I 

108TH CONGRESS 

1ST SESSION H. R. 3332

To amend title XVIII of the Social Security Act to establish a safety net 

Medicare outpatient prescription drug program for indigent beneficiaries 

without other outpatient prescription drug coverage. 

IN THE HOUSE OF REPRESENTATIVES 

OCTOBER 17, 2003

Mr. BURTON of Indiana introduced the following bill; which was referred to 

the Committee on Energy and Commerce, and in addition to the Committee on Ways and Means, for a period to be subsequently determined 

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

within the jurisdiction of the committee concerned 

A BILL

To amend title XVIII of the Social Security Act to establish 

a safety net Medicare outpatient prescription drug program for indigent beneficiaries without other outpatient 

prescription drug coverage.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

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

5 ‘‘Medicare Safety Net Prescription Drug Coverage Act of 

6 2003’’. 
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1 (b) TABLE OF CONTENTS.—The table of contents of 

2 this Act is as follows:

Sec. 1. Short title; table of contents. 

Sec. 2. Safety net medicare outpatient prescription drug program for indigent, 

uncovered beneficiaries. 

‘‘PART D—SAFETY NET MEDICARE OUTPATIENT PRESCRIPTION DRUG

PROGRAM FOR INDIGENT, UNCOVERED BENEFICIARIES

‘‘Sec. 1860D–1. Establishment of program. 

‘‘Sec. 1860D–2. Enrollment. 

‘‘Sec. 1860D–3. Enrollee protections. 

‘‘Sec. 1860D–4. Benefits under the program. 

‘‘Sec. 1860D–5. Prescription drug accounts. 

‘‘Sec. 1860D–6. Safety Net Prescription Drug Account in the Federal 

Supplementary Medical Insurance Trust Fund. 

‘‘Sec. 1860D–7. Definitions. 

Sec. 3. Exclusion of part D costs from determination of part B monthly premium. 

Sec. 4. Medicaid amendments. 

Sec. 5. Importation of prescription drugs.

3 SEC. 2. SAFETY NET MEDICARE OUTPATIENT PRESCRIP4 TION DRUG PROGRAM FOR INDIGENT, UN5 COVERED BENEFICIARIES. 

6 (a) ESTABLISHMENT OF PROGRAM.—Title XVIII of 

7 the Social Security Act (42 U.S.C. 1395 et seq.) is amend8 ed by redesignating part D as part E and by inserting 

9 after part C the following new part: 

10 ‘‘PART D—SAFETY NET MEDICARE OUTPATIENT PRE11 SCRIPTION DRUG PROGRAM FOR INDIGENT, UNCOV12 ERED BENEFICIARIES

13 ‘‘ESTABLISHMENT OF PROGRAM

14 ‘‘SEC. 1860D–1. (a) PROVISION OF BENEFIT.—The 

15 Secretary shall establish a Medicare Safety Net Out16 patient Prescription Drug Program under this part under 
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1 which an eligible beneficiary who voluntarily enrolls under 

2 this part is provided—

3 ‘‘(1) access to negotiated prices for costs before 

4 catastrophic threshold; 

5 ‘‘(2) catastrophic coverage under this part; and 

6 ‘‘(3) a prescription drug account and a public 

7 contribution into such an account. 

8 ‘‘(b) ELIGIBLE BENEFICIARY; ELIGIBLE ENTITY; 

9 PRESCRIPTION DRUG ACCOUNT.—For purposes of this 

10 part: 

11 ‘‘(1) ELIGIBLE BENEFICIARY.—The term ‘eligi12 ble beneficiary’ means an individual who—

13 ‘‘(A) is eligible for benefits under part A or 

14 enrolled under part B, regardless of whether or 

15 not the individual is enrolled with a plan under 

16 part C; 

17 ‘‘(B) does not have, and is not eligible for, 

18 any prescription drug coverage under title XIX, 

19 under a group health plan, under part C, under 

20 individual health insurance coverage, under a 

21 medicare supplemental policy, under a State 

22 pharmaceutical assistance program, or under 

23 chapter 17 of title 38, United States Code (re24 lating to Veterans benefits); and 
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1 ‘‘(C) has current income (as defined and 

2 determined by the Secretary) to be less than 

3 250 percent of the official poverty line. 

4 ‘‘(2) PRESCRIPTION DRUG ACCOUNT.—The 

5 term ‘prescription drug account’ means, with respect 

6 to an eligible beneficiary, an account established for 

7 the benefit of that beneficiary under section 1860D–

8 5.

9 ‘‘(c) IMPLEMENTATION OF PROGRAM.—

10 ‘‘(1) DEADLINE FOR IMPLEMENTATION.—The 

11 Secretary shall establish the program under this 

12 part in a manner so that benefits with respect to 

13 contributions to a prescription drug account and cat14 astrophic coverage shall begin with the month of 

15 January 2005. 

16 ‘‘(2) ADMINISTRATION THROUGH NEW DIVISION

17 WITHIN HHS.—The Secretary shall provide for es18 tablishment of a separate division within the Depart19 ment of Health and Human Services that shall be 

20 responsible for the administration of this part.

21 ‘‘(d) VOLUNTARY NATURE OF PROGRAM.—Nothing 

22 in this part shall be construed as requiring an eligible ben23 eficiary to enroll in the program under this part. 

24 ‘‘(e) FINANCING.—The costs of providing benefits 

25 under this part shall be payable from the Safety Net Pre-
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1 scription Drug Account established within the Federal 

2 Supplementary Medical Insurance Trust Fund under sec3 tion 1860D–6. 

4 ‘‘ENROLLMENT; SELECTION OF ELIGIBLE ENTITY

5 ‘‘SEC. 1860D–2. (a) ENROLLMENT UNDER PART

6 D.—

7 ‘‘(1) ESTABLISHMENT OF PROCESS.—

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

9 establish a process through which an eligible 

10 beneficiary may make an election to enroll 

11 under this part. Under such process—

12 ‘‘(i) a beneficiary may enroll at any 

13 time during a year (or during an initial en14 rollment period beginning on October 1, 

15 2004, for 2005); 

16 ‘‘(ii) once first enrolled with respect to 

17 a year, a beneficiary is eligible for benefits 

18 for the remainder of the year; and

19 ‘‘(iii) for succeeding years, a bene20 ficiary must recertify eligibility on an an21 nual basis (as specified by the Secretary) 

22 to remain eligible for benefits under this 

23 part. 

24 ‘‘(B) REQUIREMENT OF ENROLLMENT.—

25 An eligible beneficiary must be enrolled under 
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1 this part for a year in order to be eligible to re2 ceive the benefits under this part for that year. 

3 ‘‘(C) TERMINATION OF ENROLLMENT.—An 

4 enrollee under this part shall be disenrolled—

5 ‘‘(i) upon termination of coverage 

6 under part A or part B; 

7 ‘‘(ii) upon notice submitted to the 

8 Secretary in such form, manner, and time 

9 as the Secretary shall provide; and 

10 ‘‘(iii) upon failure to have eligibility 

11 recertified in accordance with subpara12 graph (A)(iii). 

13 Terminations of enrollment under this subpara14 graph shall be effective as specified by the Sec15 retary in regulations. 

16 ‘‘(2) PERIOD OF COVERAGE.—Individuals en17 rolled under this part after the beginning of a year, 

18 are eligible for benefits beginning on the first day of 

19 the month following the month in which such enroll20 ment occurs. 

21 ‘‘(b) PROVIDING ENROLLMENT AND COVERAGE IN22 FORMATION TO BENEFICIARIES.—The Secretary shall 

23 provide for activities under this part to broadly dissemi24 nate information to eligible beneficiaries (and prospective 

25 eligible beneficiaries) regarding enrollment under this part 
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1 and the prescription drug coverage made available under 

2 this part. 

3 ‘‘(c) NO ENROLLMENT FEE.—There shall be no fee 

4 for enrollment under this part. 

5 ‘‘(d) ISSUANCE OF CARD AND COORDINATION.—The 

6 Secretary shall—

7 ‘‘(1) issue to each enrolled beneficiary a card 

8 and an enrollment number that establishes proof of 

9 enrollment and that can be used in a coordinated 

10 manner—

11 ‘‘(A) to identify the beneficiary for pur12 poses of this part, including tracking expendi13 tures that count against the catastrophic cov14 erage threshold; and 

15 ‘‘(B) to make deposits to and withdrawals 

16 from a prescription drug account under section 

17 1860D–5; and 

18 ‘‘(2) provide for electronic methods to coordi19 nate with such prescription drug accounts. 

20 ‘‘ENROLLEE PROTECTIONS

21 ‘‘SEC. 1860D–3. (a) DISSEMINATION OF INFORMA22 TION.—

23 ‘‘(1) GENERAL INFORMATION.—The Secretary 

24 shall disclose, in a clear, accurate, and standardized 

25 manner to eligible beneficiaries enrolled under this 
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1 part, information relating to prescription drug cov2 erage under this part. 

3 ‘‘(2) DISCLOSURE UPON REQUEST OF GENERAL

4 COVERAGE, UTILIZATION, AND GRIEVANCE INFORMA5 TION.—Upon request of an eligible beneficiary, the 

6 Secretary shall provide the information described in 

7 section 1852(c)(2) (other than subparagraph (D)) to 

8 such beneficiary. 

9 ‘‘(3) RESPONSE TO BENEFICIARY QUESTIONS.—

10 The Secretary shall have a mechanism (including a 

11 toll-free telephone number) for providing upon re12 quest specific information (such as negotiated prices, 

13 including discounts) to beneficiaries enrolled under 

14 this part. 

15 ‘‘(4) COORDINATION WITH CATASTROPHIC COV16 ERAGE AND PRESCRIPTION DRUG ACCOUNT BENE17 FITS.—The Secretary shall provide for coordination 

18 of such information as the Secretary may specify to 

19 carry out sections 1860D–4(b) and 1860D–5. 

20 ‘‘(b) ACCESS TO COVERED BENEFITS.—

21 ‘‘(1) ENSURING PHARMACY ACCESS.—

22 ‘‘(A) PARTICIPATION OF ANY WILLING

23 PHARMACY.—The Secretary shall permit the 

24 participation of any pharmacy that meets terms 
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1 and conditions that the Secretary has estab2 lished. 

3 ‘‘(B) NEGOTIATION OF PRICES.—The Sec4 retary may negotiate with different vendors dif5 ferent prices to be paid for outpatient prescrip6 tion drugs. 

7 ‘‘(2) ACCESS TO NEGOTIATED PRICES FOR PRE8 SCRIPTION DRUGS.—For requirements relating to 

9 the access of an eligible beneficiary to negotiated 

10 prices (including applicable discounts), see section 

11 1860D–4(a). 

12 ‘‘(c) COST AND UTILIZATION MANAGEMENT; QUAL13 ITY ASSURANCE; MEDICATION THERAPY MANAGEMENT

14 PROGRAM.—

15 ‘‘(1) IN GENERAL.—For purposes of providing 

16 access to negotiated benefits under section 1860D–

17 4(a) and the catastrophic benefit described in sec18 tion 1860D–4(b), the Secretary may establish—

19 ‘‘(A) an effective cost and drug utilization 

20 management program, including appropriate in21 centives to use generic drugs, when appropriate; 

22 ‘‘(B) quality assurance measures and sys23 tems to reduce medical errors and adverse drug 

24 interactions, including a medication therapy 
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1 management program described in paragraph 

2 (2); and 

3 ‘‘(C) a program to control fraud, abuse, 

4 and waste. 

5 ‘‘(2) MEDICATION THERAPY MANAGEMENT PRO6 GRAM.—

7 ‘‘(A) IN GENERAL.—A medication therapy 

8 management program described in this para9 graph is a program of drug therapy manage10 ment and medication administration that may 

11 be furnished by a pharmacy provider and that 

12 is designed to assure, with respect to bene13 ficiaries at risk for potential medication prob14 lems, such as beneficiaries with complex or 

15 chronic diseases (such as diabetes, asthma, hy16 pertension, and congestive heart failure) or 

17 multiple prescriptions, that covered outpatient 

18 drugs are appropriately used to optimize thera19 peutic outcomes through improved medication

20 use and reduce the risk of adverse events, in21 cluding adverse drug interactions. Such pro22 grams may distinguish between services in am23 bulatory and institutional settings. 

24 ‘‘(B) ELEMENTS.—Such program may in25 clude—
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1 ‘‘(i) enhanced beneficiary under2 standing to promote the appropriate use of 

3 medications by beneficiaries and to reduce 

4 the risk of potential adverse events associ5 ated with medications, through beneficiary 

6 education, counseling, case management, 

7 disease state management programs, and 

8 other appropriate means; 

9 ‘‘(ii) increased beneficiary adherence 

10 with prescription medication regimens 

11 through medication refill reminders, special 

12 packaging, and other compliance programs 

13 and other appropriate means; and 

14 ‘‘(iii) detection of patterns of overuse 

15 and underuse of prescription drugs. 

16 ‘‘(C) DEVELOPMENT OF PROGRAM IN CO17 OPERATION WITH LICENSED PHARMACISTS.—

18 The program shall be developed in cooperation 

19 with licensed and practicing pharmacists and 

20 physicians. 

21 ‘‘(D) CONSIDERATIONS IN PHARMACY

22 FEES.—The Secretary may take into account, 

23 in establishing fees for pharmacists and others 

24 providing services under the medication therapy 
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1 management program, the resources and time 

2 used in implementing the program.

3 ‘‘(d) GRIEVANCE MECHANISM, COVERAGE DETER4 MINATIONS, AND RECONSIDERATIONS.—Subsections (f) 

5 and (g) of section 1852 shall apply with respect to benefits 

6 for drugs through the Secretary under this part in the 

7 same manner as such requirements apply to an organiza8 tion with respect to benefits it offers under a plan under 

9 part C.

10 ‘‘BENEFITS UNDER THE PROGRAM

11 ‘‘SEC. 1860D–4. (a) SAVINGS TO ENROLLEES

12 THROUGH NEGOTIATED PRICES.—

13 ‘‘(1) ACCESS TO NEGOTIATED PRICES.—

14 ‘‘(A) IN GENERAL.—Subject to paragraph 

15 (2), the Secretary shall provide each eligible 

16 beneficiary enrolled under this part with access 

17 to negotiated prices (including applicable dis18 counts) for prescription drugs. 

19 ‘‘(B) SCOPE OF ACCESS.—For purposes of 

20 this paragraph, the term ‘prescription drugs’ is 

21 not limited to covered outpatient drugs, but 

22 does not include any over-the-counter drug that 

23 is not a covered outpatient drug. 

24 ‘‘(C) EXEMPTION FROM COMPUTATION OF

25 BEST PRICE UNDER MEDICAID PROGRAM.—The 

26 prices negotiated by the Secretary under this 
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1 paragraph shall (notwithstanding any other 

2 provision of law) not be taken into account for 

3 the purposes of establishing the best price 

4 under section 1927(c)(1)(C). 

5 ‘‘(2) PROHIBITION ON CHARGES FOR REQUIRED

6 SERVICES.—The Secretary (and any pharmacy con7 tracting with the Secretary for the provision of a 

8 discount under this part) may not charge a bene9 ficiary any amount for any services required to be 

10 provided under this part. 

11 ‘‘(b) CATASTROPHIC COVERAGE.—

12 ‘‘(1) SCOPE OF COVERAGE.—

13 ‘‘(A) SCOPE.—

14 ‘‘(i) IN GENERAL.—Subject to para15 graph (4), the catastrophic coverage under 

16 this section shall consist of payment under 

17 this part for incurred expenses for covered 

18 outpatient drugs for an enrollee after the 

19 enrollee has incurred in a year expenses 

20 that equal the catastrophic coverage 

21 threshold specified in subparagraph (C) or 

22 (D) for the enrollee and year involved. 

23 ‘‘(ii) PAYMENT RATE.—The rate of 

24 payment negotiated by the Secretary with 

25 the manufacturer for a covered outpatient 
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1 drug shall be the amount paid under this 

2 part on behalf of the individual for the 

3 drug. 

4 ‘‘(B) APPLICATION.—In applying subpara5 graph (A)—

6 ‘‘(i) incurred expenses shall only in7 clude costs incurred for the catastrophic 

8 coverage threshold; and 

9 ‘‘(ii) expenses that are not paid di10 rectly from a prescription drug account 

11 shall be counted under clause (i) only if, 

12 under such process as the Secretary shall 

13 recognize, the account number of the indi14 vidual’s prescription drug account is part 

15 of the transaction involved. 

16 ‘‘(C) CATASTROPHIC COVERAGE THRESH17 OLDS.—

18 ‘‘(i) INITIAL CATASTROPHIC COV19 ERAGE THRESHOLD.—Subject to clause (ii) 

20 and subsection (e)(3), the catastrophic cov21 erage threshold is $3,000. 

22 ‘‘(ii) INFLATION ADJUSTMENT.—The 

23 provisions of subsection (c)(2)(B) shall 

24 apply with respect to the catastrophic cov25 erage threshold under clause (i) for a year 
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1 after 2004 in the same manner as it ap2 plied to the annual Federal contribution 

3 amount for that year, except that, for pur4 poses of this subparagraph, any reference 

5 in subsection (c)(2)(B)(ii) to ‘$1’ is 

6 deemed a reference to ‘$100’. 

7 ‘‘(2) ADMINISTRATION.—Insofar as the Sec8 retary does not provide for the catastrophic coverage 

9 under this subsection through a contract with a 

10 qualifying private entity, the Secretary is authorized 

11 to enter into such agreements with entities as may 

12 be required to provide for the benefits under this 

13 subsection. Such entities may be eligible entities, 

14 carriers under part B, fiscal intermediaries under 

15 part A, or other qualified entities. 

16 ‘‘(c) CONTRIBUTION INTO PRESCRIPTION DRUG AC17 COUNT.—

18 ‘‘(1) IN GENERAL.—In the case of an individual 

19 enrolled under this part, the Secretary shall—

20 ‘‘(A) establish a prescription drug account 

21 for the individual under section 1860D–5; and 

22 ‘‘(B) make deposits into such account in 

23 accordance with subsection (c) of such section. 
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1 Amounts so deposited shall not be treated as income 

2 to the accountholder for purposes of the Internal 

3 Revenue Code of 1986. 

4 ‘‘(2) ANNUAL FEDERAL CONTRIBUTION

5 AMOUNT.—

6 ‘‘(A) INITIAL AMOUNT.—Subject to sub7 paragraph (B) and subsections (d) and (e)(3), 

8 in the case of an accountholder whose modified 

9 adjusted gross income is—

10 ‘‘(i) not more than 100 percent of the 

11 poverty line, the annual Federal contribu12 tion amount is $2,500; 

13 ‘‘(ii) more than 100 percent, but less 

14 than 125 percent, of the poverty line, the 

15 annual Federal contribution amount is 

16 $1,500; 

17 ‘‘(iii) more than 125 percent, but less 

18 than 175 percent, of the poverty line, the 

19 annual Federal contribution amount is 

20 $1,100; and 

21 ‘‘(iv) at least 175 percent, but less 

22 than 250 percent, of the poverty line, the 

23 annual Federal contribution amount is 

24 $600. 

25 ‘‘(B) INFLATION ADJUSTMENT.—
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1 ‘‘(i) IN GENERAL.—For a year after 

2 2004, the annual Federal contribution 

3 amount shall be the amount specified in 

4 subparagraph (A) increased by the per5 centage (if any) by which—

6 ‘‘(I) the average per capita ag7 gregate expenditures for covered out8 patient drugs in the United States for 

9 medicare beneficiaries, as determined 

10 by the Secretary for the 12-month pe11 riod ending in July of the previous 

12 year; exceeds 

13 ‘‘(II) such aggregate expendi14 tures for the 12-month period ending 

15 with July 2004. 

16 ‘‘(ii) ROUNDING.—If an annual Fed17 eral contribution amount determined under 

18 clause (i) is not a multiple of $1, such in19 crease shall be rounded to the nearest mul20 tiple of $1. 

21 ‘‘(d) REQUIREMENT FOR VERIFICATION OF ELIGI22 BILITY.—

23 ‘‘(1) IN GENERAL.—An individual shall not be 

24 treated as an eligible beneficiary for purposes of 

25 benefits under this part unless the individual—
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1 ‘‘(A) provides such information as the Sec2 retary may require in order to determine eligi3 bility under section 1860D–1(b) and the appro4 priate category of benefits under subsection 

5 (c)(2)(A); and 

6 ‘‘(B) authorizes in a form and manner 

7 specified by the Secretary the verification of the 

8 individual’s income and prescription drug cov9 erage status by the Secretary through arrange10 ments with States or otherwise. 

11 An arrangement with a State under subparagraph 

12 (B) shall provide for the payment by the Secretary 

13 under this part of the State’s reasonable costs of 

14 conducting verifications under such arrangement. 

15 ‘‘(2) PENALTIES FOR PROVISION OF FALSE IN16 FORMATION.—The provision of false information 

17 under paragraph (1)(A) is subject to criminal pen18 alties under section 1128B. 

19 ‘‘(3) PROCEDURES FOR DETERMINING IN20 COME.—The Secretary shall establish procedures for 

21 determining the income of individuals seeking enroll22 ment under this part. 

23 ‘‘(4) DISCLOSURE OF INFORMATION.—Notwith24 standing section 6103(a) of the Internal Revenue 

25 Code of 1986, the Secretary of the Treasury may, 
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1 upon written request from the Secretary, disclose to 

2 the Secretary such return information as is nec3 essary to make the determinations described in sub4 paragraph (A). Return information disclosed under 

5 the preceding sentence may be used by the Secretary 

6 only for the purposes of, and to the extent necessary 

7 in, making such determinations. 

8 ‘‘(5) INFORMATION REGARDING PRESCRIPTION

9 DRUG COVERAGE.—In order to verify compliance 

10 with the eligibility requirement of section 1860D–

11 1(b)(1)(B), the Secretary is authorized to establish 

12 procedures, in coordination with the Secretary of 

13 Treasury and the Secretary of Labor, for deter14 mining whether eligible beneficiaries have prescrip15 tion drug coverage through insurance or otherwise, 

16 or under a group health plan or other third-party 

17 payment arrangement, and for alerting the Secretary 

18 about such coverage or arrangements. The Secretary 

19 may also periodically ask eligible beneficiaries en20 rolled under this part whether the beneficiaries are 

21 eligible or have such coverage. A material misrepre22 sentation of the information described in the pre23 ceding sentence by a beneficiary (as defined in 

24 standards set by the Secretary and determined 

25 through a process established by the Secretary) shall 
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1 constitute grounds for termination of enrollment 

2 under section 1860D–2(a)(1)(C). 

3 ‘‘(e) CAPPED APPROPRIATIONS TO COVER PROGRAM

4 EXPENDITURES.—

5 ‘‘(1) IN GENERAL.—For the purpose of car6 rying out this part, there is appropriated, out of any 

7 money in the Treasury not otherwise appropriated to 

8 the Medicare Safety Net Prescription Drug Account 

9 in the Federal Supplementary Medical Insurance 

10 Trust Fund established under section 1841 the fol11 lowing amounts: 

12 ‘‘(A) $18,000,000,000 for fiscal year 2005. 

13 ‘‘(B) $19,000,000,000 for fiscal year 2006. 

14 ‘‘(C) $20,000,000,000 for fiscal year 2007. 

15 ‘‘(D) $21,000,000,000 for fiscal year 

16 2008. 

17 ‘‘(E) $22,000,000,000 for fiscal year 2009. 

18 ‘‘(F) $23,000,000,000 for fiscal year 2010. 

19 ‘‘(G) $24,000,000,000 for fiscal year 2011.

20 ‘‘(H) $25,000,000,000 for fiscal year 

21 2012. 

22 ‘‘(I) $28,000,000,000 for fiscal year 2013. 

23 ‘‘(2) AVAILABILITY ON A CALENDAR YEAR

24 BASIS.—The amounts appropriated under paragraph 

25 (1) for a fiscal year are authorized for obligation 
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1 during the calendar year beginning in such fiscal 

2 year. 

3 ‘‘(3) ASSURANCE OF MAINTENANCE OF PRO4 GRAM WITHIN FUNDING LIMITATIONS.—

5 ‘‘(A) ANNUAL ESTIMATION.—Before the 

6 beginning of each year beginning with 2005), 

7 the Secretary shall estimate—

8 ‘‘(i) the aggregate expenditures that 

9 will be made under this part for that year 

10 (without regard to any adjustment under 

11 this paragraph); and 

12 ‘‘(ii) the cumulative aggregate expend13 itures that were made under this part for 

14 previous years (beginning with 2005). 

15 ‘‘(B) ADJUSTMENT.—If the Secretary esti16 mates under subparagraph (A)(i) for a year 

17 that such estimated aggregate expenditures will 

18 exceed the amount authorized for obligation 

19 during the year under paragraph (2) (as re20 duced by the amount by which the cumulative 

21 aggregate expenditures for previous years under 

22 subparagraph (A)(ii) are less than the amounts 

23 authorized for obligations during the respective 

24 years under paragraph (2)), the Secretary shall 

25 take such of the following actions for that year 
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1 (or, at the Secretary’s discretion, for the period, 

2 not to exceed 4 years, including that year) as 

3 will eliminate any such excess: 

4 ‘‘(i) An increase in the catastrophic 

5 coverage threshold under subsection 

6 (b)(1)(C). 

7 ‘‘(ii) A decrease in the Federal con8 tribution amounts under subsection (c)(2). 

9 ‘‘PRESCRIPTION DRUG ACCOUNTS

10 ‘‘SEC. 1860D–5. (a) ESTABLISHMENT OF AC11 COUNTS.—

12 ‘‘(1) IN GENERAL.—The Secretary shall estab13 lish and maintain for each eligible beneficiary who is 

14 enrolled under this part at the time of enrollment a 

15 prescription drug account (in this section referred to 

16 as an ‘account’). 

17 ‘‘(2) ACCOUNTHOLDER DEFINED.—In this sec18 tion, the term ‘accountholder’ means an individual 

19 for whom an account or reserve account has been es20 tablished under this section. 

21 ‘‘(3) EXPENDITURES FROM ACCOUNT.—Noth22 ing in this section shall be construed as requiring 

23 the Federal Government to obligate funds for 

24 amounts in any account until such time as a with25 drawal from such account is authorized under this 

26 section. 
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1 ‘‘(b) USE OF ACCOUNTS.—

2 ‘‘(1) IN GENERAL.—Amounts credited to an ac3 count shall only be used for the purchase of covered 

4 outpatient drugs for the accountholder. Any 

5 amounts remaining at the end of a year remain 

6 available for expenditures in succeeding years so 

7 long as the eligible beneficiary remains enrolled 

8 under this part. 

9 ‘‘(2) TREATMENT OF WITHDRAWALS.—The 

10 withdrawal of any amounts from an account in ac11 cordance with this section shall not be subject to in12 come or other tax. 

13 ‘‘(c) AMOUNTS CREDITED IN ACCOUNT.—

14 ‘‘(1) IN GENERAL.—The Secretary shall credit 

15 to a prescription drug account of an eligible bene16 ficiary Federal contributions described in section 

17 1860D–4(c) in accordance with paragraph (2). 

18 ‘‘(2) TIMING AND AMOUNT OF DEPOSIT.—In 

19 the case of an eligible beneficiary who is enrolled 

20 under this part at the beginning of a year, the entire 

21 annual Federal contribution amount under section 

22 1860D–4(c)(2) shall be made into the beneficiary’s 

23 account at the beginning of the year. In the case of 

24 an eligible beneficiary who is enrolled under this 

25 part after the beginning of a year, the amount of 
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1 such contribution shall be pro-rated by the Secretary 

2 and deposited into the beneficiary’s account at the 

3 time of enrollment. 

4 ‘‘(3) TREATMENT OF CONTRIBUTIONS.—Such 

5 contributions shall not be treated as income for pur6 poses of chapter 1 of the Internal Revenue Code of 

7 1986. 

8 ‘‘SAFETY NET PRESCRIPTION DRUG ACCOUNT IN THE

9 FEDERAL SUPPLEMENTARY MEDICAL INSURANCE

10 TRUST FUND

11 ‘‘SEC. 1860D–6. (a) ESTABLISHMENT.—

12 ‘‘(1) IN GENERAL.—There is created within the 

13 Federal Supplementary Medical Insurance Trust 

14 Fund established by section 1841 an account to be 

15 known as the ‘Safety Net Prescription Drug Ac16 count’ (in this section referred to as the ‘Account’). 

17 ‘‘(2) FUNDS.—The Account shall consist of 

18 such gifts and bequests as may be made as provided 

19 in section 201(i)(1), and such amounts as may be 

20 deposited in, or appropriated to, the Account as pro21 vided in this part. 

22 ‘‘(3) SEPARATE FROM REST OF TRUST FUND.—

23 Funds provided under this part to the Account shall 

24 be kept separate from all other funds within the 

25 Federal Supplementary Medical Insurance Trust 

26 Fund. 
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1 ‘‘(b) PAYMENTS FROM ACCOUNT.—

2 ‘‘(1) IN GENERAL.—The Managing Trustee 

3 shall pay from time to time from the Account such 

4 amounts as the Secretary certifies are necessary to 

5 make payments to operate the program under this 

6 part, including payments with respect to administra7 tive expenses under this part in accordance with sec8 tion 201(g). 

9 ‘‘(2) TREATMENT IN RELATION TO PART B PRE10 MIUM.—Amounts payable from the Account shall not 

11 be taken into account in computing actuarial rates 

12 or premium amounts under section 1839. 

13 ‘‘(c) APPROPRIATIONS TO COVER BENEFITS AND

14 ADMINISTRATIVE COSTS.—There are appropriated to the 

15 Account in a fiscal year, out of any moneys in the Treas16 ury not otherwise appropriated, an amount equal to the 

17 payments and transfers made from the Account in the 

18 year.

19 ‘‘DEFINITIONS

20 ‘‘SEC. 1860D–7. In this part: 

21 ‘‘(1) COVERED OUTPATIENT DRUG.—

22 ‘‘(A) IN GENERAL.—Except as provided in 

23 subparagraph (B), the term ‘covered outpatient 

24 drug’ means—

25 ‘‘(i) a drug that may be dispensed 

26 only upon a prescription and that is de-
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1 scribed in clause (i) or (ii) of subparagraph 

2 (A) of section 1927(k)(2); or 

3 ‘‘(ii) a biological product or insulin de4 scribed in subparagraph (B) or (C) of such 

5 section. 

6 ‘‘(B) EXCLUSIONS.—

7 ‘‘(i) IN GENERAL.—The term ‘covered 

8 outpatient drug’ does not include drugs or 

9 classes of drugs, or their medical uses, 

10 which may be excluded from coverage or 

11 otherwise restricted under section 

12 1927(d)(2), other than those restricted 

13 under subparagraph (E) of such section 

14 (relating to smoking cessation agents). 

15 ‘‘(ii) AVOIDANCE OF DUPLICATE COV16 ERAGE.—A drug prescribed for an indi17 vidual that would otherwise be a covered 

18 outpatient drug under this part shall not 

19 be considered to be such a drug if payment 

20 for the drug is available under part A or 

21 B (but such drug shall be so considered if 

22 such payment is not available because the 

23 eligible beneficiary has exhausted benefits 

24 under part A or B), without regard to 
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1 whether the individual is entitled to bene2 fits under part A or enrolled under part B. 

3 ‘‘(2) POVERTY LINE.—The term ‘poverty line’ 

4 means the income official poverty line (as defined by 

5 the Office of Management and Budget, and revised 

6 annually in accordance with section 673(2) of the 

7 Omnibus Budget Reconciliation Act of 1981) appli8 cable to a family of the size involved.’’. 

9 (b) CONFORMING REFERENCES TO PREVIOUS PART

10 D.—

11 (1) IN GENERAL.—Any reference in law (in ef12 fect before the date of enactment of this Act) to part 

13 D of title XVIII of the Social Security Act is deemed 

14 a reference to part F of such title (as in effect after 

15 such date). 

16 (2) SECRETARIAL SUBMISSION OF LEGISLATIVE

17 PROPOSAL.—Not later than 6 months after the date 

18 of enactment of this section, the Secretary of Health 

19 and Human Services shall submit to the appropriate 

20 committees of Congress a legislative proposal pro21 viding for such technical and conforming amend22 ments in the law as are required by the provisions 

23 of this section. 
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1 SEC. 3. EXCLUSION OF PART D COSTS FROM DETERMINA2 TION OF PART B MONTHLY PREMIUM. 

3 Section 1839(g) of the Social Security Act (42 U.S.C. 

4 1395r(g)) is amended—

5 (1) by striking ‘‘attributable to the application 

6 of section’’ and inserting ‘‘attributable to—

7 ‘‘(1) the application of section’’;

8 (2) by striking the period and inserting ‘‘; 

9 and’’; and 

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

11 paragraph:

12 ‘‘(2) the Medicare Safety Net Outpatient Pre13 scription Drug Program under part D.’’.

14 SEC. 4. MEDICAID AMENDMENTS. 

15 (a) VERIFICATION OF ELIGIBILITY FOR PART D 

16 BENEFITS.—

17 (1) REQUIREMENT.—Section 1902(a) (42 

18 U.S.C. 1396a(a)) is amended—

19 (A) by striking ‘‘and’’ at the end of para20 graph (64); 

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

22 paragraph (65) and inserting ‘‘; and’’; and 

23 (C) by inserting after paragraph (65) the 

24 following new paragraph: 

25 ‘‘(66) provide for verification of income under 

26 section 1860D–4(d)(1)(B).’’. 
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1 (2) NEW SECTION.—Title XIX is further 

2 amended—

3 (A) by redesignating section 1935 as sec4 tion 1936; and 

5 (B) by inserting after section 1934 the fol6 lowing new section: 

7 ‘‘SPECIAL PROVISIONS RELATING TO MEDICARE PART D

8 BENEFITS

9 ‘‘SEC. 1935. (a) REQUIREMENT FOR VERIFICATION

10 OF ELIGIBILITY DETERMINATIONS FOR IMPROVED PART

11 D BENEFITS.—As a condition of its State plan under this 

12 title under section 1902(a)(66) and receipt of any Federal 

13 financial assistance under section 1903(a), a State shall 

14 provide for verification of income statements in accordance 

15 with arrangements under section 1860D–4(d)(1). 

16 ‘‘(b) PAYMENTS FOR ADDITIONAL ADMINISTRATIVE

17 COSTS.—

18 ‘‘(1) IN GENERAL.—The amounts expended by 

19 a State in carrying out subsection (a) are, subject to 

20 paragraph (2), expenditures reimbursable under the 

21 appropriate paragraph of section 1903(a); except 

22 that, notwithstanding any other provision of such 

23 section, the applicable Federal matching rates with 

24 respect to such expenditures under such section shall 

25 be increased as follows (but in no case shall the rate 

26 as so increased exceed 100 percent): 
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1 ‘‘(A) For expenditures attributable to costs 

2 incurred during 2004, the otherwise applicable 

3 Federal matching rate shall be increased by 10 

4 percent of the percentage otherwise payable 

5 (but for this subsection) by the State. 

6 ‘‘(B)(i) For expenditures attributable to 

7 costs incurred during 2005 and each subse8 quent year through 2011, the otherwise applica9 ble Federal matching rate shall be increased by 

10 the applicable percent (as defined in clause (ii)) 

11 of the percentage otherwise payable (but for 

12 this subsection) by the State. 

13 ‘‘(ii) For purposes of clause (i), the ‘appli14 cable percent’ for—

15 ‘‘(I) 2005 is 20 percent; or 

16 ‘‘(II) a subsequent year is the applica17 ble percent under this clause for the pre18 vious year increased by 10 percentage 

19 points.

20 ‘‘(C) For expenditures attributable to costs 

21 incurred after 2011, the otherwise applicable 

22 Federal matching rate shall be increased to 100 

23 percent. 

24 ‘‘(2) COORDINATION.—The State shall provide 

25 the Secretary with such information as may be nec-
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1 essary to properly allocate administrative expendi2 tures described in paragraph (1) that may otherwise 

3 be made for eligibility determinations.’’. 

4 (b) AMENDMENT TO BEST PRICE.—Section 

5 1927(c)(1)(C)(i) (42 U.S.C. 1396r–8(c)(1)(C)(i)) is 

6 amended—

7 (1) by striking ‘‘and’’ at the end of subclause 

8 (III); 

9 (2) by striking the period at the end of sub10 clause (IV) and inserting ‘‘; and’’; and 

11 (3) by adding at the end the following new sub12 clause: 

13 ‘‘(V) any prices charged which 

14 are negotiated by the Secretary under 

15 part D of title XVIII on behalf of eli16 gible beneficiaries enrolled under such 

17 part.’’. 

18 SEC. 5. IMPORTATION OF PRESCRIPTION DRUGS. 

19 Section 804 of the Federal Food, Drug, and Cosmetic 

20 Act (21 U.S.C. 384) is amended—

21 (1) in subsection (a)—

22 (A) by striking ‘‘The Secretary’’ and in23 serting ‘‘Not later than 180 days after the date 

24 of the enactment of the Pharmaceutical Market 

25 Access Act of 2003, the Secretary’’; and 
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1 (B) by striking ‘‘pharmacists and whole2 salers’’ and inserting ‘‘pharmacists, wholesalers, 

3 and qualifying individuals’’; 

4 (2) in subsection (b)—

5 (A) by amending paragraph (1) to read as 

6 follows: 

7 ‘‘(1) require that each covered product imported 

8 pursuant to such subsection complies with sections 

9 501, 502, and 505, and other applicable require10 ments of this Act; and’’; 

11 (B) in paragraph (2), by striking ‘‘, includ12 ing subsection (d); and’’ and inserting a period; 

13 and 

14 (C) by striking paragraph (3); 

15 (3) in subsection (c), by inserting ‘‘by phar16 macists and wholesalers (but not qualifying individ17 uals)’’ after ‘‘importation of covered products’’; 

18 (4) in subsection (d)—

19 (A) by striking paragraphs (3) and (10); 

20 (B) in paragraph (5), by striking ‘‘, includ21 ing the professional license number of the im22 porter, if any’’; 

23 (C) in paragraph (6)—
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1 (i) in subparagraph (C), by inserting 

2 ‘‘(if required under subsection (e))’’ before 

3 the period; 

4 (ii) in subparagraph (D), by inserting 

5 ‘‘(if required under subsection (e))’’ before 

6 the period; and 

7 (iii) in subparagraph (E), by striking 

8 ‘‘labeling’’; 

9 (D) in paragraph (7)—

10 (i) in subparagraph (A), by inserting 

11 ‘‘(if required under subsection (e))’’ before 

12 the period; and 

13 (ii) by amending subparagraph (B) to 

14 read as follows: 

15 ‘‘(B) Certification from the importer or 

16 manufacturer of such product that the product 

17 meets all requirements of this Act.’’; and 

18 (E) by redesignating paragraphs (4) 

19 through (9) as paragraphs (3) through (8), re20 spectively; 

21 (5) by amending subsection (e) to read as fol22 lows: 

23 ‘‘(e) TESTING.—

24 ‘‘(1) IN GENERAL.—Subject to paragraph (2), 

25 regulations under subsection (a) shall require that 
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1 testing referred to in paragraphs (5) through (7) of 

2 subsection (d) be conducted by the importer of the 

3 covered product, unless the covered product is a pre4 scription drug subject to the requirements of section 

5 505B for counterfeit-resistant technologies. 

6 ‘‘(2) EXCEPTION.—The testing requirements of 

7 paragraphs (5) through (7) of subsection (d) shall 

8 not apply to an importer unless the importer is a 

9 wholesaler.’’; 

10 (6) in subsection (f), by striking ‘‘or designated 

11 by the Secretary, subject to such limitations as the 

12 Secretary determines to be appropriate to protect 

13 the public health’’; 

14 (7) in subsection (g)—

15 (A) by striking ‘‘counterfeit or’’; and 

16 (B) by striking ‘‘and the Secretary deter17 mines that the public is adequately protected 

18 from counterfeit and violative covered products 

19 being imported pursuant to subsection (a)’’; 

20 (8) in subsection (i)(1)—

21 (A) by amending subparagraph (A) to read 

22 as follows: 

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

24 conduct, or contract with an entity to conduct, 

25 a study on the imports permitted pursuant to 
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1 subsection (a), including consideration of the 

2 information received under subsection (d). In 

3 conducting such study, the Secretary or entity 

4 shall evaluate the compliance of importers with 

5 regulations under subsection (a), and the inci6 dence of shipments pursuant to such sub7 section, if any, that have been determined to be 

8 misbranded or adulterated, and determine how 

9 such compliance contrasts with the incidence of 

10 shipments of prescription drugs transported 

11 within the United States that have been deter12 mined to be misbranded or adulterated.’’; and 

13 (B) in subparagraph (B), by striking ‘‘Not 

14 later than 2 years after the effective date of 

15 final regulations under subsection (a),’’ and in16 serting ‘‘Not later than 18 months after the 

17 date of the enactment of the Pharmaceutical 

18 Market Access Act of 2003,’’; 

19 (9) in subsection (k)—

20 (A) in subparagraph (A) of paragraph 

21 (1)—

22 (i) by striking ‘‘or a biological’’ and 

23 inserting ‘‘, a biological’’; and 

24 (ii) by striking the period at the end 

25 and inserting ‘‘, or any drug or biological 
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1 product approved by the Secretary for use 

2 in connection with abortion, sex trans3 formation, sexual dysfunction, or sexual in4 adequacy.’’; and 

5 (B) in paragraph (2)—

6 (i) by redesignating subparagraphs 

7 (D) and (E) as subparagraphs (E) and 

8 (F), respectively; and 

9 (ii) by inserting after subparagraph 

10 (C) the following: 

11 ‘‘(D) The term ‘qualifying individual’ 

12 means an individual who is not a pharmacist or 

13 a wholesaler. ’’; and 

14 (10) by striking subsections (l) and (m).

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