I 

108TH CONGRESS 

1ST SESSION H. R. 2514

To freeze and repeal portions of the tax cut enacted in the Economic Growth 

and Tax Relief Reconciliation Act of 2001 and to apply savings therefrom 

to a comprehensive Medicare outpatient prescription drug benefit. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 18, 2003

Mr. WEXLER (for himself, Mr. STARK, Mr. WAXMAN, Mr. BROWN of Ohio, 

Mr. FRANK of Massachusetts, Mr. NADLER, Mr. CONYERS, and Mr. 

GRIJALVA) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on Energy 

and Commerce, 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 freeze and repeal portions of the tax cut enacted in 

the Economic Growth and Tax Relief Reconciliation Act 

of 2001 and to apply savings therefrom to a comprehensive Medicare outpatient prescription drug benefit.

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 ‘‘Honor Thy Parents 

5 Act of 2003’’. 
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1 TITLE I—TAX PROVISIONS 

2 SEC. 101. FREEZE AND REPEAL OF PORTIONS OF THE TAX 

3 CUT ENACTED IN THE ECONOMIC GROWTH 

4 AND TAX RELIEF RECONCILIATION ACT OF 

5 2001. 

6 Notwithstanding any provision of or amendment to 

7 the Internal Revenue Code of 1986 made by the Economic 

8 Growth and Tax Relief Reconciliation Act of 2001—

9 (1) any reduction in any rate of tax made by 

10 any amendment made by such Act which is sched11 uled to take effect for a year after 2003, and 

12 (2) any increase in any deduction, limitation, or 

13 credit made by any amendment made by such Act 

14 which is scheduled to take effect for a year after 

15 2003, 

16 is hereby suspended. For any year for which the suspen17 sion is in effect under subsection (a), the Internal Revenue 

18 Code of 1986 and the Employee Retirement Income Secu19 rity Act of 1974 shall be applied and administered as such 

20 Code and Act were in effect for years beginning in 2003. 
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1 TITLE II—MEDICARE 

2 PRESCRIPTION DRUG BENEFITS 

3 SEC. 201. VOLUNTARY MEDICARE OUTPATIENT PRESCRIP4 TION MEDICINE PROGRAM. 

5 (a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et 

6 seq.) is amended—

7 (1) by redesignating section 1859 and part D 

8 as section 1858 and part E, respectively; and 

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

10 part: 

11 ‘‘PART D—VOLUNTARY PRESCRIPTION MEDICINE

12 BENEFIT FOR THE AGED AND DISABLED

13 ‘‘MEDICARE OUTPATIENT PRESCRIPTION MEDICINE

14 BENEFIT

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

16 this part, the voluntary prescription medicine benefit pro17 gram under this part provides the following: 

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

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

20 $100. 

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

22 percent. 

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

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

25 $2,000. 
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1 ‘‘NEGOTIATING FAIR PRICES WITH PHARMACEUTICAL

2 MANUFACTURERS

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

4 PRICES WITH MANUFACTURERS.—The Secretary shall, 

5 consistent with the requirements of this part and the goals 

6 of providing quality care and containing costs under this 

7 part, negotiate contracts with manufacturers of covered 

8 outpatient prescription medicines that provide for the 

9 maximum prices that may be charged to individuals en10 rolled under this part by participating pharmacies for dis11 pensing such medicines to such individuals. 

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

13 In conducting negotiations with manufacturers under this 

14 part, the Secretary shall take into account the goal of pro15 moting the development of breakthrough medicines (as de16 fined in section 1859H(b)). 

17 ‘‘CONTRACT AUTHORITY

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

19 ‘‘(1) IN GENERAL.—The Secretary is respon20 sible for the administration of this part and shall 

21 enter into contracts with appropriate pharmacy con22 tractors on a national or regional basis to administer 

23 the benefits under this part. 

24 ‘‘(2) PROCEDURES.—The Secretary shall estab25 lish procedures under which the Secretary—
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1 ‘‘(A) accepts bids submitted by entities to 

2 serve as pharmacy contractors under this part 

3 in a region or on a national basis; 

4 ‘‘(B) awards contracts to such contractors 

5 to administer benefits under this part to eligible 

6 beneficiaries in the region or on a national 

7 basis; and 

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

9 nonrenewal) of a contract in the case of a con10 tractor’s failure to meet the requirements of the 

11 contract and this part. 

12 ‘‘(3) COMPETITIVE PROCEDURES.—Competitive 

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

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

15 403(5))) shall be used to enter into contracts under 

16 this part. 

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

18 shall have such terms and conditions as the Sec19 retary shall specify and shall be for such terms (of 

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

21 Secretary shall specify consistent with this part. 

22 ‘‘(5) USE OF PHARMACY CONTRACTORS IN

23 PRICE NEGOTIATIONS.—Such contracts shall require 

24 the contractor involved to negotiate contracts with 

25 manufacturers that provide for maximum prices for 
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1 covered outpatient prescription medicines that are 

2 lower than the maximum prices negotiated under 

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

4 shall be passed on to eligible beneficiaries and the 

5 Secretary shall hold the contractor accountable for 

6 meeting performance requirements with respect to 

7 price reductions and limiting price increases. 

8 ‘‘(6) AREA FOR CONTRACTS.—

9 ‘‘(A) REGIONAL BASIS.—

10 ‘‘(i) IN GENERAL.—Except as pro11 vided in clause (ii) and subject to subpara12 graph (B), the contract entered into be13 tween the Secretary and a pharmacy con14 tractor shall require the contractor to ad15 minister the benefits under this part in a 

16 region determined by the Secretary under 

17 subparagraph (B) or on a national basis. 

18 ‘‘(ii) PARTIAL REGIONAL BASIS.—

19 ‘‘(I) IN GENERAL.—If deter20 mined appropriate by the Secretary, 

21 the Secretary may permit the benefits 

22 to be administered in a partial region 

23 determined appropriate by the Sec24 retary. 
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1 ‘‘(II) REQUIREMENTS.—If the 

2 Secretary permits administration pur3 suant to subclause (I), the Secretary 

4 shall ensure that the partial region in 

5 which administration is effected is no 

6 smaller than a State and is at least 

7 the size of the commercial service area 

8 of the contractor for that area. 

9 ‘‘(B) DETERMINATION.—

10 ‘‘(i) IN GENERAL.—In determining re11 gions for contracts under this part, the 

12 Secretary shall—

13 ‘‘(I) take into account the num14 ber of individuals enrolled under this 

15 part in an area in order to encourage 

16 participation by pharmacy contrac17 tors; and 

18 ‘‘(II) ensure that there are at 

19 least 10 different regions in the 

20 United States. 

21 ‘‘(ii) NO ADMINISTRATIVE OR JUDI22 CIAL REVIEW.—The determination of ad23 ministrative areas under this paragraph 

24 shall not be subject to administrative or ju25 dicial review. 
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1 ‘‘(7) SUBMISSION OF BIDS.—

2 ‘‘(A) SUBMISSION.—

3 ‘‘(i) IN GENERAL.—Subject to sub4 paragraph (B), each entity desiring to 

5 serve as a pharmacy contractor under this 

6 part in an area shall submit a bid with re7 spect to such area to the Secretary at such 

8 time, in such manner, and accompanied by 

9 such information as the Secretary may rea10 sonably require. 

11 ‘‘(ii) BID THAT COVERS MULTIPLE

12 AREAS.—The Secretary shall permit an en13 tity to submit a single bid for multiple 

14 areas if the bid is applicable to all such 

15 areas. 

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

17 described in subparagraph (A) shall include—

18 ‘‘(i) a proposal for the estimated 

19 prices of covered outpatient prescription 

20 medicines and the projected annual in21 creases in such prices, including the addi22 tional reduction in price negotiated below 

23 the Secretary’s maximum price and dif24 ferentials between preferred and nonpre25 ferred prices, if applicable; 
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1 ‘‘(ii) a statement regarding the 

2 amount that the entity will charge the Sec3 retary for administering the benefits under 

4 the contract; 

5 ‘‘(iii) a statement regarding whether 

6 the entity will reduce the applicable coin7 surance percentage pursuant to section 

8 1859E(a)(1)(A)(ii) and if so, the amount 

9 of such reduction and how such reduction 

10 is tied to the performance requirements de11 scribed in subsection (c)(4)(A)(ii);

12 ‘‘(iv) a detailed description of the per13 formance requirements for which the ad14 ministrative fee of the entity will be subject 

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

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

17 pharmacy services provided by the entity, 

18 including information regarding whether 

19 the pharmacy contractor will use a pre20 ferred pharmacy network, and, if so, how 

21 the pharmacy contractor will ensure access 

22 to pharmacies that choose to be outside of 

23 that network, and whether there will be in24 creased cost-sharing for beneficiaries if 

25 they obtain medicines at such pharmacies;
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1 ‘‘(vi) a detailed description of the pro2 cedures and standards the entity will use 

3 for—

4 ‘‘(I) selecting preferred prescrip5 tion medicines; and 

6 ‘‘(II) determining when and how 

7 often the list of preferred prescription 

8 medicines should be modified; 

9 ‘‘(vii) a detailed description of any 

10 ownership or shared financial interests 

11 with pharmaceutical manufacturers, phar12 macies, and other entities involved in the 

13 administration or delivery of benefits under 

14 this part as proposed in the bid; 

15 ‘‘(viii) a detailed description of the en16 tity’s estimated marketing and advertising 

17 expenditures related to enrolling and re18 taining eligible beneficiaries; and 

19 ‘‘(ix) such other information that the 

20 Secretary determines is necessary in order 

21 to carry out this part, including informa22 tion relating to the bidding process under 

23 this part. 

24 The procedures under clause (vi) shall include 

25 the use of a pharmaceutical and therapeutics 
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1 committee the members of which include prac2 ticing pharmacists. 

3 ‘‘(8) AWARDING OF CONTRACTS.—

4 ‘‘(A) NUMBER OF CONTRACTS.—The Sec5 retary shall, consistent with the requirements of 

6 this part and the goals of providing quality care 

7 and of containing costs under this part, award 

8 in a competitive manner at least 2 contracts to 

9 administer benefits under this part in each area 

10 specified under paragraph (6), unless only 1 

11 pharmacy contractor submitting a bid meets the 

12 minimum standards specified under this part 

13 and by the Secretary. 

14 ‘‘(B) DETERMINATION.—In determining 

15 which of the pharmacy contractors that sub16 mitted bids that meet the minimum standards 

17 specified under this part and by the Secretary 

18 to award a contract, the Secretary shall con19 sider the comparative merits of each bid, as de20 termined on the basis of relevant factors, with 

21 respect to—

22 ‘‘(i) how well the contractor meets 

23 such minimum standards; 
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1 ‘‘(ii) the amount that the contractor 

2 will charge the Secretary for administering 

3 the benefits under the contract; 

4 ‘‘(iii) the performance standards es5 tablished under subsection (c)(2) and per6 formance requirements for which the ad7 ministrative fee of the entity will be subject 

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

9 ‘‘(iv) the proposed negotiated prices of 

10 covered outpatient medicines and annual 

11 increases in such prices; 

12 ‘‘(v) factors relating to benefits, qual13 ity and performance, beneficiary cost-shar14 ing, and consumer satisfaction; 

15 ‘‘(vi) past performance and prior ex16 perience of the contractor in administering 

17 a prescription medicine benefit program; 

18 ‘‘(vii) effectiveness of the contractor 

19 in containing costs through pricing incen20 tives and utilization management; and 

21 ‘‘(viii) such other factors as the Sec22 retary deems necessary to evaluate the 

23 merits of each bid. 

24 ‘‘(C) EXCEPTION TO CONFLICT OF INTER25 EST RULES.—In awarding contracts with phar-
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1 macy contractors under this part, the Secretary 

2 may waive conflict of interest laws generally ap3 plicable to Federal acquisitions (subject to such 

4 safeguards as the Secretary may find necessary 

5 to impose) in circumstances where the Sec6 retary finds that such waiver—

7 ‘‘(i) is not inconsistent with the—

8 ‘‘(I) purposes of the programs 

9 under this part; or 

10 ‘‘(II) best interests of bene11 ficiaries enrolled under this part; and 

12 ‘‘(ii) permits a sufficient level of com13 petition for such contracts, promotes effi14 ciency of benefits administration, or other15 wise serves the objectives of the program 

16 under this part. 

17 ‘‘(D) NO ADMINISTRATIVE OR JUDICIAL

18 REVIEW.—The determination of the Secretary 

19 to award or not award a contract to a phar20 macy contractor under this part shall not be 

21 subject to administrative or judicial review. 

22 ‘‘(9) ACCESS TO BENEFITS IN CERTAIN

23 AREAS.—

24 ‘‘(A) AREAS NOT COVERED BY CON25 TRACTS.—The Secretary shall develop proce-
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1 dures for the provision of covered outpatient 

2 prescription medicines under this part to each 

3 eligible beneficiary enrolled under this part that 

4 resides in an area that is not covered by any 

5 contract under this part. 

6 ‘‘(B) BENEFICIARIES RESIDING IN DIF7 FERENT LOCATIONS.—The Secretary shall de8 velop procedures to ensure that each eligible 

9 beneficiary enrolled under this part that resides 

10 in different areas in a year is provided the ben11 efits under this part throughout the entire year. 

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

13 AND PROGRAMS.—In consultation with appropriate phar14 macy contractors, pharmacists, and health care profes15 sionals with expertise in prescribing, dispensing, and the 

16 appropriate use of prescription medicines, the Secretary 

17 shall establish standards and programs for the administra18 tion of this part to ensure appropriate prescribing, dis19 pensing, and utilization of outpatient medicines under this 

20 part, to avoid adverse medicine reactions, and to contin21 ually reduce errors in the delivery of medically appropriate 

22 covered benefits. The Secretary shall not award a contract 

23 to a pharmacy contractor under this part unless the Sec24 retary finds that the contractor agrees to comply with 

25 such standards and programs and other terms and condi-
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1 tions as the Secretary shall specify. The standards and 

2 programs under this subsection shall be applied to any ad3 ministrative agreements described in subsection (a) the 

4 Secretary enters into. Such standards and programs shall 

5 include the following: 

6 ‘‘(1) ACCESS.—

7 ‘‘(A) IN GENERAL.—The pharmacy con8 tractor shall ensure that covered outpatient pre9 scription medicines are accessible and conven10 ient to eligible beneficiaries enrolled under this 

11 part for whom benefits are administered by the 

12 pharmacy contractor, including by offering the 

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

14 emergencies. 

15 ‘‘(B) ON-LINE REVIEW.—The pharmacy 

16 contractor shall provide for on-line prospective 

17 review available 24 hours a day and 7 days a 

18 week in order to evaluate each prescription for 

19 medicine therapy problems due to duplication, 

20 interaction, or incorrect dosage or duration of 

21 therapy. 

22 ‘‘(C) GUARANTEED ACCESS TO MEDICINES

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

24 Secretary shall ensure that all beneficiaries 

25 have guaranteed access to the full range of 
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1 pharmaceuticals under this part, and shall give 

2 special attention to access, pharmacist coun3 seling, and delivery in rural and hard-to-serve 

4 areas, including through the use of incentives 

5 such as bonus payments to retail pharmacists 

6 in rural areas and extra payments to the phar7 macy contractor for the cost of rapid delivery of 

8 pharmaceuticals and any other actions nec9 essary. 

10 ‘‘(D) PREFERRED PHARMACY NET11 WORKS.—

12 ‘‘(i) IN GENERAL.—If a pharmacy 

13 contractor uses a preferred pharmacy net14 work to deliver benefits under this part, 

15 such network shall meet minimum access 

16 standards established by the Secretary. 

17 ‘‘(ii) STANDARDS.—In establishing 

18 standards under clause (i), the Secretary 

19 shall take into account reasonable dis20 tances to pharmacy services in both urban 

21 and rural areas. 

22 ‘‘(E) ADHERENCE TO NEGOTIATED

23 PRICES.—The pharmacy contractor shall have 

24 in place procedures to assure compliance of 

25 pharmacies with the requirements of subsection 
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1 (d)(3)(C) (relating to adherence to negotiated 

2 prices). 

3 ‘‘(F) CONTINUITY OF CARE.—

4 ‘‘(i) IN GENERAL.—The pharmacy 

5 contractor shall ensure that, in the case of 

6 an eligible beneficiary who loses coverage 

7 under this part with such entity under cir8 cumstances that would permit a special 

9 election period (as established by the Sec10 retary under section 1859C(b)(3)), the 

11 contractor will continue to provide cov12 erage under this part to such beneficiary 

13 until the beneficiary enrolls and receives 

14 such coverage with another pharmacy con15 tractor under this part or, if eligible, with 

16 a Medicare+Choice organization. 

17 ‘‘(ii) LIMITED PERIOD.—In no event 

18 shall a pharmacy contractor be required to 

19 provide the extended coverage required 

20 under clause (i) beyond the date which is 

21 30 days after the coverage with such con22 tractor would have terminated but for this 

23 subparagraph. 
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1 ‘‘(2) ENROLLEE GUIDELINES.—The pharmacy 

2 contractor shall, consistent with State law, apply 

3 guidelines for counseling enrollees regarding—

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

5 prescription medicine: and 

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

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

8 shall apply methods to identify and educate pro9 viders, pharmacists, and enrollees regarding—

10 ‘‘(A) instances or patterns concerning the 

11 unnecessary or inappropriate prescribing or dis12 pensing of covered outpatient prescription medi13 cines; 

14 ‘‘(B) instances or patterns of substandard 

15 care; 

16 ‘‘(C) potential adverse reactions to covered 

17 outpatient prescription medicines; 

18 ‘‘(D) inappropriate use of antibiotics; 

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

20 and 

21 ‘‘(F) the importance of using covered out22 patient prescription medicines in accordance 

23 with the instruction of prescribing providers. 

24 ‘‘(4) COORDINATION.—The pharmacy con25 tractor shall coordinate with State prescription med-
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1 icine programs, other pharmacy contractors, phar2 macies, and other relevant entities as necessary to 

3 ensure appropriate coordination of benefits with re4 spect to enrolled individuals when such individual is 

5 traveling outside the home service area, and under 

6 such other circumstances as the Secretary may 

7 specify. 

8 ‘‘(5) COST DATA.—

9 ‘‘(A) The pharmacy contractor shall make 

10 data on prescription medicine negotiated prices 

11 (including data on discounts) available to the 

12 Secretary. 

13 ‘‘(B) The Secretary shall require, either di14 rectly or through a pharmacy contractor, that 

15 participating pharmacists, physicians, and man16 ufacturers—

17 ‘‘(i) maintain their prescription medi18 cine cost data (including data on dis19 counts) in a form and manner specified by 

20 the Secretary; 

21 ‘‘(ii) make such prescription medicine 

22 cost data available for review and audit by 

23 the Secretary; and 

24 ‘‘(iii) certify that the prescription 

25 medicine cost data are current, accurate,
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1 and complete, and reflect all discounts ob2 tained by the pharmacist or physician in 

3 the purchasing of covered outpatient pre4 scription medicines. 

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

6 shall include all volume discounts, manufacturer re7 bates, prompt payment discounts, free goods, in-kind 

8 services, or any other thing of financial value pro9 vided explicitly or implicitly in exchange for the pur10 chase of a covered outpatient prescription medicine. 

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

12 shall provide the Secretary with periodic reports 

13 on—

14 ‘‘(A) the contractor’s costs of admin15 istering this part; 

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

17 ‘‘(C) marketing and advertising expendi18 tures related to enrolling and retaining individ19 uals under this part; and 

20 ‘‘(D) grievances and appeals. 

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

22 contractor shall maintain adequate records related to 

23 the administration of benefits under this part and 

24 afford the Secretary access to such records for au25 diting purposes. 
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1 ‘‘(8) APPROVAL OF MARKETING MATERIAL AND

2 APPLICATION FORMS.—The pharmacy contractor 

3 shall comply with requirements of section 1851(h) 

4 (relating to marketing material and application 

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

6 as such requirements apply under part C, except 

7 that the provisions of paragraph (4)(A) of such sec8 tion shall not apply with respect to discounts or re9 bates provided in accordance with this part. 

10 ‘‘(c) INCENTIVES FOR COST AND UTILIZATION MAN11 AGEMENT AND QUALITY IMPROVEMENT.—

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

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

14 pharmacy contractor such incentives for cost and 

15 utilization management and quality improvement as 

16 the Secretary may deem appropriate. The contract 

17 may provide financial or other incentives to encour18 age greater savings to the program under this part. 

19 ‘‘(2) PERFORMANCE STANDARDS.—The Sec20 retary shall provide for performance standards 

21 (which may include monetary bonuses if the stand22 ards are met and penalties if the standards are not 

23 met), including standards relating to the time taken 

24 to answer member and pharmacy inquiries (written 

25 or by telephone), the accuracy of responses, claims 
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1 processing accuracy, online system availability, ap2 peal procedure turnaround time, system availability, 

3 the accuracy and timeliness of reports, and level of 

4 beneficiary satisfaction. 

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

6 under this subsection may also include—

7 ‘‘(A) financial incentives under which sav8 ings derived from the substitution of generic 

9 and other preferred multi-source medicines in 

10 lieu of nongeneric and nonpreferred medicines 

11 are made available to pharmacy contractors, 

12 pharmacies, beneficiaries, and the Federal 

13 Medicare Prescription Medicine Trust Fund; 

14 and 

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

16 deems appropriate and likely to be effective in 

17 managing costs or utilization or improving qual18 ity that does not reduce the access of bene19 ficiaries to medically necessary covered out20 patient medicines. 

21 ‘‘(4) REQUIREMENTS FOR PROCEDURES.—

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

23 establish procedures for making payments to 

24 each pharmacy contractor with a contract under 

25 this part for the administration of the benefits 
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1 under this part. The procedures shall provide 

2 for the following: 

3 ‘‘(i) ADMINISTRATIVE PAYMENT.—

4 Payment of administrative fees for such 

5 administration. 

6 ‘‘(ii) RISK REQUIREMENT.—An ad7 justment of a percentage (determined 

8 under subparagraph (B)) of the adminis9 trative fee payments made to a pharmacy 

10 contractor to ensure that the contractor, in 

11 administering the benefits under this part, 

12 pursues performance requirements estab13 lished by the Secretary, including the fol14 lowing: 

15 ‘‘(I) QUALITY SERVICE.—The 

16 contractor provides eligible bene17 ficiaries for whom it administers bene18 fits with quality services, as measured 

19 by such factors as sustained pharmacy 

20 network access, timeliness and accu21 racy of service delivery in claims proc22 essing and card production, pharmacy 

23 and member service support access, 

24 and timely action with regard to ap-
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1 peals and current beneficiary service 

2 surveys. 

3 ‘‘(II) QUALITY CLINICAL CARE.—

4 The contractor provides such bene5 ficiaries with quality clinical care, as 

6 measured by such factors as providing 

7 notification to such beneficiaries and 

8 to providers in order to prevent ad9 verse drug reactions and reduce medi10 cation errors and specific clinical sug11 gestions to improve health and patient 

12 and prescriber education as appro13 priate. 

14 ‘‘(III) CONTROL OF MEDICARE

15 COSTS.—The contractor contains costs 

16 under this part to the Federal Medi17 care Prescription Medicine Trust 

18 Fund and enrollees, as measured by 

19 generic substitution rates, price dis20 counts, and other factors determined 

21 appropriate by the Secretary that do 

22 not reduce the access of beneficiaries 

23 to medically necessary covered out24 patient prescription medicines.
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1 ‘‘(B) PERCENTAGE OF PAYMENT TIED TO

2 RISK.—

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

4 (ii), the Secretary shall determine the per5 centage of the administrative payments to 

6 a pharmacy contractor that will be tied to 

7 the performance requirements described in 

8 subparagraph (A)(ii). 

9 ‘‘(ii) LIMITATION ON RISK TO ENSURE

10 PROGRAM STABILITY.—In order to provide 

11 for program stability, the Secretary may 

12 not establish a percentage to be adjusted 

13 under this paragraph at a level that jeop14 ardizes the ability of a pharmacy con15 tractor to administer the benefits under 

16 this part or administer such benefits in a 

17 quality manner. 

18 ‘‘(C) RISK ADJUSTMENT OF PAYMENTS

19 BASED ON ENROLLEES IN PLAN.—To the extent 

20 that a pharmacy contractor is at risk under this 

21 paragraph, the procedures established under 

22 this paragraph may include a methodology for 

23 risk adjusting the payments made to such con24 tractor based on the differences in actuarial 

25 risk of different enrollees being served if the 
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1 Secretary determines such adjustments to be 

2 necessary and appropriate. 

3 ‘‘(d) AUTHORITY RELATING TO PHARMACY PARTICI4 PATION.—

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

6 provisions of this subsection, a pharmacy contractor 

7 may establish consistent with this part conditions for 

8 the participation of pharmacies, including conditions 

9 relating to quality (including reduction of medical 

10 errors) and technology. 

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

12 pharmacy contractor shall enter into a participation 

13 agreement with any pharmacy that meets the re14 quirements of this subsection and section 1859E to 

15 furnish covered outpatient prescription medicines to 

16 individuals enrolled under this part. 

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

18 under this subsection shall include the following 

19 terms and conditions: 

20 ‘‘(A) APPLICABLE REQUIREMENTS.—The 

21 pharmacy shall meet (and throughout the con22 tract period continue to meet) all applicable 

23 Federal requirements and State and local li24 censing requirements. 
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1 ‘‘(B) ACCESS AND QUALITY STANDARDS.—

2 The pharmacy shall comply with such standards 

3 as the Secretary (and such a pharmacy con4 tractor) shall establish concerning the quality 

5 of, and enrolled individuals’ access to, phar6 macy services under this part. Such standards 

7 shall require the pharmacy—

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

9 outpatient prescription medicines to any 

10 individual enrolled under this part; 

11 ‘‘(ii) to keep patient records (includ12 ing records on expenses) for all covered 

13 outpatient prescription medicines dispensed 

14 to such enrolled individuals; 

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

16 manner specified by the Secretary to be 

17 necessary to administer this part) on all 

18 purchases of such medicines dispensed to 

19 such enrolled individuals; and 

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

21 assure compliance with the requirements of 

22 this part and the accuracy of information 

23 submitted. 

24 ‘‘(C) ADHERENCE TO NEGOTIATED

25 PRICES.—(i) The total charge for each medicine 
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1 dispensed by the pharmacy to an enrolled indi2 vidual under this part, without regard to wheth3 er the individual is financially responsible for 

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

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

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

7 less, the retail price for the medicine involved) 

8 with respect to such medicine plus a reasonable 

9 dispensing fee determined contractually with 

10 the pharmacy contractor. 

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

12 collect from) an enrolled individual an amount 

13 that exceeds the individual’s obligation (as de14 termined in accordance with the provisions of 

15 this part) of the applicable price described in 

16 clause (i). 

17 ‘‘(D) ADDITIONAL REQUIREMENTS.—The 

18 pharmacy shall meet such additional contract 

19 requirements as the applicable pharmacy con20 tractor specifies under this section. 

21 ‘‘(4) APPLICABILITY OF FRAUD AND ABUSE

22 PROVISIONS.—The provisions of section 1128 

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

24 to pharmacies participating in the program under 

25 this part. 
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1 ‘‘ELIGIBILITY; VOLUNTARY ENROLLMENT; COVERAGE

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

3 who is entitled to hospital insurance benefits under part 

4 A or is eligible to be enrolled in the medical insurance pro5 gram under part B is eligible to enroll in accordance with 

6 this section for outpatient prescription medicine benefits 

7 under this part. 

8 ‘‘(b) VOLUNTARY ENROLLMENT.—

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

10 under this part only in such manner and form as 

11 may be prescribed by regulations, and only during 

12 an enrollment period prescribed in or under this sub13 section. 

14 ‘‘(2) INITIAL ENROLLMENT PERIOD.—

15 ‘‘(A) INDIVIDUALS CURRENTLY COV16 ERED.—In the case of an individual who satis17 fies subsection (a) as of November 1, 2005, the 

18 initial general enrollment period shall begin on 

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

20 2006. 

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

22 In the case of an individual who first satisfies 

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

24 the individual’s initial enrollment period shall 

25 begin on the first day of the third month before
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1 the month in which such individual first satis2 fies such paragraph and shall end seven months 

3 later. The Secretary shall apply rules similar to 

4 the rule described in the second sentence of sec5 tion 1837(d). 

6 ‘‘(3) SPECIAL ENROLLMENT PERIODS (WITHOUT

7 PREMIUM PENALTY).—

8 ‘‘(A) EMPLOYER COVERAGE AT TIME OF

9 INITIAL GENERAL ENROLLMENT PERIOD.—In 

10 the case of an individual who—

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

12 satisfies subsection (a) is enrolled in a 

13 group health plan (including continuation 

14 coverage) that provides outpatient pre15 scription medicine coverage by reason of 

16 the individual’s (or the individual’s 

17 spouse’s) current (or, in the case of con18 tinuation coverage, former) employment 

19 status, and 

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

21 deemed enrolled) under this subsection 

22 during the individual’s initial enrollment 

23 period, 

24 there shall be a special enrollment period of 6 

25 months beginning with the first month that in-
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•HR 2514 IH 

1 cludes the date of the individual’s (or individ2 ual’s spouse’s) retirement from or termination 

3 of current employment status with the employer 

4 that sponsors the plan, or, in the case of con5 tinuation coverage, that includes the date of 

6 termination of such coverage, or that includes 

7 the date the plan substantially terminates out8 patient prescription medicine coverage. 

9 ‘‘(B) DROPPING OF RETIREE PRESCRIP10 TION MEDICINE COVERAGE.—In the case of an 

11 individual who—

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

13 satisfies subsection (a) is enrolled in a 

14 group health plan that provides outpatient 

15 prescription medicine coverage other than 

16 by reason of the individual’s (or the indi17 vidual’s spouse’s) current employment; and 

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

19 deemed enrolled) under this subsection 

20 during the individual’s initial enrollment 

21 period, 

22 there shall be a special enrollment period of 6 

23 months beginning with the first month that in24 cludes the date that the plan substantially ter-
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1 minates outpatient prescription medicine cov2 erage and ending 6 months later. 

3 ‘‘(C) LOSS OF MEDICARE+CHOICE PRE4 SCRIPTION MEDICINE COVERAGE.—In the case 

5 of an individual who is enrolled under part C in 

6 a Medicare+Choice plan that provides prescrip7 tion medicine benefits, if such enrollment is ter8 minated because of the termination or reduction 

9 in service area of the plan, there shall be a spe10 cial enrollment period of 6 months beginning 

11 with the first month that includes the date that 

12 such plan is terminated or such reduction oc13 curs and ending 6 months later. 

14 ‘‘(D) LOSS OF MEDICAID PRESCRIPTION

15 MEDICINE COVERAGE.—In the case of an indi16 vidual who—

17 ‘‘(i) satisfies subsection (a); 

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

19 include benefits for prescription medicine) 

20 under a State plan after having been en21 rolled (or determined to be eligible) for 

22 such benefits under such plan; and 

23 ‘‘(iii) is not otherwise enrolled under 

24 this subsection at the time of such loss of 

25 eligibility, 
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1 there shall be a special enrollment period speci2 fied by the Secretary of not less than 6 months 

3 beginning with the first month that includes the 

4 date that the individual loses such eligibility. 

5 ‘‘(4) LATE ENROLLMENT WITH PREMIUM PEN6 ALTY.—The Secretary shall permit an individual 

7 who satisfies subsection (a) to enroll other than dur8 ing the initial enrollment period under paragraph (2) 

9 or a special enrollment period under paragraph (3). 

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

11 of the monthly premium of the individual is subject 

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

13 ‘‘(5) INFORMATION.—

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

15 broadly distribute information to individuals 

16 who satisfy subsection (a) on the benefits pro17 vided under this part. The Secretary shall peri18 odically make available information on the cost 

19 differentials to enrollees for the use of generic 

20 medicines and other medicines. 

21 ‘‘(B) TOLL-FREE HOTLINE.—The Sec22 retary shall maintain a toll-free telephone hot23 line (which may be a hotline already used by 

24 the Secretary under this title) for purposes of 

25 providing assistance to beneficiaries in the pro-
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•HR 2514 IH 

1 gram under this part, including responding to 

2 questions concerning coverage, enrollment, ben3 efits, grievances and appeals procedures, and 

4 other aspects of such program. 

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

6 this part, the term ‘enrollee’ means an individual en7 rolled for benefits under this part. 

8 ‘‘(c) COVERAGE PERIOD.—

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

10 an individual is entitled to benefits under this part 

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

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

13 Secretary shall establish consistent with the type of 

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

15 of section 1838, except that in no case shall a cov16 erage period begin before January 1, 2006. No pay17 ments may be made under this part with respect to 

18 the expenses of an individual unless such expenses 

19 were incurred by such individual during a period 

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

21 period. 

22 ‘‘(2) TERMINATION.—The Secretary shall pro23 vide for the application of provisions under this sub24 section similar to the provisions in section 1838(b).
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1 ‘‘(d) PROVISION OF BENEFITS TO

2 MEDICARE+CHOICE ENROLLEES.—In the case of an indi3 vidual who is enrolled under this part and is enrolled in 

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

5 be provided the benefits under this part through such plan 

6 and not through payment under this part. 

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

8 PREMIUMS.—

9 ‘‘(1) LATE ENROLLMENT PENALTY.—

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

11 enrollment described in subsection (b)(4), sub12 ject to the succeeding provisions of this para13 graph, the Secretary shall establish procedures 

14 for increasing the amount of the monthly pre15 mium under this part applicable to such en16 rollee by an amount that the Secretary deter17 mines is actuarially sound for each such period. 

18 ‘‘(B) PERIODS TAKEN INTO ACCOUNT.—

19 For purposes of calculating any 12-month pe20 riod under subparagraph (A), there shall be 

21 taken into account months of lapsed coverage in 

22 a manner comparable to that applicable under 

23 the second sentence of section 1839(b). 

24 ‘‘(C) PERIODS NOT TAKEN INTO AC25 COUNT.—
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•HR 2514 IH 

1 ‘‘(i) IN GENERAL.—For purposes of 

2 calculating any 12-month period under 

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

4 there shall not be taken into account 

5 months for which the enrollee can dem6 onstrate that the enrollee was covered 

7 under a group health plan that provides 

8 coverage of the cost of prescription medi9 cines whose actuarial value (as defined by 

10 the Secretary) to the enrollee equals or ex11 ceeds the actuarial value of the benefits 

12 provided to an individual enrolled in the 

13 outpatient prescription medicine benefit 

14 program under this part. 

15 ‘‘(ii) APPLICATION.—This subpara16 graph shall only apply with respect to a 

17 coverage period the enrollment for which 

18 occurs before the end of the 60-day period 

19 that begins on the first day of the month 

20 which includes the date on which the plan 

21 terminates or reduces its service area (in a 

22 manner that results in termination of en23 rollment), ceases to provide, or reduces the 

24 value of the prescription medicine coverage 

25 under such plan to below the value of the 
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1 coverage provided under the program 

2 under this part. 

3 ‘‘(2) INCORPORATION OF PREMIUM PAYMENT

4 AND GOVERNMENT CONTRIBUTIONS PROVISIONS.—

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

6 apply to enrollees under this part in the same man7 ner as they apply to individuals 65 years of age or 

8 older enrolled under part B. For purposes of this 

9 subsection, any reference in a section referred to in 

10 a previous subsection to the Federal Supplementary 

11 Medical Insurance Trust Fund is deemed a reference 

12 to the Federal Medicare Prescription Medicine Trust 

13 Fund. 

14 ‘‘(f) ELECTION OF PHARMACY CONTRACTOR TO AD15 MINISTER BENEFITS.—The Secretary shall establish a 

16 process whereby each individual enrolled under this part 

17 and residing in a region may elect the pharmacy con18 tractor that will administer the benefits under this part 

19 with respect to the individual. Such process shall permit 

20 the individual to make an initial election and to change 

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

22 such other circumstances as the Secretary shall specify. 

23 ‘‘PROVISION OF, AND ENTITLEMENT TO, BENEFITS

24 ‘‘SEC. 1859D. (a) BENEFITS.—Subject to the suc25 ceeding provisions of this section, the benefits provided to 
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1 an enrollee by the program under this part shall consist 

2 of the following: 

3 ‘‘(1) COVERED OUTPATIENT PRESCRIPTION

4 MEDICINE BENEFITS.—Entitlement to have payment 

5 made on the individual’s behalf for covered out6 patient prescription medicines. 

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

8 B OUTPATIENT PRESCRIPTION MEDICINES.—

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

10 incurred aggregate countable cost-sharing (as 

11 defined in subparagraph (B)) equal to the stop12 loss limit specified in subsection (c)(4) for ex13 penses in a year, entitlement to the elimination 

14 of cost-sharing otherwise applicable under part 

15 B for additional expenses incurred in the year 

16 for outpatient prescription medicines or 

17 biologicals for which payment is made under 

18 part B. 

19 ‘‘(B) COUNTABLE COST-SHARING DE20 FINED.—For purposes of this part, the term 

21 ‘countable cost-sharing’ means—

22 ‘‘(i) out-of-pocket expenses for out23 patient prescription medicines with respect 

24 to which benefits are payable under part 

25 B, and 
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1 ‘‘(ii) cost-sharing under subsections 

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

3 ‘‘(b) COVERED OUTPATIENT PRESCRIPTION MEDI4 CINE DEFINED.—

5 ‘‘(1) IN GENERAL.—Except as provided in para6 graph (2), for purposes of this part the term ‘cov7 ered outpatient prescription medicine’ means any of 

8 the following products: 

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

10 only upon prescription, and—

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

12 effectiveness as a prescription medicine 

13 under section 505 of the Federal Food, 

14 Drug, and Cosmetic Act;

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

16 or sold in the United States before the 

17 date of enactment of the Drug Amend18 ments of 1962 or which is identical, simi19 lar, or related (within the meaning of sec20 tion 310.6(b)(1) of title 21 of the Code of 

21 Federal Regulations) to such a medicine, 

22 and 

23 (II) which has not been the subject of 

24 a final determination by the Secretary that 

25 it is a ‘new drug’ (within the meaning of 
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1 section 201(p) of the Federal Food, Drug,

2 and Cosmetic Act) or an action brought by 

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

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

5 502(f) or 505(a) of such Act; or 

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

7 107(c)(3) of the Drug Amendments of 

8 1962 and for which the Secretary has de9 termined there is a compelling justification 

10 for its medical need, or is identical, simi11 lar, or related (within the meaning of sec12 tion 310.6(b)(1) of title 21 of the Code of 

13 Federal Regulations) to such a medicine, 

14 and 

15 (II) for which the Secretary has not 

16 issued a notice of an opportunity for a 

17 hearing under section 505(e) of the Fed18 eral Food, Drug, and Cosmetic Act on a 

19 proposed order of the Secretary to with20 draw approval of an application for such 

21 medicine under such section because the 

22 Secretary has determined that the medi23 cine is less than effective for all conditions 

24 of use prescribed, recommended, or sug25 gested in its labeling. 
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1 ‘‘(B) A biological product which—

2 ‘‘(i) may only be dispensed upon pre3 scription; 

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

5 the Public Health Service Act; and 

6 ‘‘(iii) is produced at an establishment 

7 licensed under such section to produce 

8 such product. 

9 ‘‘(C) Insulin approved under appropriate 

10 Federal law, and needles, syringes, and dispos11 able pumps for the administration of such insu12 lin. 

13 ‘‘(D) A prescribed medicine or biological 

14 product that would meet the requirements of 

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

16 over-the-counter in addition to being available 

17 upon prescription, but only if the particular 

18 dosage form or strength prescribed and re19 quired for the individual is not available over20 the-counter. 

21 ‘‘(E) Smoking cessation agents (as speci22 fied by the Secretary). 

23 ‘‘(2) EXCLUSION.—The term ‘covered out24 patient prescription medicine’ does not include—
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1 ‘‘(A) medicines or classes of medicines, or 

2 their medical uses, which may be excluded from 

3 coverage or otherwise restricted under section 

4 1927(d)(2), other than subparagraph (E) there5 of (relating to smoking cessation agents), as the 

6 Secretary may specify and does not include 

7 such other medicines, classes, and uses as the 

8 Secretary may specify consistent with the goals 

9 of providing quality care and containing costs 

10 under this part; 

11 ‘‘(B) except as provided in paragraphs 

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

13 distributed to individuals without a prescrip14 tion; 

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

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

17 other item or service for which payment may be 

18 made under this title; or 

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

20 part B of this title. 

21 ‘‘(c) PAYMENT OF BENEFITS.—

22 ‘‘(1) COVERED OUTPATIENT PRESCRIPTION

23 MEDICINES.—There shall be paid from the Federal 

24 Medicare Prescription Medicine Trust Fund, in the 

25 case of each enrollee who incurs expenses for medi-
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•HR 2514 IH 

1 cines with respect to which benefits are payable 

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

3 equal to the sum of—

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

5 made available under this part (consistent with 

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

7 applicable cost-sharing under paragraphs (2) 

8 and (3); and 

9 ‘‘(B) a reasonable dispensing fee. 

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

11 exceed the retail price for the medicine involved. 

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

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

14 beginning with 2006, shall be reduced by an annual 

15 deductible equal to the amount specified in section 

16 1859(2) (subject to adjustment under paragraph 

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

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

19 account in applying this paragraph. 

20 ‘‘(3) COINSURANCE.—

21 ‘‘(A) IN GENERAL.—The amount of pay22 ment under paragraph (1) for expenses in23 curred in a year shall be further reduced (sub24 ject to the stop-loss limit under paragraph (4)) 
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1 by coinsurance as provided under this para2 graph. 

3 ‘‘(B) PREFERRED MEDICINES.—The coin4 surance under this paragraph in the case of a 

5 preferred medicine (including a medicine treat6 ed as a preferred medicine under paragraph 

7 (5)), is equal to 20 percent of the price applica8 ble under paragraph (1)(A) (or such lower per9 centage as may be provided for under section 

10 1859E(a)(1)(A)(ii)). In this part, the term ‘pre11 ferred medicine’ means, with respect to medi12 cines classified within a therapeutic class, those 

13 medicines which have been designated as a pre14 ferred medicine by the Secretary or the phar15 macy contractor involved with respect to that 

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

17 with respect to which a contract has been nego18 tiated under this part. 

19 ‘‘(C) NONPREFERRED MEDICINES.—The 

20 coinsurance under this paragraph in the case of 

21 a nonpreferred medicine that is not treated as 

22 a preferred medicine under paragraph (5) is 

23 equal to the sum of—
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1 ‘‘(i) 20 percent of the price for lowest 

2 price preferred medicine that is within the 

3 same therapeutic class; and 

4 ‘‘(ii) the amount by which—

5 ‘‘(I) the price at which the non6 preferred medicine is made available 

7 to the enrollee; exceeds 

8 ‘‘(II) the price of such lowest 

9 price preferred medicine. 

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

11 EXPENDITURES EQUAL STOP-LOSS LIMIT.—Once an 

12 enrollee has incurred aggregate countable cost-shar13 ing under paragraph (3) (including cost-sharing 

14 under part B attributable to outpatient prescription 

15 drugs or biologicals) equal to the amount specified 

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

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

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

19 paragraph (3) for additional expenses incurred 

20 in the year involved; and 

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

22 part B for additional expenses incurred in the 

23 year involved for outpatient prescription drugs 

24 and biologicals. 
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1 ‘‘(5) APPEALS RIGHTS RELATING TO COVERAGE

2 OF NONPREFERRED MEDICINES.—

3 ‘‘(A) PROCEDURES REGARDING THE DE4 TERMINATION OF MEDICINES THAT ARE MEDI5 CALLY NECESSARY.—Each pharmacy contractor 

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

7 basis to treat a nonpreferred medicine as a pre8 ferred medicine under this part if the preferred 

9 medicine is determined to be not as effective for 

10 the enrollee or to have significant adverse effect 

11 on the enrollee. Such procedures shall require 

12 that such determinations are based on profes13 sional medical judgment, the medical condition 

14 of the enrollee, and other medical evidence. 

15 ‘‘(B) PROCEDURES REGARDING DENIALS

16 OF CARE.—Such contractor shall have in place 

17 procedures to ensure—

18 ‘‘(i) a timely internal review for reso19 lution of denials of coverage (in whole or 

20 in part and including those regarding the 

21 coverage of nonpreferred medicines) in ac22 cordance with the medical exigencies of the 

23 case and a timely resolution of complaints, 

24 by enrollees in the plan, or by providers, 

25 pharmacists, and other individuals acting 
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•HR 2514 IH 

1 on behalf of each such enrollee (with the 

2 enrollee’s consent) in accordance with re3 quirements (as established by the Sec4 retary) that are comparable to such re5 quirements for Medicare+Choice organiza6 tions under part C; 

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

8 timely manner with requirements estab9 lished by the Secretary that (I) provide for 

10 an external review by an independent enti11 ty selected by the Secretary of denials of 

12 coverage described in clause (i) not re13 solved in the favor of the beneficiary (or 

14 other complainant) under the process de15 scribed in such clause and (II) are com16 parable to the external review requirements 

17 established for Medicare+Choice organiza18 tions under part C; and 

19 ‘‘(iii) that enrollees are provided with 

20 information regarding the appeals proce21 dures under this part at the time of enroll22 ment with a pharmacy contractor under 

23 this part and upon request thereafter. 

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

25 PART B PRESCRIPTION MEDICINE CATASTROPHIC
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1 BENEFIT.—With respect to benefits described in 

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

3 Federal Medicare Prescription Medicine Trust Fund 

4 to the Federal Supplementary Medical Insurance 

5 Trust Fund amounts equivalent to the elimination of 

6 cost-sharing described in such subsection. 

7 ‘‘(7) PERMITTING APPLICATION UNDER PART B

8 OF NEGOTIATED PRICES.—For purposes of making 

9 payment under part B for medicines that would be 

10 covered outpatient prescription medicines but for the 

11 exclusion under subparagraph (B) or (C) of sub12 section (b)(2), the Secretary may elect to apply the 

13 payment basis used for payment of covered out14 patient prescription medicines under this part in15 stead of the payment basis otherwise used under 

16 such part, if it results in a lower cost to the pro17 gram. 

18 ‘‘(8) INFLATION ADJUSTMENT.—

19 ‘‘(A) IN GENERAL.—With respect to ex20 penses incurred in a year after 2006—

21 ‘‘(i) the deductible under paragraph 

22 (2) is equal to the deductible determined 

23 under such paragraph (or this subpara24 graph) for the previous year increased by 

25 the percentage increase in per capita pro-
49

•HR 2514 IH 

1 gram expenditures (as estimated in ad2 vance for the year involved under subpara3 graph (B)); and

4 ‘‘(ii) the stop-loss limit under para5 graph (3) is equal to the stop-loss limit de6 termined under such paragraph (or this 

7 subparagraph) for the previous year in8 creased by such percentage increase. 

9 The Secretary shall adjust such percentage in10 crease in subsequent years to take into account 

11 misestimations made of the per capita program 

12 expenditures under clauses (i) and (ii) in pre13 vious years. Any increase under this subpara14 graph that is not a multiple of $10 shall be 

15 rounded to the nearest multiple of $10. 

16 ‘‘(B) ESTIMATION OF INCREASE IN PER

17 CAPITA PROGRAM EXPENDITURES.—The Sec18 retary shall before the beginning of each year 

19 (beginning with 2007) estimate the percentage 

20 increase in average per capita aggregate ex21 penditures from the Federal Medicare Prescrip22 tion Medicine Trust Fund for the year involved 

23 compared to the previous year. 

24 ‘‘(C) RECONCILIATION.—The Secretary 

25 shall also compute (beginning with 2008) the 
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•HR 2514 IH 

1 actual percentage increase in such aggregate 

2 expenditures in order to provide for reconcili3 ation of deductibles, stop-loss limits, and pre4 miums under the second sentence of subpara5 graph (A) and under section 1859D(d)(2). 

6 ‘‘(d) AMOUNT OF PREMIUMS.—

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

8 monthly premium rate in 2006 for prescription med9 icine benefits under this part is the amount specified 

10 in section 1859(1). 

11 ‘‘(2) INFLATION ADJUSTMENT FOR SUBSE12 QUENT YEARS.—The monthly premium rate for a 

13 year after 2006 for prescription medicine benefits 

14 under this part is equal to the monthly premium 

15 rate for the previous year under this subsection in16 creased by the percentage increase in per capita pro17 gram expenditures (as estimated in advance for the 

18 year involved under subsection (c)(8)(B)). The Sec19 retary shall adjust such percentage in subsequent 

20 years to take into account misestimations made of 

21 the per capita program expenditures under the pre22 vious sentence in previous years. Any increase under 

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

24 rounded to the nearest multiple of $1. 
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1 ‘‘ADMINISTRATION; QUALITY ASSURANCE

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

3 OF BENEFITS.—

4 ‘‘(1) PROVISION OF BENEFITS.—

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

6 under this part, the Secretary (directly or 

7 through the contracts with pharmacy contrac8 tors) shall employ mechanisms to provide bene9 fits appropriately and efficiently, and those 

10 mechanisms may include—

11 ‘‘(i) the use of—

12 ‘‘(I) price negotiations (con13 sistent with subsection (b)); 

14 ‘‘(II) reduced coinsurance (below 

15 20 percent) to encourage the utiliza16 tion of appropriate preferred medi17 cines; and 

18 ‘‘(III) methods to reduce medica19 tion errors and encourage appropriate 

20 use of medications; and 

21 ‘‘(ii) permitting pharmacy contractors, 

22 as approved by the Secretary, to make ex23 ceptions to section 1859D(c)(3)(C) (relat24 ing to cost-sharing for non-preferred medi25 cines) to secure best prices for enrollees so 
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•HR 2514 IH 

1 long as the payment amount under section 

2 1859D(c)(1) does not equal zero. 

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

4 subsection shall be construed to prevent the 

5 Secretary (directly or through the contracts 

6 with pharmacy contractors) from using incen7 tives to encourage enrollees to select generic or 

8 other cost-effective medicines, so long as—

9 ‘‘(i) such incentives are designed not 

10 to result in any increase in the aggregate 

11 expenditures under the Federal Medicare 

12 Prescription Medicine Trust Fund; and 

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

14 be no greater than 20 percent in the case 

15 of a preferred medicine (including a non16 preferred medicine treated as a preferred 

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

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

19 shall preclude the Secretary or a pharmacy con20 tractor from—

21 ‘‘(A) educating prescribing providers, phar22 macists, and enrollees about medical and cost 

23 benefits of preferred medicines; 

24 ‘‘(B) requesting prescribing providers to 

25 consider a preferred medicine prior to dis-
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1 pensing of a nonpreferred medicine, as long as 

2 such request does not unduly delay the provi3 sion of the medicine; 

4 ‘‘(C) using mechanisms to encourage en5 rollees under this part to select cost-effective 

6 medicines or less costly means of receiving or 

7 administering medicines, including the use of 

8 therapeutic interchange programs, disease man9 agement programs, and notification to the bene10 ficiary that a more affordable generic medicine 

11 equivalent was not selected by the prescribing 

12 provider and a statement of the lost cost sav13 ings to the beneficiary; 

14 ‘‘(D) using price negotiations to achieve re15 duced prices on covered outpatient prescription 

16 medicines, including new medicines, medicines 

17 for which there are few therapeutic alternatives, 

18 and medicines of particular clinical importance 

19 to individuals enrolled under this part; and 

20 ‘‘(E) utilizing information on medicine 

21 prices of OECD countries and of other payors 

22 in the United States in the negotiation of prices 

23 under this part. 

24 ‘‘(b) PRICE NEGOTIATIONS PROCESS.—
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1 ‘‘(1) REQUIREMENTS WITH RESPECT TO PRE2 FERRED MEDICINES.—Negotiations of contracts with 

3 manufacturers with respect to covered outpatient

4 prescription medicines under this part shall be con5 ducted in a manner so that—

6 ‘‘(A) there is at least a contract for a med7 icine within each therapeutic class (as defined 

8 by the Secretary in consultation with such 

9 Medicare Prescription Medicine Advisory Com10 mittee); 

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

12 available in a therapeutic class, there are con13 tracts for at least 2 medicines within such class 

14 unless determined clinically inappropriate in ac15 cordance with standards established by the Sec16 retary; and 

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

18 available in a therapeutic class, there is a con19 tract for at least 2 medicines within such class 

20 and a contract for generic medicine substitute 

21 if available unless determined clinically inappro22 priate in accordance with standards established 

23 by the Secretary. 

24 ‘‘(2) ESTABLISHMENT OF THERAPEUTIC CLASS25 ES.—The Secretary, in consultation with the Medi-
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•HR 2514 IH 

1 care Prescription Medicine Advisory Committee (es2 tablished under section 1859H), shall establish for 

3 purposes of this part therapeutic classes and assign 

4 to such classes covered outpatient prescription medi5 cines. 

6 ‘‘(3) DISCLOSURE CONCERNING PREFERRED

7 MEDICINES.—The Secretary shall provide, through 

8 pharmacy contractors or otherwise, for—

9 ‘‘(A) disclosure to current and prospective 

10 enrollees and to participating providers and 

11 pharmacies in each service area a list of the 

12 preferred medicines and differences in applica13 ble cost-sharing between such medicines and 

14 nonpreferred medicines; and 

15 ‘‘(B) advance disclosure to current enroll16 ees and to participating providers and phar17 macies in each service area of changes to any 

18 such list of preferred medicines and differences 

19 in applicable cost-sharing. 

20 ‘‘(4) NO REVIEW.—The Secretary’s establish21 ment of therapeutic classes and the assignment of 

22 medicines to such classes and the Secretary’s deter23 mination of what is a breakthrough medicine are not 

24 subject to administrative or judicial review. 
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1 ‘‘(c) CONFIDENTIALITY.—The Secretary shall ensure 

2 that the confidentiality of individually identifiable health 

3 information relating to the provision of benefits under this 

4 part is protected, consistent with the standards for the 

5 privacy of such information promulgated by the Secretary 

6 under the Health Insurance Portability and Accountability 

7 Act of 1996, or any subsequent comprehensive and more 

8 protective set of confidentiality standards enacted into law 

9 or promulgated by the Secretary. Nothing in this sub10 section shall be construed as preventing the coordination 

11 of data with a State prescription medicine program so long 

12 as such program has in place confidentiality standards 

13 that are equal to or exceed the standards used by the Sec14 retary. 

15 ‘‘(d) FRAUD AND ABUSE SAFEGUARDS.—The Sec16 retary, through the Office of the Inspector General, is au17 thorized and directed to issue regulations establishing ap18 propriate safeguards to prevent fraud and abuse under 

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

20 compliance programs, certification data, audits, and rec21 ordkeeping practices. In developing such regulations, the 

22 Secretary shall consult with the Attorney General and 

23 other law enforcement and regulatory agencies. 
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1 ‘‘FEDERAL MEDICARE PRESCRIPTION MEDICINE TRUST

2 FUND

3 ‘‘SEC. 1859F. (a) ESTABLISHMENT.—There is here4 by created on the books of the Treasury of the United 

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

6 Prescription Medicine Trust Fund’ (in this section re7 ferred to as the ‘Trust Fund’). The Trust Fund shall con8 sist of the following: 

9 ‘‘(1) Amounts estimated by the Secretary of the 

10 Treasury that would have been paid from the gen11 eral fund of the Treasury but for the amendments 

12 and repeals made by section 101 of the Honor Thy 

13 Parents Act of 2003. 

14 ‘‘(2) Such gifts and bequests as may be made 

15 as provided in section 201(i)(1). 

16 ‘‘(3) Such amounts as may be deposited in, or 

17 appropriated to, such fund as provided in this 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. 
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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. 
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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 
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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 
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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—
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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 
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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. 
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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. 
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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 
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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), 
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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 (b) 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;’’. 
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1 (c) 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)’’. 
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1 SEC. 202. 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 
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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 
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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 
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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 (e) 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’’.
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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 (f) 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 
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1 a requirement that an enrollee pay cost-sharing in 

2 excess of the cost-sharing otherwise permitted under 

3 part D.’’. 

4 SEC. 203. 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 
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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. 
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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 
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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. 204. 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)’’. 
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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-
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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))’’. 
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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-
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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 
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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.

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