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[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 2664 Introduced in Senate (IS)]

109th CONGRESS
  2d Session
                                S. 2664

 To amend title XVIII of the Social Security Act to improve access to 
                        pharmacies under part D.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                             April 27, 2006

 Mr. Baucus (for himself, Mrs. Lincoln, and Mr. Conrad) introduced the 
 following bill; which was read twice and referred to the Committee on 
                                Finance

_______________________________________________________________________

                                 A BILL

 
 To amend title XVIII of the Social Security Act to improve access to 
                        pharmacies under part D.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Pharmacy Access Improvement (PhAIm) 
Act of 2006''.

SEC. 2. STRENGTHENING STANDARDS FOR ACCESS TO PHARMACIES.

    (a) In General.--Section 1860D-4(b)(1)(C) of the Social Security 
Act (42 U.S.C. 1395w-104(b)(1)(C)) is amended--
            (1) in clause (i)--
                    (A) by inserting ``that are accessible to the 
                general public (not including closed pharmacies, such 
                as pharmacies that dispense drugs by mail order only or 
                are located in a hospital or nursing home, except that 
                a closed pharmacy shall be included if the pharmacy is 
                operated by the Indian Health Service, an Indian tribe 
                or tribal organization, or an urban Indian organization 
                (as defined in section 4 of the Indian Health Care 
                Improvement Act))'' after ``sufficient number of 
                pharmacies''; and
                    (B) by striking ``(other than by mail order)''; and
            (2) in clause (ii), by adding at the end the following new 
        sentence: ``If the PDP sponsor of a prescription drug plan 
        designates in-network pharmacies as either preferred or non-
        preferred pharmacies (or any designation other than preferred 
        or any other distinction between or among pharmacies with 
        respect to participation status), only in-network preferred 
        pharmacies shall be counted in determining if the requirements 
        of such rules are met.''.
    (b) Expanding Participation by Any Willing Pharmacy.--Section 
1860D-4(b)(1)(A) of the Social Security Act (42 U.S.C. 1395w-
104(b)(1)(A)) is amended--
            (1) by striking ``Pharmacy.--A prescription drug plan'' and 
        inserting ``pharmacy.--
                            ``(i) In general.--Subject to clause (ii), 
                        a prescription drug plan'';
            (2) in clause (i), as added by paragraph (1), by adding at 
        the end the following new sentence: ``A previous refusal by a 
        pharmacy of an offer to participate, or the expiration of such 
        an offer, shall not be grounds to exclude a pharmacy from 
        participation under this subparagraph.''; and
            (3) by adding at the end the following new clause:
                            ``(ii) Participation of 340b entities.--
                                    ``(I) In general.--A prescription 
                                drug plan shall not exclude a pharmacy 
                                from participation solely on the basis 
                                that such pharmacy is a covered entity 
                                under section 340B of the Public Health 
                                Service Act.
                                    ``(II) Reasonable terms and 
                                conditions for 340b entities.--In the 
                                case of a pharmacy that is a covered 
                                entity under such section 340B, if such 
                                an entity requests that the terms and 
                                conditions of the appropriate version 
                                (as determined by the Secretary) of the 
                                Model Safety Net Pharmacy Addendum to 
                                Pharmacy Contract apply to a contract 
                                to dispense covered part D drugs under 
                                such plan, subject to subclause (III), 
                                the terms and conditions of such 
                                Contract shall be the terms and 
                                conditions for participation of such 
                                pharmacy under clause (i).
                                    ``(III) Permitting waiver of cost-
                                sharing.--In the case of a pharmacy 
                                that is a covered entity under such 
                                section 340B, if such an entity 
                                requests that the terms and conditions 
                                of a contract to dispense covered part 
                                D drugs under such plan permit the 
                                pharmacy to waive or reduce cost-
                                sharing under this part, consistent 
                                with the requirements of section 
                                1128B(b)(3)(G), such permission shall 
                                be included in the terms and conditions 
                                for participation of such pharmacy 
                                under clause (i).''.
    (c) Strengthening Convenient Access Standards.--Section 1860D-
4(b)(1)(C) of the Social Security Act (42 U.S.C. 1395w-104(b)(1)(C)) is 
amended by striking clause (iv) and inserting the following new 
clauses:
                            ``(iv) Convenient access in long-term care 
                        facilities.--Such rules shall include standards 
                        with respect to access for enrollees who are 
                        residing in long-term care facilities to ensure 
                        that such enrollees have access to a long-term 
                        care network pharmacy.
                            ``(v) Convenient access to pharmacies 
                        serving indians.--Such rules may include 
                        standards with respect to access for enrollees 
                        to pharmacies operated by the Indian Health 
                        Service, Indian tribes and tribal 
                        organizations, and urban Indian organizations 
                        (as defined in section 4 of the Indian Health 
                        Care Improvement Act.''.
    (d) Reference to Provisions Relating to Reasonable Dispensing 
Fees.--Section 1860D-4(b) of the Social Security Act (42 U.S.C. 1395w-
104(b)) is amended by adding at the end the following new paragraph:
            ``(4) Reference to reasonable dispensing fee provisions.--
        For provisions relating to reasonable dispensing fees, see 
        section 1860D-12(b)(7).''.
    (e) Effective Date.--The amendments made by this section shall 
apply to plan years beginning on or after January 1, 2007.

SEC. 3. PROMPT PAYMENT BY PRESCRIPTION DRUG PLANS AND MA-PD PLANS UNDER 
              PART D.

    (a) Prompt Payment by Prescription Drug Plans.--Section 1860D-12(b) 
of the Social Security Act (42 U.S.C. 1395w-112(b)) is amended by 
adding at the end the following new paragraph:
            ``(4) Prompt payment of clean claims.--
                    ``(A) Prompt payment.--
                            ``(i) In general.--Each contract entered 
                        into with a PDP sponsor under this section with 
                        respect to a prescription drug plan offered by 
                        such sponsor shall provide that payment shall 
                        be issued, mailed, or otherwise transmitted 
                        with respect to all clean claims submitted by 
                        pharmacies (other than pharmacies that dispense 
                        drugs by mail order only or are located in, or 
                        contract with, a long-term care facility) under 
                        this part within the applicable number of 
                        calendar days after the date on which the claim 
                        is received.
                            ``(ii) Clean claim defined.--In this 
                        paragraph, the term `clean claim' means a claim 
                        that has no defect or impropriety (including 
                        any lack of any required substantiating 
                        documentation) or particular circumstance 
                        requiring special treatment that prevents 
                        timely payment from being made on the claim 
                        under this part.
                    ``(B) Applicable number of calendar days defined.--
                In this paragraph, the term `applicable number of 
                calendar days' means--
                            ``(i) with respect to claims submitted 
                        electronically, 14 days; and
                            ``(ii) with respect to claims submitted 
                        otherwise, 30 days.
                    ``(C) Interest payment.--If payment is not issued, 
                mailed, or otherwise transmitted within the applicable 
                number of calendar days (as defined in subparagraph 
                (B)) after a clean claim is received, interest shall be 
                paid at a rate equal to the weighted average of 
                interest on 3-month marketable Treasury securities 
                determined for such period, increased by 0.1 percentage 
                point for the period beginning on the day after the 
                required payment date and ending on the date on which 
                payment is made. Interest amounts paid under this 
                subparagraph shall not be counted against the 
                administrative costs of a prescription drug plan.
                    ``(D) Procedures involving claims.--
                            ``(i) In general.--A contract entered into 
                        with a PDP sponsor under this section with 
                        respect to a prescription drug plan offered by 
                        such sponsor shall provide that, not later than 
                        10 days after the date on which a clean claim 
                        is submitted, the PDP sponsor shall provide the 
                        claimant with a notice that acknowledges 
                        receipt of the claim by such sponsor. Such 
                        notice shall be considered to have been 
                        provided on the date on which the notice is 
                        mailed or electronically transferred.
                            ``(ii) Claim deemed to be clean.--A claim 
                        is deemed to be a clean claim if the PDP 
                        sponsor involved does not provide notice to the 
                        claimant of any deficiency in the claim within 
                        10 days of the date on which the claim is 
                        submitted.
                            ``(iii) Claim determined to not be a clean 
                        claim.--
                                    ``(I) In general.--If a PDP sponsor 
                                determines that a submitted claim is 
                                not a clean claim, the PDP sponsor 
                                shall, not later than the end of the 
                                period described in clause (ii), notify 
                                the claimant of such determination. 
                                Such notification shall specify all 
                                defects or improprieties in the claim 
                                and shall list all additional 
                                information or documents necessary for 
                                the proper processing and payment of 
                                the claim.
                                    ``(II) Determination after 
                                submission of additional information.--
                                A claim is deemed to be a clean claim 
                                under this paragraph if the PDP sponsor 
                                involved does not provide notice to the 
                                claimant of any defect or impropriety 
                                in the claim within 10 days of the date 
                                on which additional information is 
                                received under subclause (I).
                                    ``(III) Payment of clean portion of 
                                a claim.--A PDP sponsor shall, as 
                                appropriate, pay any portion of a claim 
                                that would be a clean claim but for a 
                                defect or impropriety in a separate 
                                portion of the claim in accordance with 
                                subparagraph (A).
                            ``(iv) Obligation to pay.--A claim 
                        submitted to a PDP sponsor that is not paid or 
                        contested by the provider within the applicable 
                        number of days (as defined in subparagraph (B)) 
                        shall be deemed to be a clean claim and shall 
                        be paid by the PDP sponsor in accordance with 
                        subparagraph (A).
                            ``(v) Date of payment of claim.--Payment of 
                        a clean claim under such subparagraph is 
                        considered to have been made on the date on 
                        which--
                                    ``(I) with respect to claims paid 
                                electronically, the payment is 
                                transferred; and
                                    ``(II) with respect to claims paid 
                                otherwise, the payment is submitted to 
                                the United States Postal Service or 
                                common carrier for delivery.
                    ``(E) Electronic transfer of funds.--A PDP sponsor 
                shall pay all clean claims submitted electronically by 
                electronic transfer of funds if the pharmacy so 
                requests or has so requested previously.
                    ``(F) Private right of action.--
                            ``(i) In general.--Nothing in this 
                        paragraph shall be construed to prohibit or 
                        limit a claim or action not covered by the 
                        subject matter of this section that any 
                        individual or organization has against a 
                        provider or a PDP sponsor.
                            ``(ii) Anti-retaliation.--Consistent with 
                        applicable Federal or State law, a PDP sponsor 
                        shall not retaliate against an individual or 
                        provider for exercising a right of action under 
                        this subparagraph.''.
    (b) Prompt Payment by MA-PD Plans.--Section 1857(f) of the Social 
Security Act (42 U.S.C. 1395w-27) is amended by adding at the end the 
following new paragraph:
            ``(3) Incorporation of certain prescription drug plan 
        contract requirements.--The following provisions shall apply to 
        contracts with a Medicare Advantage organization in the same 
        manner as they apply to contracts with a PDP sponsor offering a 
        prescription drug plan under part D:
                    ``(A) Prompt payment.--Section 1860D-12(b)(4).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning on or after January 1, 2007.

SEC. 4. MEDICARE PART D INFORMATIONAL RESOURCES AND CUSTOMER SERVICE.

    (a) Health and Human Services Pharmacy Hotline.--The Secretary of 
Health and Human Services shall--
            (1) establish a toll-free telephone number that is 
        dedicated to providing information regarding the Medicare 
        prescription drug benefit under part D of title XVIII of the 
        Social Security Act to pharmacists and pharmacy staff; and
            (2) staff such telephone number in order to ensure that the 
        toll-free number is available to answer calls 24-hours each 
        day.
    (b) Customer Service Provided by Prescription Drug Plans and MA-PD 
Plans.--
            (1) In general.--Section 1860D-4 of the Social Security Act 
        (42 U.S.C. 1395w-104) is amended by adding at the end the 
        following new subsection:
    ``(l) Customer Service.--
            ``(1) Pharmacy hotline.--A PDP sponsor of a prescription 
        drug plan shall--
                    ``(A) establish a toll-free telephone number that 
                is dedicated to providing information regarding the 
                plan to pharmacists and pharmacy staff; and
                    ``(B) staff such telephone number in order to 
                ensure compliance with customer service standards (as 
                established by the Secretary).
            ``(2) Physician and provider hotline.--A PDP sponsor of a 
        prescription drug plan shall--
                    ``(A) establish a toll-free telephone number that 
                is dedicated to providing information regarding the 
                plan to physicians and providers; and
                    ``(B) staff such telephone number in order to 
                ensure compliance with customer service standards (as 
                established by the Secretary).''.
            (2) Effective date.--The amendments made by this subsection 
        shall apply to plan years beginning on or after January 1, 
        2007.

SEC. 5. TRANSACTION STANDARDS FOR PRESCRIPTION DRUG PLANS AND MA-PD 
              PLANS.

    (a) In General.--Section 1860D-4(b)(2) of the Social Security Act 
is amended--
            (1) in subparagraph (A)--
                    (A) by striking ``In general.--The PDP'' and 
                inserting ``In general.--
                            ``(i) Standardized technology for benefit 
                        access.--Subject to subsection (m), the PDP''; 
                        and
                    (B) by adding at the end the following new clause:
                            ``(ii) Standardized technology for 
                        communications and transactions.--The PDP 
                        sponsor of a prescription drug plan shall 
                        utilize standardized technology for any 
                        communication or transaction (including a 
                        billing or coding transaction) occurring 
                        between such plan and a participating 
                        pharmacy.''; and
            (2) by amending subparagraph (B) to read as follows:
                    ``(B) Standards.--The card or technology required 
                under subparagraph (A) shall comply with the most 
                recent standards adopted by the Secretary under section 
                1173(c).''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to cards issued, and communications or transactions conducted, on 
or after the date that is 60 days after the date of enactment of this 
Act.

SEC. 6. RESTRICTIONS ON PHARMACY CO-BRANDING BY PRESCRIPTION DRUG PLANS 
              AND MA-PD PLANS.

    (a) In General.--Section 1860D-4 of the Social Security Act (42 
U.S.C. 1395w-104), as amended by section 4(b), is amended by adding at 
the end the following new subsection:
    ``(m) Co-Branding.--
            ``(1) Prohibition of co-branding on prescription drug 
        card.--A card that is issued under subsection (b)(2)(A) for use 
        under a prescription drug plan offered by a PDP sponsor shall 
        not display the name, brand, logo, or trademark of any 
        pharmacy.
            ``(2) Marketing materials.--Marketing materials distributed 
        by a PDP sponsor that has a co-branding relationship with a 
        pharmacy with respect to such a plan shall include a disclaimer 
        in large, off-set, bold-face type of the following: Other 
        pharmacies are also available in our network.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to cards and marketing materials distributed on or after the date 
that is 60 days after the date of enactment of this Act.

SEC. 7. SUBMISSION OF CLAIMS BY PHARMACIES LOCATED IN OR CONTRACTING 
              WITH LONG-TERM CARE FACILITIES.

    (a) Submission of Claims by Pharmacies Located in or Contracting 
With Long-Term Care Facilities.--
            (1) Submission of claims to prescription drug plans.--
        Section 1860D-12(b) of the Social Security Act (42 U.S.C. 
        1395w-112(b)), as amended by section 3(a), is amended by adding 
        at the end the following new paragraph:
            ``(5) Submission of claims by pharmacies located in or 
        contracting with long-term care facilities.--Each contract 
        entered into with a PDP sponsor under this section with respect 
        to a prescription drug plan offered by such sponsor shall 
        provide that a pharmacy located in, or having a contract with, 
        a long-term care facility shall have not less than 30 days (but 
        not more than 90 days) to submit claims to the sponsor for 
        reimbursement under the plan.''.
            (2) Submission of claims to ma-pd plans.--Section 
        1857(f)(3) of the Social Security Act, as added by section 
        3(b), is amended by adding at the end the following new 
        subparagraph:
                    ``(B) Submission of claims by pharmacies located in 
                or contracting with long-term care facilities.--Section 
                1860D-12(b)(5).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to plan years beginning on or after January 1, 2007.

SEC. 8. ASSURING PHARMACY ACCESS BY REQUIRING REASONABLE PAYMENT OF 
              PHARMACIES.

    (a) Reasonable Dispensing Fees Required.--
            (1) Requirement for prescription drug plans.--Section 
        1860D-12(b) of the Social Security Act (42 U.S.C. 1395w-
        104(b)(1)), as amended by section 7(a)(1), is amended by adding 
        at the end the following new paragraph:
            ``(6) Reasonable dispensing fees required.--
                    ``(A) Reasonable dispensing fee required.--In the 
                case of plan years beginning on or after January 1, 
                2009, subject to subparagraph (E), each contract 
                entered into with a PDP sponsor under this section with 
                respect to a prescription drug plan offered by such 
                sponsor shall provide that such sponsor shall pay a 
                reasonable dispensing fee (as determined under 
                subparagraph (B)) for covered part D drugs dispensed 
                through a participating pharmacy (other than such a 
                pharmacy that dispenses drugs by mail order only or is 
                located in, or contracts with, a long-term care 
                facility).
                    ``(B) Establishment of reasonable dispensing fees 
                for prescription drug plans.--
                            ``(i) In general.--The Secretary shall 
                        establish, on an expedited basis and using a 
                        negotiated rulemaking process under subchapter 
                        III of chapter 5 of title 5, United States 
                        Code, reasonable dispensing fees for covered 
                        part D drugs dispensed through participating 
                        pharmacies.
                            ``(ii) Consideration of oig 
                        recommendations.--In establishing such 
                        reasonable dispensing fees, the Secretary shall 
                        consider the recommendations included in the 
                        report submitted under section 8(b)(2) of the 
                        Pharmacy Access Improvement (PhAIm) Act of 2006 
                        with respect to the geographic area in which a 
                        prescription drug plan is offered, including 
                        any adjustment recommended in such report for 
                        dispensing an extended supply of a covered part 
                        D drug.
                            ``(iii) Publication of notice.--In carrying 
                        out the rulemaking process under this 
                        subparagraph, the Secretary, after consultation 
                        with pharmacists, pharmacies (including long-
                        term care, independent, chain, and mass market 
                        retail pharmacies), part D eligible 
                        individuals, beneficiary advocates, PDP 
                        sponsors of prescription drug plans, Medicare 
                        Advantage organizations offering MA-PD plans, 
                        and any other interested parties the Secretary 
                        determines appropriate, shall publish the 
                        notice provided under section 564(a) of title 
                        5, United States Code, by not later than 60 
                        days after the date of enactment of the 
                        Pharmacy Access Improvement (PhAIm) Act of 
                        2006.
                            ``(iv) Target date for publication of 
                        rule.--As part of the notice provided under 
                        clause (iii), and for purposes of this 
                        subparagraph, the `target date for publication' 
                        (referred to in section 564(a)(5) of such 
                        title) shall be March 1, 2008.
                            ``(v) Abbreviated period for submission of 
                        comments.--In applying section 564(c) of such 
                        title under this subparagraph, `15 days' shall 
                        be substituted for `30 days'.
                            ``(vi) Appointment of negotiated rulemaking 
                        committee and facilitator.--The Secretary shall 
                        provide for--
                                    ``(I) the appointment of a 
                                negotiated rulemaking committee under 
                                section 565(a) of such title by not 
                                later than 20 days after the end of the 
                                comment period provided for under 
                                section 564(c) of such title (as 
                                shortened under clause (v)); and
                                    ``(II) the nomination of a 
                                facilitator under section 566(c) of 
                                such title by not later than 10 days 
                                after the date of appointment of the 
                                committee.
                            ``(vii) Preliminary committee report.--The 
                        negotiated rulemaking committee appointed under 
                        clause (vi)(I) shall report to the Secretary, 
                        by not later than December 1, 2007, regarding 
                        the committee's progress on achieving a 
                        consensus with regard to the rulemaking 
                        proceeding and whether such consensus is likely 
                        to occur before 1 month before the target date 
                        for publication of the rule. If the committee 
                        reports that the committee has failed to make 
                        significant progress towards such consensus or 
                        is unlikely to reach such consensus by the 
                        target date, the Secretary may terminate such 
                        process and provide for the publication of a 
                        rule under this subsection through such other 
                        methods as the Secretary may provide.
                            ``(viii) Final committee report.--If the 
                        committee is not terminated under clause (vii), 
                        the rulemaking committee shall submit a report 
                        containing a proposed rule by not later than 1 
                        month before the target date of publication.
                            ``(ix) Interim, final effect.--The 
                        Secretary shall publish a rule under this 
                        subparagraph in the Federal Register by not 
                        later than the target date of publication. Such 
                        rule shall be effective and final immediately 
                        on an interim basis, but is subject to a change 
                        and revision after public notice and 
                        opportunity for a period (of not less than 60 
                        days) for public comment. In connection with 
                        such rule, the Secretary shall specify the 
                        process for the timely review and approval of 
                        contracts with PDP sponsors of prescription 
                        drug plans to be certified as paying reasonable 
                        dispensing fees for covered part D drugs 
                        dispensed through participating pharmacies 
                        pursuant to such rules and consistent with this 
                        subparagraph.
                            ``(x) Publication of rule after public 
                        comment.--The Secretary shall provide for 
                        consideration of such comments and 
                        republication of such rule by not later than 1 
                        year after the target date of publication.
                    ``(C) Annual review.--The Secretary shall annually 
                review the rule published under subparagraph (C) and 
                revise such rule as appropriate based on the following 
                considerations:
                            ``(i) Any reasonable costs associated with 
                        a pharmacist's time in--
                                    ``(I) checking for information 
                                about an individual's coverage; and
                                    ``(II) performing necessary 
                                clinical review and quality assurance 
                                activities.
                            ``(ii) Costs incurred by the pharmacist 
                        that are associated with--
                                    ``(I) the measurement or mixing of 
                                a covered part D drug;
                                    ``(II) filling the container for 
                                such a drug;
                                    ``(III) physically providing the 
                                completed prescription to an individual 
                                enrolled in such a plan;
                                    ``(IV) delivery;
                                    ``(V) special packaging;
                                    ``(VI) overhead related to the 
                                facility and its maintenance, and the 
                                equipment necessary to operate the 
                                pharmacy, including the salaries of 
                                pharmacists and other pharmacy workers; 
                                and
                                    ``(VII) geographic factors that 
                                impact operational costs.
                            ``(iii) The reasonable variation in costs 
                        described in clause (ii) based on whether the 
                        pharmacist is dispensing a standard or extended 
                        supply of a covered part D drug.
                            ``(iv) The annual National Industry-
                        Specific Occupational Employment and Wage 
                        Estimates published by the Bureau of Labor 
                        Statistics of the Department of Labor, as 
                        determined with respect to pharmacists.
                    ``(D) Special rule for plan year 2008.--In the case 
                of the plan year beginning on January 1, 2008, subject 
                to subparagraph (E), each contract entered into with a 
                PDP sponsor under this section with respect to a 
                prescription drug plan offered by such sponsor shall 
                provide that such sponsor shall pay a reasonable 
                dispensing fee for covered part D drugs dispensed 
                through a participating pharmacy (other than such a 
                pharmacy that dispenses drugs by mail order only or is 
                located in, or contracts with, a long-term care 
                facility) based on the following considerations:
                            ``(i) Any reasonable costs associated with 
                        a pharmacist's time in--
                                    ``(I) checking for information 
                                about an individual's coverage; and
                                    ``(II) performing necessary 
                                clinical review and quality assurance 
                                activities.
                            ``(ii) Costs incurred by the pharmacist 
                        that are associated with--
                                    ``(I) the measurement or mixing of 
                                a covered part D drug;
                                    ``(II) filling the container for 
                                such a drug;
                                    ``(III) physically providing the 
                                completed prescription to an individual 
                                enrolled in such a plan;
                                    ``(IV) delivery;
                                    ``(V) special packaging;
                                    ``(VI) overhead related to the 
                                facility and its maintenance, and the 
                                equipment necessary to operate the 
                                pharmacy, including the salaries of 
                                pharmacists and other pharmacy workers; 
                                and
                                    ``(VII) geographic factors that 
                                impact operational costs.
                            ``(iii) The reasonable variation in costs 
                        described in clause (ii) based on whether the 
                        pharmacist is dispensing a standard or extended 
                        supply of a covered part D drug.
                    ``(E) Minimum dispensing fees for participating 
                pharmacies.--In the case of a PDP sponsor of a 
                prescription drug plan that sets separate rates for in-
                network pharmacies based on whether the pharmacy is a 
                preferred or non-preferred pharmacy (or any designation 
                other than preferred or any other distinction between 
                or among pharmacies with respect to participation 
                status), the dispensing fee established by such sponsor 
                for a participating pharmacy that is not so designated 
                as a preferred or non-preferred pharmacy shall be at a 
                rate that is not less than the rate at which the PDP 
                sponsor reimburses such non-preferred pharmacies.''.
            (2) Requirement for ma-pd plans.--Section 1857(f)(3) of the 
        Social Security Act, as amended by section 7(a)(2), is amended 
        by adding at the end the following new subparagraph:
                    ``(C) Reasonable dispensing fees required.--Section 
                1860D-12(b)(6).''.
    (b) OIG Study and Report on Reasonable Dispensing Fees.--
            (1) Study.--The Inspector General of the Department of 
        Health and Human Services shall conduct an analysis of the cost 
        of dispensing covered part D drugs (as defined in section 
        1860D-2(e) of the Social Security Act (42 U.S.C. 1395w-102(e)) 
        under a prescription drug plan under part D of title XVIII or 
        an MA-PD plan under part C of such title that takes into 
        consideration the following:
                    (A) Any reasonable costs associated with a 
                pharmacist's time in--
                            (i) checking for information about an 
                        individual's coverage; and
                            (ii) performing necessary clinical review 
                        and quality assurance activities.
                    (B) Costs incurred by the pharmacist that are 
                associated with--
                            (i) the measurement or mixing of a covered 
                        part D drug;
                            (ii) filling the container for such a drug;
                            (iii) physically providing the completed 
                        prescription to an individual enrolled in such 
                        a plan;
                            (iv) delivery;
                            (v) special packaging;
                            (vi) overhead related to the facility and 
                        its maintenance, and the equipment necessary to 
                        operate the pharmacy, including the salaries of 
                        pharmacists and other pharmacy workers; and
                            (vii) geographic factors that impact 
                        operational costs.
                    (C) The reasonable variation in costs described in 
                subparagraph (B) based on whether the pharmacist is 
                dispensing a standard or extended supply of a covered 
                part D drug.
                    (D) The reasonable variation in dispensing fees, 
                taking into consideration the costs described in 
                subparagraphs (A), (B), and (C), that is sufficient to 
                encourage the use of covered generic alternative 
                therapies.
            (2) Report.--By not later than March 1, 2007, the Inspector 
        General of the Department of Health and Human Services shall 
        submit a report to the Secretary of Health and Human Services 
        on the study conducted under paragraph (1). The report shall 
        include recommendations on the following:
                    (A) What the minimum reasonable dispensing fee 
                should be with respect to a prescription drug plan 
                under part D of title XVIII or an MA-PD plan under part 
                C of such title determined with respect to the area in 
                which such plan is offered, including with respect to 
                each PDP region (as determined under section 1860D-
                11(a)(2) of the Social Security Act (42 U.S.C. 1395w-
                111(a)(2)) and each MA region (as determined under 
                section 1858(a) of such Act (42 U.S.C. 1395w-27(a)).
                            (i) The extent to which the dispensing fee 
                        described in subparagraph (A) can reasonably be 
                        increased when an extended supply of a covered 
                        part D drug (as so defined) is dispensed 
                        (depending on the number of days worth of such 
                        a drug being supplied to the beneficiary).
    (c) Encouraging Utilization of Generic Drugs.--Section 1860D-4(b) 
of the Social Security Act (42 U.S.C. 1395w-104(b)), as amended by 
section 2(d), is amended by adding at the end the following new 
paragraph:
            ``(5) Encouraging utilization of generic drugs.--With 
        respect to prescriptions filled on or after January 1, 2008, 
        the PDP sponsor of a prescription drug plan shall encourage 
        generic utilization by paying an increased dispensing fee for 
        generic drugs.''.
    (d) Regular Update of Prescription Drug Pricing Standard 
Required.--
            (1) Requirement for prescription drug plans.--Section 
        1860D-12(b) of the Social Security Act (42 U.S.C. 1395w-
        104(b)(1)), as amended by subsection (a), is amended by adding 
        at the end the following new paragraph:
            ``(7) Regular update of prescription drug pricing 
        standard.--If the PDP sponsor of a prescription drug plan uses 
        a standard for reimbursement of pharmacies based on the cost of 
        a drug, each contract entered into with such sponsor under this 
        section with respect to the plan shall provide that the sponsor 
        shall update such standard not less frequently than every 7 
        days, beginning with an initial update on January 1 of each 
        year, to accurately reflect the market price of acquiring the 
        drug.''.
            (2) Requirement for ma-pd plans.--Section 1857(f)(3) of the 
        Social Security Act, as amended by subsection (a)(2), is 
        amended by adding at the end the following new subparagraph:
                    ``(D) Regular update of prescription drug pricing 
                standard.--Section 1860D-12(b)(7).''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to plan years beginning on or after January 1, 
        2007.
                                 <all>
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