pay a dispensing fee (less 

19 the applicable deductible and coinsurance amounts) 

20 to the pharmacy. Such a dispensing fee shall be sub21 ject to adjustment from year to year based upon 

22 changes in the consumer price index over time and 

23 may be adjusted as the Secretary determines to be 

24 appropriate to reflect differences in the costs of dis25 pensing different drugs and biologicals. 
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1 ‘‘(5) PAYMENT REQUIRED ON AN ASSIGNMENT2 RELATED BASIS.—

3 ‘‘(A) IN GENERAL.—Payment for a charge 

4 for any drug or biological for which payment 

5 may be made under this part may be made only 

6 on an assignment-related basis. 

7 ‘‘(B) APPLICATION OF ENFORCEMENT

8 PROVISIONS.—The provisions of subsection 

9 (b)(18)(B) shall apply to charges for such 

10 drugs or biologicals in the same manner as they 

11 apply to services furnished by a practitioner de12 scribed in subsection (b)(18)(C).’’. 

13 (2) EFFECTIVE DATE.—Subject to subsection 

14 (c)(2), the amendment made by paragraph (1) shall 

15 apply to drugs and biologicals furnished on or after 

16 January 1, 2004. 

17 (b) REVISION IN PRACTICE EXPENSE PAYMENTS.—

18 (1) ADJUSTMENT IN ONCOLOGIST MEDICAL

19 SUPPLY EXPENSES.—In computing the practice ex20 pense component of the physician fee schedule under 

21 section 1848 of the Social Security Act (42 U.S.C. 

22 1395w–4) with respect to payment for services of 

23 oncologists, the Secretary of Health and Human 

24 Services shall make adjustments to oncologists’ re25 ported medical supply expenses in order to ensure 
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1 that such expenses better reflect the actual supply 

2 costs of providing such services. 

3 (2) ALLOCATION OF INDIRECT EXPENSES.—In 

4 establishing such fee schedule, the Secretary shall 

5 change the allocation of indirect expenses in a man6 ner so that all services, including services without di7 rect physician involvement, are allocated the appro8 priate share of indirect expenses. 

9 (3) SERVICES WITHOUT DIRECT PHYSICIAN IN10 VOLVEMENT.—In establishing such fee schedule, the 

11 Secretary shall calculate payments, for those services 

12 without direct physician involvement under the basic 

13 method, using information on the resources required 

14 for each services and, if deemed necessary, shall vali15 date the underlying resource-based estimates of di16 rect practice expenses required to provide each serv17 ice. 

18 (4) BUDGET NEUTRAL ADJUSTMENT.—The 

19 changes in payment made by this subsection shall 

20 not be treated as a change in law or regulation de21 scribed in section 1848(f)(2)(D) of the Social Secu22 rity Act (42 U.S.C. 1395w–4(f)(2)(D)). 

23 (5) EFFECTIVE DATE.—The provisions of this 

24 subsection apply to payments for services furnished 

25 on or after January 1, 2004. 
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1 (c) STUDY OF PAYMENTS FOR BLOOD CLOTTING

2 FACTORS AND OTHER BIOLOGICALS.—

3 (1) IN GENERAL.—The Secretary of Health and 

4 Human Services shall provide for a study of the ap5 propriateness of the medicare payment methodology 

6 for blood clotting factors and other biologicals under 

7 part B of title XVIII of the Social Security Act. Not 

8 later than 9 months after the date of the enactment 

9 of this Act, the Secretary shall submit to Congress 

10 a report on such study and shall include in such re11 port recommendations regarding whether to apply 

12 the payment methodology provided under the 

13 amendment made by subsection (a)(1) and alter14 native recommendations for appropriate dispensing 

15 fees. 

16 (2) DELAY IN EFFECTIVE DATE.—The amend17 ment made by subsection (a)(1) shall not apply to 

18 blood clotting factors furnished before the first day 

19 of the first calendar year that begins at least 6 

20 months after the date the report under paragraph 

21 (1) has been submitted to the Congress.

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