II

107TH CONGRESS

1ST SESSION S. 10

To amend title XVIII of the Social Security Act to provide coverage of

outpatient prescription drugs under the medicare program.

IN THE SENATE OF THE UNITED STATES

JANUARY 22, 2001

Mr. DASCHLE (for himself, Mr. BAUCUS, Mr. GRAHAM, Mr. KENNEDY, Mr.

AKAKA, Mr. BIDEN, Mr. BINGAMAN, Mrs. BOXER, Mr. BYRD, Mrs.

CARNAHAN, Mr. CLELAND, Mrs. CLINTON, Mr. CORZINE, Mr. DAYTON,

Mr. DODD, Mr. DORGAN, Mr. DURBIN, Mr. HOLLINGS, Mr. INOUYE, Mr.

JOHNSON, Mr. KERRY, Mr. LEAHY, Mr. LEVIN, Mrs. LINCOLN, Ms. MIKULSKI, Mrs. MURRAY, Mr. NELSON of Florida, Mr. REED, Mr. REID,

Mr. ROCKEFELLER, Mr. SARBANES, and Mr. SCHUMER) 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 provide

coverage of outpatient prescription drugs under the medicare program.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Medicare Prescription Drug Coverage Act of 2001’’.
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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. Findings.

Sec. 3. Medicare outpatient prescription drug benefit program.

‘‘PART D—OUTPATIENT PRESCRIPTION DRUG BENEFIT PROGRAM

‘‘Sec. 1860. Definitions.

‘‘SUBPART 1—ESTABLISHMENT OF OUTPATIENT PRESCRIPTION DRUG

BENEFIT PROGRAM

‘‘Sec. 1860A. Establishment of outpatient prescription drug benefit program.

‘‘Sec. 1860B. Enrollment.

‘‘Sec. 1860C. Providing information to beneficiaries.

‘‘Sec. 1860D. Premiums.

‘‘Sec. 1860E. Cost-sharing.

‘‘Sec. 1860F. Selection of entities to provide outpatient drug benefit.

‘‘Sec. 1860G. Conditions for awarding contract.

‘‘Sec. 1860H. Payments.

‘‘Sec. 1860I. Employer incentive program for employment-based retiree

drug coverage.

‘‘Sec. 1860J. Procedures for partial year implementation.

‘‘Sec. 1860K. Appropriations.

‘‘SUBPART 2—MEDICARE PHARMACY AND THERAPEUTICS (P&T) ADVISORY

COMMITTEE

‘‘Sec. 1860M. Medicare Pharmacy and Therapeutics (P&T) Advisory Committee.’’.

Sec. 4. Part D benefits under Medicare+Choice plans.

Sec. 5. Exclusion of part D costs from determination of part B monthly premium.

Sec. 6. Additional assistance for low-income beneficiaries.

Sec. 7. Medigap revisions.

Sec. 8. Comprehensive immunosuppressive drug coverage for transplant patients.

Sec. 9. HHS studies and report to Congress regarding outpatient prescription

drug benefit program.

Sec. 10. GAO study and biennial reports on competition and savings.

Sec. 11. MedPAC study and annual reports on the pharmaceutical market,

pharmacies, and beneficiary access.

Sec. 12. Appropriations.

3 SEC. 2. FINDINGS.

4 Congress makes the following findings:

5 (1) Prescription drug coverage was not a stand6 ard part of health insurance when the medicare pro-
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1 gram under title XVIII of the Social Security Act

2 was enacted in 1965. Since 1965, however, drug cov3 erage has become a key component of most private

4 and public health insurance coverage, except for the

5 medicare program.

(2) At least 2 6 ⁄3 of medicare beneficiaries have

7 unreliable, inadequate, or no drug coverage at all.

8 (3) Seniors who do not have drug coverage typi9 cally pay 15 percent more for prescription drugs

10 than individuals that have such coverage pay for

11 such drugs, and often pay 2 times the best available

12 price for such drugs.

13 (4) Although many medicare beneficiaries who

14 lack prescription drug coverage have low incomes,

more than 1 15 ⁄2 of such beneficiaries have incomes

16 greater than 150 percent of the poverty line.

17 (5) The number of private firms offering retiree

18 health coverage is declining.

19 (6) The premiums for medicare supplemental

20 policies (medigap policies) that provide prescription

21 drug coverage are too expensive for most medicare

22 beneficiaries and are highest for older senior citizens

23 who need prescription drug coverage the most and

24 typically have the lowest incomes.
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1 (7) The management of a medicare prescription

2 drug benefit should mirror the practices employed by

3 private entities in delivering prescription drugs. Dis4 counts should be achieved through competition.

5 (8) All medicare beneficiaries should have ac6 cess to a voluntary, reliable, affordable outpatient

7 drug benefit as part of the medicare program that

8 assists with the high cost of prescription drugs and

9 protects them against excessive out-of-pocket costs.

10 (9) The addition of a medicare drug benefit

11 should be consistent with an overall plan to

12 strengthen and modernize the medicare program.

13 SEC. 3. MEDICARE OUTPATIENT PRESCRIPTION DRUG BEN14 EFIT PROGRAM.

15 (a) ESTABLISHMENT.—Title XVIII of the Social Se16 curity Act (42 U.S.C. 1395 et seq.) is amended by redesig17 nating part D as part E and by inserting after part C

18 the following new part:

19 ‘‘PART D—OUTPATIENT PRESCRIPTION DRUG BENEFIT

20 PROGRAM

21 ‘‘DEFINITIONS

22 ‘‘SEC. 1860. In this part:

23 ‘‘(1) COVERED OUTPATIENT DRUG.—
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1 ‘‘(A) IN GENERAL.—Except as provided in

2 subparagraph (B), the term ‘covered outpatient

3 drug’ means any of the following products:

4 ‘‘(i) A drug which may be dispensed

5 only upon prescription, and—

6 ‘‘(I) which is approved for safety

7 and effectiveness as a prescription

8 drug under section 505 of the Federal

9 Food, Drug, and Cosmetic Act;

10 ‘‘(II)(aa) which was commercially

11 used or sold in the United States be12 fore the date of enactment of the

13 Drug Amendments of 1962 or which

14 is identical, similar, or related (within

15 the meaning of section 310.6(b)(1) of

16 title 21 of the Code of Federal Regu17 lations) to such a drug, and (bb)

18 which has not been the subject of a

19 final determination by the Secretary

20 that it is a ‘new drug’ (within the

21 meaning of section 201(p) of the Fed22 eral Food, Drug, and Cosmetic Act)

23 or an action brought by the Secretary

24 under section 301, 302(a), or 304(a)
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1 of such Act to enforce section 502(f)

2 or 505(a) of such Act; or

3 ‘‘(III)(aa) which is described in

4 section 107(c)(3) of the Drug Amend5 ments of 1962 and for which the Sec6 retary has determined there is a com7 pelling justification for its medical

8 need, or is identical, similar, or re9 lated (within the meaning of section

10 310.6(b)(1) of title 21 of the Code of

11 Federal Regulations) to such a drug,

12 and (bb) for which the Secretary has

13 not issued a notice of an opportunity

14 for a hearing under section 505(e) of

15 the Federal Food, Drug, and Cos16 metic Act on a proposed order of the

17 Secretary to withdraw approval of an

18 application for such drug under such

19 section because the Secretary has de20 termined that the drug is less than ef21 fective for all conditions of use pre22 scribed, recommended, or suggested in

23 its labeling.

24 ‘‘(ii) A biological product which—
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1 ‘‘(I) may only be dispensed upon

2 prescription;

3 ‘‘(II) is licensed under section

4 351 of the Public Health Service Act;

5 and

6 ‘‘(III) is produced at an estab7 lishment licensed under such section

8 to produce such product.

9 ‘‘(iii) Insulin approved under appro10 priate Federal law, including needles, sy11 ringes, and disposable pumps for the ad12 ministration of such insulin.

13 ‘‘(iv) A prescribed drug or biological

14 product that would meet the requirements

15 of clause (i) or (ii) but that it is available

16 over-the-counter in addition to being avail17 able upon prescription.

18 ‘‘(B) EXCLUSION.—The term ‘covered out19 patient drug’ does not include any product—

20 ‘‘(i) except as provided in subpara21 graph (A)(iv), which may be distributed to

22 individuals without a prescription;

23 ‘‘(ii) that is covered under part A or

24 B (unless coverage of such product is not
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1 available because benefits under part A or

2 B have been exhausted); or

3 ‘‘(iii) except for agents used to pro4 mote smoking cessation, for which cov5 erage may be excluded or restricted under

6 section 1927(d)(2).

7 ‘‘(2) ELIGIBLE BENEFICIARY.—The term ‘eligi8 ble beneficiary’ means an individual that is entitled

9 to benefits under part A or enrolled under part B.

10 ‘‘(3) ELIGIBLE ENTITY.—The term ‘eligible en11 tity’ means any entity that the Secretary determines

12 to be appropriate to provide eligible beneficiaries

13 with covered outpatient drugs under a contract en14 tered into under this part, including—

15 ‘‘(A) a pharmacy benefit management com16 pany;

17 ‘‘(B) a retail pharmacy delivery system;

18 ‘‘(C) a health plan or insurer;

19 ‘‘(D) a State (through mechanisms estab20 lished under a State plan under title XIX);

21 ‘‘(E) any other entity approved by the Sec22 retary; or

23 ‘‘(F) any combination of the entities de24 scribed in subparagraphs (A) through (E) if the

25 Secretary determines that such combination—
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1 ‘‘(i) increases the scope or efficiency

2 of the provision of benefits under this part;

3 and

4 ‘‘(ii) is not anticompetitive.

5 ‘‘SUBPART 1—ESTABLISHMENT OF OUTPATIENT

6 PRESCRIPTION DRUG BENEFIT PROGRAM

7 ‘‘ESTABLISHMENT OF OUTPATIENT PRESCRIPTION DRUG

8 BENEFIT PROGRAM

9 ‘‘SEC. 1860A. (a) PROVISION OF BENEFIT.—Begin10 ning on the date that is 1 year after the date of enactment

11 of this Act, the Secretary shall provide for an outpatient

12 prescription drug benefit program under which an eligible

13 beneficiary shall be provided covered outpatient drugs.

14 ‘‘(b) VOLUNTARY NATURE OF PROGRAM.—Nothing

15 in this part shall be construed as requiring an eligible ben16 eficiary to enroll in the program established under this

17 part.

18 ‘‘(c) SCOPE OF BENEFITS.—The program established

19 under this part shall provide for coverage of all therapeutic

20 classes of covered outpatient drugs.

21 ‘‘(d) FINANCING.—The costs of providing benefits

22 under this part shall be payable from the Federal Supple23 mentary Medical Insurance Trust Fund established under

24 section 1841.

25 ‘‘ENROLLMENT

26 ‘‘SEC. 1860B. (a) ENROLLMENT UNDER PART D.—
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1 ‘‘(1) ESTABLISHMENT OF PROCESS.—

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

3 establish a process through which an eligible

4 beneficiary (including an eligible beneficiary en5 rolled in a Medicare+Choice plan offered by a

6 Medicare+Choice organization) may make an

7 election to enroll under this part. Such process

8 shall be similar to the process for enrollment in

9 part B under section 1837.

10 ‘‘(B) REQUIREMENT OF ENROLLMENT.—

11 An eligible beneficiary must enroll under this

12 part in order to be eligible to receive covered

13 outpatient drugs under this title.

14 ‘‘(2) ENROLLMENT PROCEDURES.—

15 ‘‘(A) LATE ENROLLMENT PENALTY.—

16 ‘‘(i) IN GENERAL.—Subject to the

17 succeeding provisions of this subparagraph,

18 in the case of an eligible beneficiary whose

19 coverage period under this part began pur20 suant to an enrollment after the bene21 ficiary’s initial enrollment period under

22 part B (determined pursuant to section

23 1837(d)) and not pursuant to the open en24 rollment period described in subparagraph

25 (B), the Secretary shall establish proce-
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1 dures for increasing the amount of the

2 monthly premium under section 1860D ap3 plicable to such beneficiary—

4 ‘‘(I) by an amount that is equal

5 to 10 percent of such premium for

6 each full 12-month period (in the

7 same continuous period of eligibility)

8 in which the eligible beneficiary could

9 have been enrolled under this part but

10 was not so enrolled; or

11 ‘‘(II) if determined appropriate

12 by the Secretary, by an amount that

13 the Secretary determines is actuarily

14 sound for each such period.

15 ‘‘(ii) PERIODS TAKEN INTO AC16 COUNT.—For purposes of calculating any

17 12-month period under clause (i), there

18 shall be taken into account—

19 ‘‘(I) the months which elapsed

20 between the close of the eligible bene21 ficiary’s initial enrollment period and

22 the close of the enrollment period in

23 which the beneficiary enrolled; and

24 ‘‘(II) in the case of an eligible

25 beneficiary who reenrolls under this
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1 part, the months which elapsed be2 tween the date of termination of a

3 previous coverage period and the close

4 of the enrollment period in which the

5 beneficiary reenrolled.

6 ‘‘(iii) PERIODS NOT TAKEN INTO AC7 COUNT.—

8 ‘‘(I) IN GENERAL.—For purposes

9 of calculating any 12-month period

10 under clause (i), subject to subclause

11 (II), there shall not be taken into ac12 count months for which the eligible

13 beneficiary can demonstrate that the

14 beneficiary was covered under a group

15 health plan, including a qualified re16 tiree prescription drug plan (as de17 fined in section 1860I(e)(3)) for which

18 an incentive payment was paid under

19 section 1860I, that provides coverage

20 of the cost of prescription drugs

21 whose actuarial value (as defined by

22 the Secretary) to the beneficiary

23 equals or exceeds the actuarial value

24 of the benefits provided to an indi25 vidual enrolled in the outpatient pre-
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1 scription drug benefit program under

2 this part.

3 ‘‘(II) APPLICATION.—This clause

4 shall only apply with respect to a cov5 erage period the enrollment for which

6 occurs before the end of the 60-day

7 period that begins on the first day of

8 the month which includes the date on

9 which the plan terminates, ceases to

10 provide, or reduces the value of the

11 prescription drug coverage under such

12 plan to below the value of the cov13 erage provided under the program

14 under this part.

15 ‘‘(iv) PERIODS TREATED SEPA16 RATELY.—Any increase in an eligible bene17 ficiary’s monthly premium under clause (i)

18 with respect to a particular continuous pe19 riod of eligibility shall not be applicable

20 with respect to any other continuous period

21 of eligibility which the beneficiary may

22 have.

23 ‘‘(v) CONTINUOUS PERIOD OF ELIGI24 BILITY.—
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1 ‘‘(I) IN GENERAL.—Subject to

2 subclause (II), for purposes of this

3 subparagraph, an eligible beneficiary’s

4 ‘continuous period of eligibility’ is the

5 period that begins with the first day

6 on which the beneficiary is eligible to

7 enroll under section 1836 and ends

8 with the beneficiary’s death.

9 ‘‘(II) SEPARATE PERIOD.—Any

10 period during all of which an eligible

11 beneficiary satisfied paragraph (1) of

12 section 1836 and which terminated in

13 or before the month preceding the

14 month in which the beneficiary at15 tained age 65 shall be a separate ‘con16 tinuous period of eligibility’ with re17 spect to the beneficiary (and each

18 such period which terminates shall be

19 deemed not to have existed for pur20 poses of subsequently applying this

21 subparagraph).

22 ‘‘(B) OPEN ENROLLMENT PERIOD FOR

23 CURRENT BENEFICIARIES IN WHICH LATE EN24 ROLLMENT PROCEDURES DO NOT APPLY.—The

25 Secretary shall establish an applicable period,
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1 which shall begin on the date on which the Sec2 retary first begins to accept elections for enroll3 ment under this part, during which any eligible

4 beneficiary may enroll under this part without

5 the application of the late enrollment proce6 dures established under subparagraph (A)(i).

7 ‘‘(3) PERIOD OF COVERAGE.—

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

9 subparagraph (B), an eligible beneficiary’s cov10 erage under the program under this part shall

11 be effective for the period provided in section

12 1838, as if that section applied to the program

13 under this part.

14 ‘‘(B) OPEN ENROLLMENT.—An eligible

15 beneficiary who enrolls under the program

16 under this part pursuant to paragraph (2)(B)

17 shall be entitled to the benefits under this part

18 beginning on the first day of the month fol19 lowing the month in which such enrollment oc20 curs.

21 ‘‘(C) LIMITATION.—Coverage under this

22 part shall not begin prior to the date that is 1

23 year after the date of enactment of this Act.

24 ‘‘(4) PART D COVERAGE TERMINATED BY TER25 MINATION OF COVERAGE UNDER PARTS A AND B.—
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1 ‘‘(A) IN GENERAL.—In addition to the

2 causes of termination specified in section 1838,

3 the Secretary shall terminate an individual’s

4 coverage under this part if the individual is no

5 longer enrolled in either part A or part B.

6 ‘‘(B) EFFECTIVE DATE.—The termination

7 described in subparagraph (A) shall be effective

8 on the effective date of termination of coverage

9 under part A or (if later) under part B.

10 ‘‘(b) ENROLLMENT WITH ELIGIBLE ENTITY.—

11 ‘‘(1) PROCESS.—

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

13 establish a process through which an eligible

14 beneficiary who is enrolled under this part but

15 not enrolled in a Medicare+Choice plan offered

16 by a Medicare+Choice organization shall make

17 an annual election to enroll with any eligible en18 tity that has been awarded a contract under

19 this part and serves the geographic area in

20 which the beneficiary resides.

21 ‘‘(B) RULES.—In establishing the process

22 under subparagraph (A), the Secretary shall

23 use rules similar to the rules for enrollment and

24 disenrollment with a Medicare+Choice plan
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1 under section 1851 (including special election

2 periods under subsection (e)(4) of such section).

3 ‘‘(2) MEDICARE+CHOICE ENROLLEES.—An eli4 gible beneficiary who is enrolled under this part and

5 enrolled in a Medicare+Choice plan offered by a

6 Medicare+Choice organization shall receive coverage

7 of covered outpatient drugs under this part through

8 such plan.

9 ‘‘(c) FIRST ENROLLMENT PERIOD.—The processes

10 developed under subsections (a) and (b) shall ensure that

11 eligible beneficiaries are permitted to enroll under this

12 part and with an eligible entity prior to the date that is

13 1 year after the date of enactment of this Act, in order

14 to ensure that coverage under this part is effective as of

15 such date.

16 ‘‘PROVIDING INFORMATION TO BENEFICIARIES

17 ‘‘SEC. 1860C. (a) ACTIVITIES.—

18 ‘‘(1) IN GENERAL.—The Secretary shall con19 duct activities that are designed to broadly dissemi20 nate information to eligible beneficiaries (and pro21 spective eligible beneficiaries) regarding the coverage

22 provided under this part.

23 ‘‘(2) SPECIAL RULE FOR FIRST ENROLLMENT

24 UNDER THE PROGRAM.—To the extent practicable,

25 the activities described in paragraph (1) shall ensure

26 that eligible beneficiaries are provided with such in-
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1 formation at least 30 days prior to the first enroll2 ment period described in section 1860B(c).

3 ‘‘(b) REQUIREMENTS.—

4 ‘‘(1) IN GENERAL.—The activities described in

5 subsection (a) shall—

6 ‘‘(A) be similar to the activities performed

7 by the Secretary under section 1851(d);

8 ‘‘(B) be coordinated with the activities per9 formed by the Secretary under such section and

10 under section 1804; and

11 ‘‘(C) provide for the dissemination of infor12 mation comparing the eligible entities that are

13 available to eligible beneficiaries residing in an

14 area under this part.

15 ‘‘(2) COMPARATIVE INFORMATION.—The com16 parative information described in paragraph (1)(B)

17 shall include the following:

18 ‘‘(A) BENEFITS.—A comparison of the

19 benefits provided by each eligible entity, includ20 ing a comparison of the pharmacy networks

21 used by each eligible entity and the formularies

22 and appeals processes implemented by each en23 tity.
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1 ‘‘(B) QUALITY AND PERFORMANCE.—To

2 the extent available, the quality and perform3 ance of each eligible entity.

4 ‘‘(C) BENEFICIARY COSTS.—The cost-shar5 ing required of eligible beneficiaries enrolled in

6 each eligible entity.

7 ‘‘(D) CONSUMER SATISFACTION SUR8 VEYS.—To the extent available, the results of

9 consumer satisfaction surveys regarding each

10 eligible entity.

11 ‘‘(E) ADDITIONAL INFORMATION.—Such

12 additional information as the Secretary may

13 prescribe.

14 ‘‘(3) INFORMATION STANDARDS.—The Sec15 retary shall develop standards to ensure that the in16 formation provided to eligible beneficiaries under

17 this part is complete, accurate, and uniform.

18 ‘‘(c) USE OF MEDICARE CONSUMER COALITIONS TO

19 PROVIDE INFORMATION.—

20 ‘‘(1) IN GENERAL.—The Secretary may con21 tract with Medicare Consumer Coalitions to conduct

22 the informational activities—

23 ‘‘(A) under this section;

24 ‘‘(B) under section 1851(d); and

25 ‘‘(C) under section 1804.
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1 ‘‘(2) SELECTION OF COALITIONS.—If the Sec2 retary determines the use of Medicare Consumer

3 Coalitions to be appropriate, the Secretary shall—

4 ‘‘(A) develop and disseminate, in such

5 areas as the Secretary determines appropriate,

6 a request for proposals for Medicare Consumer

7 Coalitions to contract with the Secretary in

8 order to conduct any of the informational ac9 tivities described in paragraph (1); and

10 ‘‘(B) select a proposal of a Medicare Con11 sumer Coalition to conduct the informational

12 activities in each such area, with a preference

13 for broad participation by organizations with

14 experience in providing information to bene15 ficiaries under this title.

16 ‘‘(3) PAYMENT TO MEDICARE CONSUMER COA17 LITIONS.—The Secretary shall make payments to

18 Medicare Consumer Coalitions contracting under

19 this subsection in such amounts and in such manner

20 as the Secretary determines appropriate.

21 ‘‘(4) AUTHORIZATION OF APPROPRIATIONS.—

22 There are authorized to be appropriated to the Sec23 retary such sums as may be necessary to contract

24 with Medicare Consumer Coalitions under this sec25 tion.
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1 ‘‘(5) MEDICARE CONSUMER COALITION DE2 FINED.—In this subsection, the term ‘Medicare Con3 sumer Coalition’ means an entity that is a nonprofit

4 organization operated under the direction of a board

5 of directors that is primarily composed of bene6 ficiaries under this title.

7 ‘‘PREMIUMS

8 ‘‘SEC. 1860D. (a) ANNUAL ESTABLISHMENT OF

9 MONTHLY PREMIUM RATES.—

10 ‘‘(1) PREMIUM.—The Secretary shall, during

11 September of each year (beginning with the first

12 September after the day that is 1 year after the date

13 of enactment of the Medicare Prescription Drug

14 Coverage Act of 2001), determine and promulgate a

15 monthly premium rate for the succeeding year in ac16 cordance with the provisions of this subsection.

17 ‘‘(2) ACTUARIAL DETERMINATIONS.—

18 ‘‘(A) DETERMINATION OF ANNUAL BEN19 EFIT AND ADMINISTRATIVE COSTS.—The Sec20 retary shall estimate annually for the suc21 ceeding year the amount equal to the total of

22 the benefits and administrative costs that will

23 be payable from the Federal Supplementary

24 Medical Insurance Trust Fund for providing

25 covered outpatient drugs in such calendar year
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1 with respect to enrollees in the program under

2 this part.

3 ‘‘(B) DETERMINATION OF MONTHLY PRE4 MIUM RATES.—

5 ‘‘(i) IN GENERAL.—The Secretary

6 shall determine the monthly premium rate

7 with respect to such enrollees for such succeeding year, which shall be 1 8 ⁄12 of the ap9 plicable percent of the amount determined

10 under subparagraph (A), divided by the

11 total number of such enrollees, and round12 ed (if such rate is not a multiple of 10

13 cents) to the nearest multiple of 10 cents.

14 ‘‘(ii) DEFINITION OF APPLICABLE

15 PERCENT.—For purposes of clause (i), the

16 term ‘applicable percent’ means—

17 ‘‘(I) 45 percent, in the case of

18 premiums paid by an eligible bene19 ficiary enrolled in the program under

20 this part; and

21 ‘‘(II) 66.66 percent, in the case

22 of premiums paid for such a bene23 ficiary by an employer (as defined in

24 section 1860I(e)(2)) that the bene25 ficiary formerly worked for.
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1 ‘‘(3) PUBLICATION OF ASSUMPTIONS.—The

2 Secretary shall publish, together with the promulga3 tion of the monthly premium rates for the suc4 ceeding year, a statement setting forth the actuarial

5 assumptions and bases employed in arriving at the

6 amounts and rates determined under paragraphs (1)

7 and (2).

8 ‘‘(b) COLLECTION OF PREMIUM.—The monthly pre9 mium applicable to an eligible beneficiary under this part

10 shall be collected and credited to the Federal Supple11 mentary Medical Insurance Trust Fund in the same man12 ner as the monthly premium determined under section

13 1839 is collected and credited to such Trust Fund under

14 section 1840.

15 ‘‘COST-SHARING

16 ‘‘SEC. 1860E. (a) DEDUCTIBLE.—

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

18 no payments shall be made under this part on behalf

19 of an eligible beneficiary until the beneficiary has

20 met a $250 deductible.

21 ‘‘(2) WAIVER OF DEDUCTIBLE FOR GENERIC

22 DRUGS.—

23 ‘‘(A) IN GENERAL.—An eligible entity may

24 provide that generic drugs are not subject to

25 the deductible described in paragraph (1) if the
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1 Secretary determines that the waiver of the

2 deductible—

3 ‘‘(i) is tied to the performance meas4 ures and other incentives applicable to the

5 entity pursuant to section 1860H(a); and

6 ‘‘(ii) will not result in an increase in

7 the expenditures made from the Federal

8 Supplementary Medical Insurance Trust

9 Fund.

10 ‘‘(B) CREDIT FOR AMOUNTS PAID.—If the

11 deductible is waived pursuant to subparagraph

12 (A), any coinsurance paid by an eligible bene13 ficiary for the generic drug shall be credited to14 ward the annual deductible.

15 ‘‘(b) COINSURANCE.—

16 ‘‘(1) ESTABLISHMENT.—

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

18 (2), if any covered outpatient drug is provided

19 to an eligible beneficiary in a year after the

20 beneficiary has met any deductible requirement

21 under subsection (a) for the year, the bene22 ficiary shall be responsible for making payments

23 for the drug in an amount equal to the applica24 ble percentage of the cost of the drug.
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1 ‘‘(B) APPLICABLE PERCENTAGE DE2 FINED.—For purposes of subparagraph (A), the

3 ‘applicable percentage’ means, with respect to

4 any covered outpatient drug provided to an eli5 gible beneficiary in a year—

6 ‘‘(i) 50 percent to the extent the out7 of-pocket expenses of the beneficiary for

8 such drug, when added to the out-of-pocket

9 expenses of the beneficiary for covered out10 patient drugs previously provided in the

11 year, do not exceed $3,500;

12 ‘‘(ii) 25 percent to the extent such ex13 penses, when so added, exceed $3,500 but

14 do not exceed $4,000; and

15 ‘‘(iii) 0 percent to the extent such ex16 penses, when so added, would exceed

17 $4,000.

18 ‘‘(C) OUT-OF-POCKET EXPENSES DE19 FINED.—For purposes of subparagraph (B),

20 the term ‘out-of-pocket expenses’ means ex21 penses incurred as a result of the application of

22 the deductible under subsection (a) and the co23 insurance required under this subsection.

24 ‘‘(2) REDUCTION BY ELIGIBLE ENTITY.—An el25 igible entity may reduce the applicable percentage
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1 that an eligible beneficiary is subject to under para2 graph (1) if the Secretary determines that such

3 reduction—

4 ‘‘(A) is tied to the performance measures

5 and other incentives applicable to the entity

6 pursuant to section 1860H(a); and

7 ‘‘(B) will not result in an increase in the

8 expenditures made from the Federal Supple9 mentary Medical Insurance Trust Fund.

10 ‘‘(c) INFLATION ADJUSTMENT.—

11 ‘‘(1) IN GENERAL.—In the case of any calendar

12 year beginning after 2004, each of the dollar

13 amounts in subsections (a)(1) and (b)(1)(B) shall be

14 increased by an amount equal to—

15 ‘‘(A) such dollar amount, multiplied by

16 ‘‘(B) the percentage (if any) by which the

17 amount of average per capita expenditures

18 under this part in the preceding calendar year

19 exceeds the amount of such expenditures in

20 2003.

21 ‘‘(2) ROUNDING.—If any dollar amount after

22 being increased under paragraph (1) is not a mul23 tiple of $5, such dollar amount shall be rounded to

24 the nearest multiple of $5.
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1 ‘‘SELECTION OF ENTITIES TO PROVIDE OUTPATIENT

2 DRUG BENEFIT

3 ‘‘SEC. 1860F. (a) ESTABLISHMENT OF BIDDING

4 PROCESS.—

5 ‘‘(1) IN GENERAL.—The Secretary shall estab6 lish procedures under which the Secretary accepts

7 bids submitted by eligible entities and awards con8 tracts to such entities in order to administer and de9 liver the benefits provided under this part to eligible

10 beneficiaries in an area.

11 ‘‘(2) COMPETITIVE PROCEDURES.—Competitive

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

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

14 403(5))) shall be used to enter into contracts under

15 this part.

16 ‘‘(b) AREA FOR CONTRACTS.—

17 ‘‘(1) REGIONAL BASIS.—

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

19 subparagraph (B) and subject to paragraph (2),

20 the contract entered into between the Secretary

21 and an eligible entity shall require the eligible

22 entity to provide covered outpatient drugs on a

23 regional basis.

24 ‘‘(B) PARTIAL REGIONAL BASIS.—
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1 ‘‘(i) IN GENERAL.—If determined ap2 propriate by the Secretary, the Secretary

3 may permit the coverage described in sub4 paragraph (A) to be provided on a partial

5 regional basis.

6 ‘‘(ii) REQUIREMENTS.—If the Sec7 retary permits coverage pursuant to clause

8 (i), the Secretary shall ensure that the par9 tial region in which coverage is provided

10 is—

11 ‘‘(I) at least the size of the com12 mercial service area of the eligible en13 tity for that area; and

14 ‘‘(II) not smaller than a State.

15 ‘‘(2) DETERMINATION.—

16 ‘‘(A) IN GENERAL.—In determining cov17 erage areas under this part, the Secretary

18 shall—

19 ‘‘(i) take into account the number of

20 eligible beneficiaries in an area in order to

21 encourage participation by eligible entities;

22 and

23 ‘‘(ii) ensure that there are at least 10

24 different coverage areas in the United

25 States.
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1 ‘‘(B) NO ADMINISTRATIVE OR JUDICIAL

2 REVIEW.—The determination of coverage areas

3 under this part shall not be subject to adminis4 trative or judicial review.

5 ‘‘(c) SUBMISSION OF BIDS.—

6 ‘‘(1) IN GENERAL.—Each eligible entity desir7 ing to provide covered outpatient drugs under this

8 part shall submit a bid to the Secretary at such

9 time, in such manner, and accompanied by such in10 formation as the Secretary may reasonably require.

11 ‘‘(2) REQUIRED INFORMATION.—The bids de12 scribed in paragraph (1) shall include—

13 ‘‘(A) a proposal for the estimated prices of

14 covered outpatient drugs and the projected an15 nual increases in such prices, including differen16 tials between formulary and nonformulary

17 prices, if applicable;

18 ‘‘(B) the amount that the entity will

19 charge the Secretary for administering and de20 livering the benefits under such contract;

21 ‘‘(C) a statement regarding whether the

22 entity will waive the deductible for generic

23 drugs pursuant to section 1860E(a)(2);

24 ‘‘(D) a statement regarding whether the

25 entity will reduce the applicable coinsurance
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•S 10 IS

1 percentage pursuant to section 1860E(b)(2)

2 and if so, the amount of such reduction;

3 ‘‘(E) a detailed description of—

4 ‘‘(i) the risk corridors tied to perform5 ance measures and other incentives that

6 the entity will accept under the contract;

7 and

8 ‘‘(ii) how the entity will meet such

9 measures and incentives;

10 ‘‘(F) a detailed description of proposed

11 contracts with local pharmacy providers de12 signed to ensure access, including compensation

13 for local pharmacists’ services;

14 ‘‘(G) a detailed description of any owner15 ship or shared financial interests with other en16 tities involved in the delivery of the benefit as

17 proposed;

18 ‘‘(H) a detailed description of the entity’s

19 estimated marketing and advertising expendi20 tures related to enrolling and retaining eligible

21 beneficiaries; and

22 ‘‘(I) such other information that the Sec23 retary determines is necessary in order to carry

24 out this part, including information relating to

25 the bidding process under this part.
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1 ‘‘(d) ACCESS.—

2 ‘‘(1) IN GENERAL.—The Secretary shall ensure

3 that an eligible entity—

4 ‘‘(A) complies with the access requirements

5 described in section 1860G(a)(4)(A); and

6 ‘‘(B) makes available to each beneficiary

7 covered under the contract the full scope of the

8 benefits required under this part.

9 ‘‘(2) AREAS NOT COVERED BY CONTRACTS.—

10 The Secretary shall develop procedures for the provi11 sion of covered outpatient drugs under this part to

12 each eligible beneficiary that resides in an area that

13 is not covered by any contract under this part.

14 ‘‘(3) BENEFICIARIES RESIDING IN DIFFERENT

15 LOCATIONS.—The Secretary shall develop procedures

16 to ensure that each eligible beneficiary that resides

17 in different areas in a year is provided the benefits

18 under this part throughout the entire year.

19 ‘‘(4) SPECIAL ATTENTION TO RURAL AND

20 HARD-TO-SERVE AREAS.—

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

22 ensure that all eligible beneficiaries have access

23 to the full range of benefits under this part,

24 and shall give special attention to access, phar25 macist counseling, and delivery in rural and
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1 hard-to-serve areas (as the Secretary may de2 fine by regulation).

3 ‘‘(B) SPECIAL ATTENTION DEFINED.—For

4 purposes of subparagraph (A), the term ‘special

5 attention’ may include bonus payments to retail

6 pharmacists in rural areas, extra payments to

7 eligible entities for the cost of rapid delivery of

8 pharmaceuticals, and any other actions the Sec9 retary determines are necessary to ensure full

10 access to benefits under this part by eligible

11 beneficiaries residing in rural and hard-to-serve

12 areas.

13 ‘‘(C) GAO REPORT.—Not later than 2

14 years after the date of enactment of the Medi15 care Prescription Drug Coverage Act of 2001,

16 the Comptroller General of the United States

17 shall submit to Congress a report on the access

18 to benefits under this part by eligible bene19 ficiaries residing in rural and hard-to-serve

20 areas, together with any recommendations of

21 the Comptroller General regarding any addi22 tional steps the Secretary may need to take to

23 ensure the access of medicare beneficiaries to

24 such benefits.

25 ‘‘(e) AWARDING OF CONTRACTS.—
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1 ‘‘(1) NUMBER OF CONTRACTS.—The Secretary

2 shall, consistent with the requirements of this part

3 and the goal of containing costs under this title,

4 award in a competitive manner at least 2 contracts

5 in an area, unless only 1 bidding entity meets the

6 minimum standards specified under this part and by

7 the Secretary.

8 ‘‘(2) DETERMINATION.—In determining which

9 of the eligible entities that submitted bids that meet

10 the minimum standards specified under this part

11 and by the Secretary (including the terms and condi12 tions described in section 1860G) to award a con13 tract, the Secretary shall consider the comparative

14 merits of each bid, as determined on the basis of the

15 past performance of the entity and other relevant

16 factors, with respect to—

17 ‘‘(A) how well the entity meets such min18 imum standards;

19 ‘‘(B) the amount that the entity will

20 charge the Secretary for administering and de21 livering the benefits under the contract;

22 ‘‘(C) the proposed prices of covered out23 patient drugs and annual increases in such

24 prices;
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•S 10 IS

1 ‘‘(D) the proposed risk corridors tied to

2 performance measures and other incentives that

3 the entity will be subject to under the contract;

4 ‘‘(E) the factors described in section

5 1860C(b)(2);

6 ‘‘(F) prior experience in administering a

7 prescription drug benefit program;

8 ‘‘(G) effectiveness in containing costs

9 through pricing incentives and utilization man10 agement; and

11 ‘‘(H) such other factors as the Secretary

12 deems necessary to evaluate the merits of each

13 bid.

14 ‘‘(3) EXCEPTION TO CONFLICT OF INTEREST

15 RULES.—In awarding contracts under this part, the

16 Secretary may waive conflict of interest laws gen17 erally applicable to Federal acquisitions (subject to

18 such safeguards as the Secretary may find necessary

19 to impose) in circumstances where the Secretary

20 finds that such waiver—

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

22 ‘‘(i) purposes of the programs under

23 this title; or

24 ‘‘(ii) best interests of enrolled individ25 uals; and
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•S 10 IS

1 ‘‘(B) permits a sufficient level of competi2 tion for such contracts, promotes efficiency of

3 benefits administration, or otherwise serves the

4 objectives of the program under this part.

5 ‘‘(4) NO ADMINISTRATIVE OR JUDICIAL RE6 VIEW.—The determination of the Secretary to award

7 or not award a contract to an eligible entity under

8 this part shall not be subject to administrative or ju9 dicial review.

10 ‘‘(f) APPROVAL OF MARKETING MATERIAL AND AP11 PLICATION FORMS.—The provisions of section 1851(h)

12 shall apply to marketing material and application forms

13 under this part in the same manner as such provisions

14 apply to marketing material and application forms under

15 part C.

16 ‘‘(g) DURATION OF CONTRACTS.—Each contract

17 under this part shall be for a term of at least 2 years

18 but not more than 5 years, as determined by the Sec19 retary.

20 ‘‘CONDITIONS FOR AWARDING CONTRACT

21 ‘‘SEC. 1860G. (a) IN GENERAL.—The Secretary shall

22 not award a contract to an eligible entity under this part

23 unless the Secretary finds that the eligible entity agrees

24 to comply with such terms and conditions as the Secretary

25 shall specify, including the following:
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1 ‘‘(1) QUALITY AND FINANCIAL STANDARDS.—

2 The eligible entity meets the quality and financial

3 standards specified by the Secretary.

4 ‘‘(2) PROCEDURES TO ENSURE PROPER UTILI5 ZATION, COMPLIANCE, AND AVOIDANCE OF ADVERSE

6 DRUG REACTIONS.—The eligible entity has in place

7 drug utilization review procedures to ensure—

8 ‘‘(A) the appropriate utilization by eligible

9 beneficiaries of the benefits to be provided

10 under the contract; and

11 ‘‘(B) the avoidance of adverse drug reac12 tions among eligible beneficiaries enrolled with

13 the entity, including problems due to thera14 peutic duplication, drug-disease contraindica15 tions, drug-drug interactions (including serious

16 interactions with nonprescription or over-the17 counter drugs), incorrect drug dosage or dura18 tion of drug treatment, drug-allergy inter19 actions, and clinical abuse and misuse.

20 ‘‘(3) COST-EFFECTIVE PROVISION OF BENE21 FITS.—

22 ‘‘(A) IN GENERAL.—In providing the bene23 fits under a contract under this part, an eligible

24 entity may—
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1 ‘‘(i) employ mechanisms to provide

2 the benefits economically, including the use

3 of—

4 ‘‘(I) formularies (pursuant to

5 subparagraph (B));

6 ‘‘(II) alternative methods of dis7 tribution; and

8 ‘‘(III) generic drug substitution;

9 ‘‘(ii) use mechanisms to encourage eli10 gible beneficiaries to select cost-effective

11 drugs or less costly means of receiving

12 drugs, including the use of pharmacy in13 centive programs, therapeutic interchange

14 programs, and disease management pro15 grams; and

16 ‘‘(iii) encourage pharmacy providers

17 to—

18 ‘‘(I) inform beneficiaries of the

19 differentials in price between generic

20 and nongeneric drug equivalents; and

21 ‘‘(II) provide medication therapy

22 management programs in order to en23 hance beneficiaries’ understanding of

24 the appropriate use of medications

25 and to reduce the risk of potential ad-
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1 verse events associated with medica2 tions.

3 ‘‘(B) FORMULARIES.—If an eligible entity

4 uses a formulary under this part, such for5 mulary shall comply with standards established

6 by the Secretary in consultation with the Medi7 care Pharmacy and Therapeutics Advisory

8 Committee established under section 1860M.

9 Such standards shall require that the eligible

10 entity—

11 ‘‘(i) use a pharmacy and therapeutic

12 committee (that meets the standards for a

13 pharmacy and therapeutic committee es14 tablished by the Secretary in consultation

15 with the Medicare Pharmacy and Thera16 peutics Advisory Committee established

17 under section 1860M) to develop and im18 plement the formulary;

19 ‘‘(ii) include in the formulary—

20 ‘‘(I) at least 1 drug from each

21 therapeutic class (as defined by the

22 entity’s pharmacy and therapeutic

23 committee in accordance with stand24 ards established by the Secretary in

25 consultation with the Medicare Phar-
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1 macy and Therapeutics Advisory

2 Committee established under section

3 1860M);

4 ‘‘(II) if there is more than 1 drug

5 available in a therapeutic class, at

6 least 2 drugs from such class; and

7 ‘‘(III) if there are more than 2

8 drugs available in a therapeutic class,

9 at least 2 drugs from such class and

10 a generic drug substitute if available;

11 ‘‘(iii) develop procedures for the—

12 ‘‘(I) addition of new therapeutic

13 classes to the formulary;

14 ‘‘(II) addition of new drugs to an

15 existing therapeutic class; and

16 ‘‘(III) modification of the for17 mulary;

18 ‘‘(iv) provide for coverage of otherwise

19 covered non-formulary drugs when rec20 ommended by a prescribing provider; and

21 ‘‘(v) disclose to current and prospec22 tive beneficiaries and to providers in the

23 service area the nature of the formulary

24 restrictions, including information regard25 ing the drugs included in the formulary,
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1 coinsurance, and any difference in the

2 cost-sharing for different types of drugs.

3 ‘‘(C) CONSTRUCTION.—Nothing in this

4 paragraph shall be construed as precluding an

5 eligible entity from—

6 ‘‘(i) requiring cost-sharing for nonfor7 mulary drugs that is higher than the cost8 sharing established in section 1860E(b),

9 except that such entity shall provide for

10 coverage of a nonformulary drug at the

11 same cost-sharing level as a drug within

12 the formulary if such nonformulary drug is

13 recommended by a prescribing provider;

14 ‘‘(ii) educating prescribing providers,

15 pharmacists, and beneficiaries about the

16 medical and cost benefits of formulary

17 drugs (including generic drugs); or

18 ‘‘(iii) requiring prescribing providers

19 to consider a formulary drug prior to dis20 pensing of a nonformulary drug, as long as

21 such requirement does not unduly delay

22 the provision of the drug.

23 ‘‘(4) PATIENT PROTECTIONS.—

24 ‘‘(A) ACCESS.—The eligible entity ensures

25 that the covered outpatient drugs are accessible
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1 and convenient to eligible beneficiaries covered

2 under the contract, including by doing the fol3 lowing:

4 ‘‘(i) SERVICES DURING EMER5 GENCIES.—Offering services 24 hours a

6 day and 7 days a week for emergencies.

7 ‘‘(ii) AGREEMENTS WITH PHAR8 MACIES.—Entering into participation

9 agreements under subsection (b) with

10 pharmacies, that include terms that—

11 ‘‘(I) secure the participation of

12 sufficient numbers of pharmacies to

13 ensure convenient access (including

14 adequate emergency access); and

15 ‘‘(II) permit the participation of

16 any pharmacy in the service area that

17 meets the participation requirements

18 described in subsection (b).

19 ‘‘(B) CONTINUITY OF CARE.—

20 ‘‘(i) IN GENERAL.—The eligible entity

21 ensures that, in the case of an eligible ben22 eficiary who loses coverage under this part

23 with such entity under circumstances that

24 would permit a special election period (as

25 established by the Secretary under section
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1 1860B(b)), the entity will continue to pro2 vide coverage under this part to such bene3 ficiary until the beneficiary enrolls and re4 ceives such coverage with another eligible

5 entity under this part.

6 ‘‘(ii) LIMITED PERIOD.—In no event

7 shall an eligible entity be required to pro8 vide the extended coverage required under

9 clause (i) beyond the date which is 30 days

10 after the coverage with such entity would

11 have terminated but for this subparagraph.

12 ‘‘(C) PROCEDURES REGARDING DENIALS

13 OF CARE.—The eligible entity has in place pro14 cedures to ensure—

15 ‘‘(i) a timely internal and external re16 view and resolution of denials of coverage

17 (in whole or in part) and complaints (in18 cluding those regarding the use of

19 formularies under paragraph (3)) by eligi20 ble beneficiaries, or by providers, phar21 macists, and other individuals acting on

22 behalf of each such beneficiary (with the

23 beneficiary’s consent) in accordance with

24 requirements (as established by the Sec25 retary) that are comparable to such re-
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1 quirements for Medicare+Choice organiza2 tions under part C; and

3 ‘‘(ii) that beneficiaries are provided

4 with information regarding the appeals

5 procedures under this part at the time of

6 enrollment.

7 ‘‘(D) PROCEDURES REGARDING PATIENT

8 CONFIDENTIALITY.—Insofar as an eligible enti9 ty maintains individually identifiable medical

10 records or other health information regarding

11 eligible beneficiaries under a contract entered

12 into under this part, the entity has in place pro13 cedures to—

14 ‘‘(i) safeguard the privacy of any indi15 vidually identifiable beneficiary informa16 tion;

17 ‘‘(ii) maintain such records and infor18 mation in a manner that is accurate and

19 timely;

20 ‘‘(iii) ensure timely access by such

21 beneficiaries to such records and informa22 tion; and

23 ‘‘(iv) otherwise comply with applicable

24 laws relating to patient confidentiality.
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1 ‘‘(E) PROCEDURES REGARDING TRANSFER

2 OF MEDICAL RECORDS.—

3 ‘‘(i) IN GENERAL.—The eligible entity

4 has in place procedures for the timely

5 transfer of records and information de6 scribed in subparagraph (D) (with respect

7 to a beneficiary who loses coverage under

8 this part with the entity and enrolls with

9 another entity under this part) to such

10 other entity.

11 ‘‘(ii) PATIENT CONFIDENTIALITY.—

12 The procedures described in clause (i) shall

13 comply with the patient confidentiality pro14 cedures described in subparagraph (D).

15 ‘‘(F) PROCEDURES REGARDING MEDICAL

16 ERRORS.—The eligible entity has in place pro17 cedures for working with the Secretary to deter

18 medical errors related to the provision of cov19 ered outpatient drugs.

20 ‘‘(5) PROCEDURES TO CONTROL FRAUD, ABUSE,

21 AND WASTE.—The eligible entity has in place proce22 dures to control fraud, abuse, and waste.

23 ‘‘(6) REPORTING REQUIREMENTS.—
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1 ‘‘(A) IN GENERAL.—The eligible entity

2 provides the Secretary with reports containing

3 information regarding the following:

4 ‘‘(i) The prices that the eligible entity

5 is paying for covered outpatient drugs.

6 ‘‘(ii) The prices that eligible bene7 ficiaries enrolled with the entity will be

8 charged for covered outpatient drugs.

9 ‘‘(iii) The administrative costs of pro10 viding such benefits.

11 ‘‘(iv) Utilization of such benefits.

12 ‘‘(v) Marketing and advertising ex13 penditures related to enrolling and retain14 ing eligible beneficiaries.

15 ‘‘(B) TIMEFRAME FOR SUBMITTING RE16 PORTS.—

17 ‘‘(i) IN GENERAL.—The eligible entity

18 shall submit a report described in subpara19 graph (A) to the Secretary within 3

20 months after the end of each 12-month pe21 riod in which the eligible entity has a con22 tract under this part. Such report shall

23 contain information concerning the benefits

24 provided during such 12-month period.
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1 ‘‘(ii) LAST YEAR OF CONTRACT.—In

2 the case of the last year of a contract

3 under this section, the Secretary may re4 quire that a report described in subpara5 graph (A) be submitted 3 months prior to

6 the end of the contract. Such report shall

7 contain information concerning the benefits

8 provided between the period covered by the

9 most recent report under this subpara10 graph and the date that a report is sub11 mitted under this clause.

12 ‘‘(C) CONFIDENTIALITY OF INFORMA13 TION.—

14 ‘‘(i) IN GENERAL.—Notwithstanding

15 any other provision of law and subject to

16 clause (ii), information disclosed by an eli17 gible entity pursuant to subparagraph (A)

18 is confidential and shall only be used by

19 the Secretary for the purposes of, and to

20 the extent necessary, to carry out this

21 part.

22 ‘‘(ii) UTILIZATION DATA.—Subject to

23 patient confidentiality laws, the Secretary

24 shall make information disclosed by an eli25 gible entity pursuant to subparagraph
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1 (A)(iv) (regarding utilization data) avail2 able for research purposes. The Secretary

3 may charge a reasonable fee for making

4 such information available.

5 ‘‘(7) APPROVAL OF MARKETING MATERIAL AND

6 APPLICATION FORMS.—The eligible entity will com7 ply with the requirements described in section

8 1860F(f).

9 ‘‘(8) RECORDS AND AUDITS.—The eligible enti10 ty maintains adequate records related to the admin11 istration of the benefit under this part and affords

12 the Secretary access to such records for auditing

13 purposes.

14 ‘‘(b) PHARMACY PARTICIPATION AGREEMENTS.—

15 ‘‘(1) IN GENERAL.—A pharmacy that meets the

16 requirements of this subsection shall be eligible to

17 enter an agreement with an eligible entity to furnish

18 covered outpatient drugs and pharmacists’ services

19 to eligible beneficiaries enrolled with such entity and

20 residing in the service area.

21 ‘‘(2) TERMS OF AGREEMENT.—An agreement

22 under this subsection shall include the following

23 terms and requirements:

24 ‘‘(A) LICENSING.—The pharmacy and

25 pharmacists shall meet (and throughout the
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1 contract period will continue to meet) all appli2 cable State and local licensing requirements.

3 ‘‘(B) LIMITATION ON CHARGES.—Phar4 macies participating under this part shall not

5 charge an eligible beneficiary enrolled with the

6 eligible entity more than—

7 ‘‘(i) the negotiated price for an indi8 vidual drug (as reported to the Secretary

9 pursuant to subsection (a)(6)(A)); or

10 ‘‘(ii) the amount of the beneficiary’s

11 obligation (as determined in accordance

12 with the provisions of this part) of the ne13 gotiated price of such drug.

14 ‘‘(C) PERFORMANCE STANDARDS.—The

15 pharmacy shall comply with performance stand16 ards relating to—

17 ‘‘(i) measures for quality assurance,

18 reduction of medical errors, and compli19 ance with the drug utilization review proce20 dures described in subsection (a)(2);

21 ‘‘(ii) systems to ensure compliance

22 with the patient confidentiality standards

23 applicable under subsection (a)(4)(D); and

24 ‘‘(iii) other requirements as the Sec25 retary may impose to ensure integrity, effi-
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1 ciency, and the quality of the program

2 under this part.

3 ‘‘PAYMENTS

4 ‘‘SEC. 1860H. (a) PAYMENTS TO ELIGIBLE ENTI5 TIES.—

6 ‘‘(1) PROCEDURES.—

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

8 establish procedures for making payments to an

9 eligible entity under a contract entered into

10 under this part for the administration and de11 livery of the benefits under this part.

12 ‘‘(B) ENTITIES ONLY SUBJECT TO LIM13 ITED RISK.—Under the procedures established

14 under subparagraph (A), an eligible entity shall

15 only be at risk to the extent that the entity is

16 at risk under paragraph (2).

17 ‘‘(2) RISK CORRIDORS TIED TO PERFORMANCE

18 MEASURES AND OTHER INCENTIVES.—

19 ‘‘(A) IN GENERAL.—The procedures estab20 lished under paragraph (1) may include the use

21 of—

22 ‘‘(i) risk corridors tied to performance

23 measures that have been agreed to between

24 the eligible entity and the Secretary under

25 the contract; and
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1 ‘‘(ii) any other incentives that the

2 Secretary determines appropriate.

3 ‘‘(B) PHASE-IN OF RISK CORRIDORS TIED

4 TO PERFORMANCE MEASURES.—The Secretary

5 may phase-in the use of risk corridors tied to

6 performance measures if the Secretary deter7 mines such phase-in to be appropriate.

8 ‘‘(C) PAYMENTS SUBJECT TO INCEN9 TIVES.—If a contract under this part includes

10 the use of risk corridors tied to performance

11 measures or other incentives pursuant to sub12 paragraph (A), payments to eligible entities

13 under such contract shall be subject to such

14 risk corridors tied to performance measures and

15 other incentives.

16 ‘‘(3) RISK ADJUSTMENT.—To the extent that

17 eligible entities are at risk because of the risk cor18 ridors or other incentives described in paragraph

19 (2)(A), the procedures established under paragraph

20 (1) may include a methodology for adjusting the

21 payments made to such entities based on the dif22 ferences in actuarial risk of different enrollees being

23 served if the Secretary determines such adjustments

24 to be necessary and appropriate.
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1 ‘‘(b) SECONDARY PAYER PROVISIONS.—The provi2 sions of section 1862(b) shall apply to the benefits pro3 vided under this part.

4 ‘‘EMPLOYER INCENTIVE PROGRAM FOR EMPLOYMENT5 BASED RETIREE DRUG COVERAGE

6 ‘‘SEC. 1860I. (a) PROGRAM AUTHORITY.—The Sec7 retary is authorized to develop and implement a program

8 under this section called the ‘Employer Incentive Pro9 gram’ that encourages employers and other sponsors of

10 employment-based health care coverage to provide ade11 quate prescription drug benefits to retired individuals by

12 subsidizing, in part, the sponsor’s cost of providing cov13 erage under qualifying plans.

14 ‘‘(b) SPONSOR REQUIREMENTS.—In order to be eligi15 ble to receive an incentive payment under this section with

16 respect to coverage of an individual under a qualified re17 tiree prescription drug plan (as defined in subsection

18 (f)(3)), a sponsor shall meet the following requirements:

19 ‘‘(1) ASSURANCES.—The sponsor shall—

20 ‘‘(A) annually attest, and provide such as21 surances as the Secretary may require, that the

22 coverage offered by the sponsor is a qualified

23 retiree prescription drug plan, and will remain

24 such a plan for the duration of the sponsor’s

25 participation in the program under this section;

26 and
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1 ‘‘(B) guarantee that it will give notice to

2 the Secretary and covered retirees—

3 ‘‘(i) at least 120 days before termi4 nating its plan; and

5 ‘‘(ii) immediately upon determining

6 that the actuarial value of the prescription

7 drug benefit under the plan falls below the

8 actuarial value of the outpatient prescrip9 tion drug benefit under this part.

10 ‘‘(2) BENEFICIARY INFORMATION.—The spon11 sor shall report to the Secretary, for each calendar

12 quarter for which it seeks an incentive payment

13 under this section, the names and social security

14 numbers of all retirees (and their spouses and de15 pendents) covered under such plan during such

16 quarter and the dates (if less than the full quarter)

17 during which each such individual was covered.

18 ‘‘(3) AUDITS.—The sponsor and the employ19 ment-based retiree health coverage plan seeking in20 centive payments under this section shall agree to

21 maintain, and to afford the Secretary access to, such

22 records as the Secretary may require for purposes of

23 audits and other oversight activities necessary to en24 sure the adequacy of prescription drug coverage, the
53

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1 accuracy of incentive payments made, and such

2 other matters as may be appropriate.

3 ‘‘(4) OTHER REQUIREMENTS.—The sponsor

4 shall provide such other information, and comply

5 with such other requirements, as the Secretary may

6 find necessary to administer the program under this

7 section.

8 ‘‘(c) INCENTIVE PAYMENTS.—

9 ‘‘(1) IN GENERAL.—A sponsor that meets the

10 requirements of subsection (b) with respect to a

11 quarter in a calendar year shall be entitled to have

12 payment made by the Secretary on a quarterly basis

13 (to the sponsor or, at the sponsor’s direction, to the

14 appropriate employment-based health plan) of an in15 centive payment, in the amount determined in para16 graph (2), for each retired individual (or spouse)

17 who—

18 ‘‘(A) was covered under the sponsor’s

19 qualified retiree prescription drug plan during

20 such quarter; and

21 ‘‘(B) was eligible for, but was not enrolled

22 in, the outpatient prescription drug benefit pro23 gram under this part.

24 ‘‘(2) AMOUNT OF INCENTIVE.—The payment

25 under this section with respect to each individual de-
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1 scribed in paragraph (1) for a month shall be equal

to 2 2 ⁄3 of the monthly premium amount payable by an

3 eligible beneficiary enrolled under this part, as set

4 for the calendar year pursuant to section

5 1860D(a)(2).

6 ‘‘(3) PAYMENT DATE.—The incentive under

7 this section with respect to a calendar quarter shall

8 be payable as of the end of the next succeeding cal9 endar quarter.

10 ‘‘(d) CIVIL MONEY PENALTIES.—A sponsor, health

11 plan, or other entity that the Secretary determines has,

12 directly or through its agent, provided information in con13 nection with a request for an incentive payment under this

14 section that the entity knew or should have known to be

15 false shall be subject to a civil monetary penalty in an

16 amount up to 3 times the total incentive amounts under

17 subsection (c) that were paid (or would have been payable)

18 on the basis of such information.

19 ‘‘(e) DEFINITIONS.—In this section:

20 ‘‘(1) EMPLOYMENT-BASED RETIREE HEALTH

21 COVERAGE.—The term ‘employment-based retiree

22 health coverage’ means health insurance or other

23 coverage of health care costs for retired individuals

24 (or for such individuals and their spouses and de-
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1 pendents) based on their status as former employees

2 or labor union members.

3 ‘‘(2) EMPLOYER.—The term ‘employer’ has the

4 meaning given the term in section 3(5) of the Em5 ployee Retirement Income Security Act of 1974 (ex6 cept that such term shall include only employers of

7 2 or more employees).

8 ‘‘(3) QUALIFIED RETIREE PRESCRIPTION DRUG

9 PLAN.—The term ‘qualified retiree prescription drug

10 plan’ means health insurance coverage included in

11 employment-based retiree health coverage that—

12 ‘‘(A) provides coverage of the cost of pre13 scription drugs whose actuarial value (as de14 fined by the Secretary) to each retired bene15 ficiary equals or exceeds the actuarial value of

16 the benefits provided to an individual enrolled

17 in the outpatient prescription drug benefit pro18 gram under this part; and

19 ‘‘(B) does not deny, limit, or condition the

20 coverage or provision of prescription drug bene21 fits for retired individuals based on age or any

22 health status-related factor described in section

23 2702(a)(1) of the Public Health Service Act.

24 ‘‘(4) SPONSOR.—The term ‘sponsor’ has the

25 meaning given the term ‘plan sponsor’ in section
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1 3(16)(B) of the Employer Retirement Income Secu2 rity Act of 1974.

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

4 are authorized to be appropriated from time to time, out

5 of any moneys in the Treasury not otherwise appropriated,

6 such sums as may be necessary to carry out the program

7 under this section.

8 ‘‘PROCEDURES FOR PARTIAL YEAR IMPLEMENTATION

9 ‘‘SEC. 1860J. If the Secretary first implements the

10 program under this part on a day other that January 1

11 of a year, the Secretary shall establish procedures for im12 plementing the program during the period between the

13 date of implementation and December 31 of such year,

14 including procedures—

15 ‘‘(1) for prorating premiums, deductibles, and

16 coinsurance under the program during such period;

17 and

18 ‘‘(2) relating to requirements and payments

19 under the Medicare+Choice program during such

20 period.

21 ‘‘APPROPRIATIONS

22 ‘‘SEC. 1860K. There are authorized to be appro23 priated from time to time, out of any moneys in the Treas24 ury not otherwise appropriated, to the Federal Supple25 mentary Medical Insurance Trust Fund established under

26 section 1841, an amount equal to the amount by which
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1 the benefits and administrative costs of providing the ben2 efits under this part exceed the premiums collected under

3 section 1860D.

4 ‘‘SUBPART 2—MEDICARE PHARMACY AND

5 THERAPEUTICS (P&T) ADVISORY COMMITTEE

6 ‘‘MEDICARE PHARMACY AND THERAPEUTICS (P&T)

7 ADVISORY COMMITTEE

8 ‘‘SEC. 1860M. (a) ESTABLISHMENT OF COM9 MITTEE.—There is established a Medicare Pharmacy and

10 Therapeutics Advisory Committee (in this section referred

11 to as the ‘Committee’).

12 ‘‘(b) FUNCTIONS OF COMMITTEE.—On and after

13 January 1, 2002, the Committee shall advise the Sec14 retary on policies related to—

15 ‘‘(1) the development of guidelines for the im16 plementation and administration of the outpatient

17 prescription drug benefit program under this part;

18 and

19 ‘‘(2) the development of—

20 ‘‘(A) standards for a pharmacy and thera21 peutics committee required of eligible entities

22 under section 1860G(a)(3)(B)(i);

23 ‘‘(B) standards for—

24 ‘‘(i) defining therapeutic classes;
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1 ‘‘(ii) adding new therapeutic classes to

2 a formulary;

3 ‘‘(iii) adding new drugs to a thera4 peutic class within a formulary; and

5 ‘‘(iv) when and how often a formulary

6 should be modified;

7 ‘‘(C) procedures to evaluate the bids sub8 mitted by eligible entities under this part; and

9 ‘‘(D) procedures to ensure that eligible en10 tities with a contract under this part are in

11 compliance with the requirements under this

12 part.

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) eleven shall be chosen to rep4 resent physicians;

5 ‘‘(ii) four shall be chosen to represent

6 pharmacists;

7 ‘‘(iii) one shall be chosen to represent

8 the Health Care Financing Administration;

9 ‘‘(iv) two shall be chosen to represent

10 actuaries and pharmacoeconomists; and

11 ‘‘(v) one shall be chosen to represent

12 emerging drug technologies.

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

14 the Committee shall serve for a term determined appro15 priate by the Secretary. The terms of service of the mem16 bers initially appointed shall begin on January 1, 2002.

17 ‘‘(e) CHAIRMAN.—The Secretary shall designate a

18 member of the Committee as Chairman. The term as

19 Chairman shall be for a 1-year period.

20 ‘‘(f) COMPENSATION AND TRAVEL EXPENSES.—

21 ‘‘(1) COMPENSATION OF MEMBERS.—Each

22 member of the Committee who is not an officer or

23 employee of the Federal Government shall be com24 pensated at a rate equal to the daily equivalent of

25 the annual rate of basic pay prescribed for level IV
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1 of the Executive Schedule under section 5315 of title

2 5, United States Code, for each day (including travel

3 time) during which such member is engaged in the

4 performance of the duties of the Committee. All

5 members of the Committee who are officers or em6 ployees of the United States shall serve without com7 pensation in addition to that received for their serv8 ices as officers or employees of the United States.

9 ‘‘(2) TRAVEL EXPENSES.—The members of the

10 Committee shall be allowed travel expenses, includ11 ing per diem in lieu of subsistence, at rates author12 ized for employees of agencies under subchapter I of

13 chapter 57 of title 5, United States Code, while

14 away from their homes or regular places of business

15 in the performance of services for the Committee.

16 ‘‘(g) OPERATION OF THE COMMITTEE.—

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

18 the call of the Chairman (after consultation with the

19 other members of the Committee) not less often

20 than quarterly to consider a specific agenda of

21 issues, as determined by the Chairman after such

22 consultation.

23 ‘‘(2) QUORUM.—Ten members of the Com24 mittee shall constitute a quorum for purposes of

25 conducting business.
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1 ‘‘(h) FEDERAL ADVISORY COMMITTEE ACT.—Section

2 14 of the Federal Advisory Committee Act (5 U.S.C.

3 App.) shall not apply to the Committee.

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

5 ASSETS.—For purposes of carrying out its duties, the Sec6 retary and the Committee may provide for the transfer

7 to the Committee of such civil service personnel in the em8 ploy of the Department of Health and Human Services,

9 and such resources and assets of the Department used in

10 carrying out this title, as the Committee requires.

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

12 are authorized to be appropriated such sums as may be

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

14 (b) EXCLUSIONS FROM COVERAGE.—

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

16 of the Social Security Act (42 U.S.C. 1395y(a)) is

17 amended in the matter preceding paragraph (1) by

18 striking ‘‘part A or part B’’ and inserting ‘‘part A,

19 B, or D’’.

20 (2) PRESCRIPTION DRUGS NOT EXCLUDED

21 FROM COVERAGE IF APPROPRIATELY PRESCRIBED.—

22 Section 1862(a)(1) of the Social Security Act (42

23 U.S.C. 1395y(a)(1)) is amended—

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

25 ‘‘and’’ at the end;
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1 (B) in subparagraph (I), by striking the

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

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

4 subparagraph:

5 ‘‘(J) in the case of prescription drugs cov6 ered under part D, which are not prescribed in

7 accordance with such part;’’.

8 (c) CONFORMING REFERENCES TO PREVIOUS PART

9 D.—

10 (1) IN GENERAL.—Any reference in law (in ef11 fect before the date of enactment of this Act) to part

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

13 a reference to part E of such title (as in effect after

14 such date).

15 (2) SECRETARIAL SUBMISSION OF LEGISLATIVE

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

17 of enactment of this Act, the Secretary of Health

18 and Human Services shall submit to the appropriate

19 committees of Congress a legislative proposal pro20 viding for such technical and conforming amend21 ments in the law as are required by the provisions

22 of this Act.
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1 SEC. 4. PART D BENEFITS UNDER MEDICARE+CHOICE

2 PLANS.

3 (a) ELIGIBILITY, ELECTION, AND ENROLLMENT.—

4 Section 1851 of the Social Security Act (42 U.S.C.

5 1395w–21) is amended—

6 (1) in subsection (a)(1)(A), by striking ‘‘parts

7 A and B’’ and inserting ‘‘parts A, B, and D’’; and

8 (2) in subsection (i)(1), by striking ‘‘parts A

9 and B’’ and inserting ‘‘parts A, B, and D’’.

10 (b) VOLUNTARY BENEFICIARY ENROLLMENT FOR

11 DRUG COVERAGE.—Section 1852(a)(1)(A) of such Act

12 (42 U.S.C. 1395w–22(a)(1)(A)) is amended by inserting

13 ‘‘(and under part D to individuals also enrolled under that

14 part)’’ after ‘‘parts A and B’’.

15 (c) ACCESS TO SERVICES.—Section 1852(d)(1) of

16 such Act (42 U.S.C. 1395w–22(d)(1)) is amended—

17 (1) in subparagraph (D), by striking ‘‘and’’ at

18 the end;

19 (2) in subparagraph (E), by striking the period

20 at the end and inserting ‘‘; and’’; and

21 (3) by adding at the end the following new sub22 paragraph:

23 ‘‘(F) in the case of covered outpatient

24 drugs provided to individuals enrolled under

25 part D (as defined in section 1860(1)), the or-
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1 ganization complies with the access require2 ments applicable under part D.’’.

3 (d) PAYMENTS TO ORGANIZATIONS.—Section

4 1853(a)(1)(A) of such Act (42 U.S.C. 1395w–

5 23(a)(1)(A)) is amended—

6 (1) by inserting ‘‘determined separately for the

7 benefits under parts A and B and under part D (for

8 individuals enrolled under that part)’’ after ‘‘as cal9 culated under subsection (c)’’;

10 (2) by striking ‘‘that area, adjusted for such

11 risk factors’’ and inserting ‘‘that area. In the case

12 of payment for the benefits under parts A and B,

13 such payment shall be adjusted for such risk factors

14 as’’; and

15 (3) by inserting before the last sentence the fol16 lowing: ‘‘In the case of the payments for the benefits

17 under part D, such payment shall initially be ad18 justed for the risk factors of each enrollee as the

19 Secretary determines to be feasible and appropriate

20 to ensure actuarial equivalence. By 2006, the adjust21 ments to payments for benefits under part D shall

22 be for the same risk factors used to adjust payments

23 for the benefits under parts A and B.’’.
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1 (e) CALCULATION OF ANNUAL MEDICARE+CHOICE

2 CAPITATION RATES.—Section 1853(c) of such Act (42

3 U.S.C. 1395w–23(c)) is amended—

4 (1) in paragraph (1), in the matter preceding

5 subparagraph (A), by inserting ‘‘for benefits under

6 parts A and B’’ after ‘‘capitation rate’’; and

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

8 paragraph:

9 ‘‘(8) PAYMENT FOR PART D BENEFITS.—The

10 Secretary shall determine a capitation rate for part

11 D benefits (for individuals enrolled under such part)

12 as follows:

13 ‘‘(A) DRUGS DISPENSED BEFORE 2004.—In

14 the case of prescription drugs dispensed on or

15 after the date that is 1 year after the date of

16 enactment of the Medicare Prescription Drug

17 Coverage Act of 2001 and before January 1,

18 2004, the capitation rate shall be based on the

19 projected national per capita costs for prescrip20 tion drug benefits under part D and associated

21 claims processing costs for beneficiaries enrolled

22 under part D and not enrolled with a

23 Medicare+Choice organization under this part.

24 ‘‘(B) DRUGS DISPENSED IN SUBSEQUENT

25 YEARS.—In the case of prescription drugs dis-
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1 pensed in 2004 or a subsequent year, the capi2 tation rate shall be equal to the capitation rate

3 for the preceding year increased by the Sec4 retary’s estimate of the projected per capita

5 rate of growth in expenditures under this title

6 for an individual enrolled under part D for such

7 subsequent year.’’.

8 (f) LIMITATION ON ENROLLEE LIABILITY.—Section

9 1854(e) of such Act (42 U.S.C. 1395w–24(e)) is amended

10 by adding at the end the following new paragraph:

11 ‘‘(5) SPECIAL RULE FOR PART D BENEFITS.—

12 With respect to outpatient prescription drug benefits

13 under part D, a Medicare+Choice organization may

14 not require that an enrollee pay a deductible or a co15 insurance percentage that exceeds the deductible or

16 coinsurance percentage applicable for such benefits

17 for an eligible beneficiary under part D.’’.

18 (g) REQUIREMENT FOR ADDITIONAL BENEFITS.—

19 Section 1854(f)(1) of such Act (42 U.S.C. 1395w–

20 24(f)(1)) is amended by adding at the end the following

21 new sentence: ‘‘Such determination shall be made sepa22 rately for the benefits under parts A and B and for pre23 scription drug benefits under part D.’’.

24 (h) EFFECTIVE DATE.—The amendments made by

25 this section shall apply to items and services provided
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1 under a Medicare+Choice plan on or after the date that

2 is 1 year after the date of enactment of this Act.

3 SEC. 5. EXCLUSION OF PART D COSTS FROM DETERMINA4 TION OF PART B MONTHLY PREMIUM.

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

6 1395r(g)) is amended—

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

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

9 ‘‘(1) the application of section’’;

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

11 and’’; and

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

13 paragraph:

14 ‘‘(2) the program under part D providing pay15 ment for covered outpatient drugs (including costs

16 associated with making payments to employers and

17 other sponsors of employment-based health care cov18 erage under the Employer Incentive Program under

19 section 1860I).’’.

20 SEC. 6. ADDITIONAL ASSISTANCE FOR LOW-INCOME BENE21 FICIARIES.

22 (a) INCLUSION IN MEDICARE COST-SHARING.—Sec23 tion 1905(p)(3) of the Social Security Act (42 U.S.C.

24 1396d(p)(3)) is amended—

25 (1) in subparagraph (A)—
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1 (A) in clause (i), by striking ‘‘and’’ at the

2 end;

3 (B) in clause (ii), by inserting ‘‘and’’ at

4 the end; and

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

6 clause:

7 ‘‘(iii) premiums under section 1860D.’’;

8 (2) in subparagraph (B), by striking ‘‘section

9 1813’’ and inserting ‘‘sections 1813 and 1860E(b)’’;

10 and

11 (3) in subparagraph (C), by striking ‘‘section

12 1813 and section 1833(b)’’ and inserting ‘‘sections

13 1813, 1833(b), and 1860E(a)’’.

14 (b) EXPANSION OF MEDICAL ASSISTANCE.—Section

15 1902(a)(10)(E) of the Social Security Act (42 U.S.C.

16 1396a(a)(10)(E)) is amended—

17 (1) in clause (iii)—

18 (A) by striking ‘‘section 1905(p)(3)(A)(ii)’’

19 and inserting ‘‘clauses (ii) and (iii) of section

20 1905(p)(3)(A), for the coinsurance described in

21 section 1860E(b), and for the deductible de22 scribed in section 1860E(a)’’; and

23 (B) by striking ‘‘and’’ at the end;

24 (2) by redesignating clause (iv) as clause (vi);

25 and
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1 (3) by inserting after clause (iii) the following

2 new clauses:

3 ‘‘(iv) for making medical assistance avail4 able for Medicare cost-sharing described in sec5 tion 1905(p)(3)(A)(iii), for the coinsurance de6 scribed in section 1860E(b), and for the de7 ductible described in section 1860E(a) for indi8 viduals who would be qualified Medicare bene9 ficiaries described in section 1905(p)(1) but for

10 the fact that their income exceeds 120 percent

11 but does not exceed 135 percent of such official

12 poverty line for a family of the size involved;

13 ‘‘(v) for making medical assistance avail14 able for Medicare cost-sharing described in sec15 tion 1905(p)(3)(A)(iii) on a linear sliding scale

16 based on the income of such individuals for in17 dividuals who would be qualified Medicare bene18 ficiaries described in section 1905(p)(1) but for

19 the fact that their income exceeds 135 percent

20 but does not exceed 175 percent of such official

21 poverty line for a family of the size involved;

22 and’’.

23 (c) NONAPPLICABILITY OF RESOURCE REQUIRE24 MENTS TO MEDICARE PART D COST-SHARING.—Section

25 1905(p)(1) of the Social Security Act (42 U.S.C.
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1 1396d(p)(1)) is amended by adding at the end the fol2 lowing flush sentence:

3 ‘‘In determining if an individual is a qualified medicare

4 beneficiary under this paragraph, subparagraph (C) shall

5 not be applied for purposes of providing the individual

6 with medicare cost-sharing that consists of premiums

7 under section 1860D, coinsurance described in section

8 1860E(b), or deductibles described in section 1860E(a).’’.

9 (d) NONAPPLICABILITY OF PAYMENT DIFFERENTIAL

10 REQUIREMENTS TO MEDICARE PART D COST-SHAR11 ING.—Section 1902(n)(2) of the Social Security Act (42

12 U.S.C. 1396a(n)(2)) is amended by adding at the end the

13 following new sentence: ‘‘The preceding sentence shall not

14 apply to coinsurance described in section 1860E(b) or

15 deductibles described in section 1860E(a).’’.

16 (e) 100 PERCENT FEDERAL MEDICAL ASSISTANCE

17 PERCENTAGE.—The first sentence of section 1905(b) of

18 the Social Security Act (42 U.S.C. 1396d(b)) is

19 amended—

20 (1) by striking ‘‘and’’ before ‘‘(3)’’; and

21 (2) by inserting before the period at the end the

22 following: ‘‘, and (4) the Federal medical assistance

23 percentage shall be 100 percent with respect to med24 ical assistance provided under clauses (iv) and (v) of

25 section 1902(a)(10)(E)’’.
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1 (f) TREATMENT OF TERRITORIES.—Section 1108(g)

2 of such Act (42 U.S.C. 1308(g)) is amended by adding

3 at the end the following new paragraph:

4 ‘‘(3) Notwithstanding the preceding provisions of this

5 subsection, with respect to the first fiscal quarter that be6 gins on or after the date that is 1 year after the date

7 of enactment of the Medicare Prescription Drug Coverage

8 Act of 2001 and any fiscal year thereafter, the amount

9 otherwise determined under this subsection (and sub10 section (f)) for the fiscal year for a Commonwealth or ter11 ritory shall be increased by the ratio (as estimated by the

12 Secretary) of—

13 ‘‘(A) the aggregate amount of payments made

14 to the 50 States and the District of Columbia for

15 the fiscal year under title XIX that are attributable

16 to making medical assistance available for individ17 uals described in clauses (i), (iii), (iv), and (v) of

18 section 1902(a)(10)(E) for payment of Medicare

19 cost-sharing that consists of premiums under section

20 1860D, coinsurance described in section 1860E(b),

21 or deductibles described in section 1860E(a); to

22 ‘‘(B) the aggregate amount of total payments

23 made to such States and District for the fiscal year

24 under such title.’’.
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1 (g) CONFORMING AMENDMENTS.—Section 1933 of

2 the Social Security Act (42 U.S.C. 1396u–3) is

3 amended—

4 (1) in subsection (a), by striking ‘‘section

5 1902(a)(10)(E)(iv)’’ and inserting ‘‘section

6 1902(a)(10)(E)(vi)’’;

7 (2) in subsection (c)(2)(A)—

8 (A) in clause (i), by striking ‘‘section

9 1902(a)(10)(E)(iv)(I)’’ and inserting ‘‘section

10 1902(a)(10)(E)(vi)(I)’’; and

11 (B) in clause (ii), by striking ‘‘section

12 1902(a)(10)(E)(iv)(II)’’ and inserting ‘‘section

13 1902(a)(10)(E)(vi)(II)’’;

14 (3) in subsection (d), by striking ‘‘section

15 1902(a)(10)(E)(iv)’’ and inserting ‘‘section

16 1902(a)(10)(E)(vi)’’; and

17 (4) in subsection (e), by striking ‘‘section

18 1902(a)(10)(E)(iv)’’ and inserting ‘‘section

19 1902(a)(10)(E)(vi)’’.

20 (h) EFFECTIVE DATE.—The amendments made by

21 this section shall apply for medical assistance provided

22 under section 1902(a)(10)(E) of the Social Security Act

23 (42 U.S.C. 1396a(a)(10)(E)) on and after the date that

24 is 1 year after the date of enactment of this Act.
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1 SEC. 7. MEDIGAP REVISIONS.

2 Section 1882 of the Social Security Act (42 U.S.C.

3 1395ss) is amended by adding at the end the following

4 new subsection:

5 ‘‘(v) MODERNIZED BENEFIT PACKAGES FOR MEDI6 CARE SUPPLEMENTAL POLICIES.—

7 ‘‘(1) PROMULGATION OF MODEL REGULA8 TION.—

9 ‘‘(A) NAIC MODEL REGULATION.—If,

10 within 6 months after the date of enactment of

11 the Medicare Prescription Drug Coverage Act

12 of 2001, the National Association of Insurance

13 Commissioners (in this subsection referred to as

14 the ‘NAIC’) changes the 1991 NAIC Model

15 Regulation (described in subsection (p)) to re16 vise the benefit packages classified as ‘H’, ‘I’,

17 and ‘J’ under the standards established by sub18 section (p)(2) (including the benefit package

19 classified as ‘J’ with a high deductible feature,

20 as described in subsection (p)(11)) so that—

21 ‘‘(i) the coverage for outpatient pre22 scription drugs available under such ben23 efit packages is replaced with coverage for

24 outpatient prescription drugs that com25 pliments but does not duplicate the bene26 fits for outpatient prescription drugs that
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1 beneficiaries are otherwise entitled to

2 under this title;

3 ‘‘(ii) the revised benefit packages pro4 vide a range of coverage options for out5 patient prescription drugs for beneficiaries,

6 but do not provide coverage for—

7 ‘‘(I) the deductible under section

8 1860E(a); or

9 ‘‘(II) more than 90 percent of

10 the coinsurance applicable to an indi11 vidual under section 1860E(b);

12 ‘‘(iii) uniform language and defini13 tions are used with respect to such revised

14 benefits;

15 ‘‘(iv) uniform format is used in the

16 policy with respect to such revised benefits;

17 and

18 ‘‘(v) such revised standards meet any

19 additional requirements imposed by the

20 Medicare Prescription Drug Coverage Act

21 of 2001;

22 subsection (g)(2)(A) shall be applied in each

23 State, effective for policies issued to policy hold24 ers on and after the date that is 1 year after

25 the date of enactment of the Medicare Prescrip-
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1 tion Drug Coverage Act of 2001, as if the ref2 erence to the Model Regulation adopted on

3 June 6, 1979, were a reference to the 1991

4 NAIC Model Regulation as changed under this

5 subparagraph (such changed regulation referred

6 to in this section as the ‘2002 NAIC Model

7 Regulation’).

8 ‘‘(B) REGULATION BY THE SECRETARY.—

9 If the NAIC does not make the changes in the

10 1991 NAIC Model Regulation within the 6-

11 month period specified in subparagraph (A), the

12 Secretary shall promulgate, not later than 6

13 months after the end of such period, a regula14 tion and subsection (g)(2)(A) shall be applied in

15 each State, effective for policies issued to policy

16 holders on and after the date that is 1 year

17 after the date of enactment of the Medicare

18 Prescription Drug Coverage Act of 2001, as if

19 the reference to the Model Regulation adopted

20 on June 6, 1979, were a reference to the 1991

21 NAIC Model Regulation as changed by the Sec22 retary under this subparagraph (such changed

23 regulation referred to in this section as the

24 ‘2002 Federal Regulation’).
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1 ‘‘(C) CONSULTATION WITH WORKING

2 GROUP.—In promulgating standards under this

3 paragraph, the NAIC or Secretary shall consult

4 with a working group similar to the working

5 group described in subsection (p)(1)(D).

6 ‘‘(D) MODIFICATION OF STANDARDS IF

7 MEDICARE BENEFITS CHANGE.—If benefits (in8 cluding deductibles and coinsurance) under part

9 D of this title are changed and the Secretary

10 determines, in consultation with the NAIC, that

11 changes in the 2002 NAIC Model Regulation or

12 2002 Federal Regulation are needed to reflect

13 such changes, the preceding provisions of this

14 paragraph shall apply to the modification of

15 standards previously established in the same

16 manner as they applied to the original estab17 lishment of such standards.

18 ‘‘(2) CONSTRUCTION OF BENEFITS IN OTHER

19 MEDICARE SUPPLEMENTAL POLICIES.—Nothing in

20 the benefit packages classified as ‘A’ through ‘G’

21 under the standards established by subsection (p)(2)

22 (including the benefit package classified as ‘F’ with

23 a high deductible feature, as described in subsection

24 (p)(11)) shall be construed as providing coverage for
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1 benefits for which payment may be made under part

2 D.

3 ‘‘(3) APPLICATION OF PROVISIONS AND CON4 FORMING REFERENCES.—

5 ‘‘(A) APPLICATION OF PROVISIONS.—The

6 provisions of paragraphs (4) through (10) of

7 subsection (p) shall apply under this section,

8 except that—

9 ‘‘(i) any reference to the model regu10 lation applicable under that subsection

11 shall be deemed to be a reference to the

12 applicable 2002 NAIC Model Regulation or

13 2002 Federal Regulation; and

14 ‘‘(ii) any reference to a date under

15 such paragraphs of subsection (p) shall be

16 deemed to be a reference to the appro17 priate date under this subsection.

18 ‘‘(B) OTHER REFERENCES.—Any reference

19 to a provision of subsection (p) or a date appli20 cable under such subsection shall also be con21 sidered to be a reference to the appropriate pro22 vision or date under this subsection.’’.
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1 SEC. 8. COMPREHENSIVE IMMUNOSUPPRESSIVE DRUG

2 COVERAGE FOR TRANSPLANT PATIENTS.

3 (a) IN GENERAL.—Section 1861(s)(2)(J) of the So4 cial Security Act (42 U.S.C. 1395x(s)(2)(J)), as amended

5 by section 113(a) of the Medicare, Medicaid, and SCHIP

6 Benefits Improvement and Protection Act of 2000 (as en7 acted into law by section 1(a)(6) of Public Law 106–554),

8 is amended by striking ‘‘, to an individual who receives’’

9 and all that follows before the semicolon at the end and

10 inserting ‘‘to an individual who has received an organ

11 transplant’’.

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

13 subsection (a) shall apply to drugs furnished on or after

14 the date of enactment of this Act.

15 SEC. 9. HHS STUDIES AND REPORT TO CONGRESS REGARD16 ING OUTPATIENT PRESCRIPTION DRUG BEN17 EFIT PROGRAM.

18 (a) STUDIES.—The Secretary of Health and Human

19 Services shall conduct a study on the following:

20 (1) WAIVER OR REDUCTION OF LATE ENROLL21 MENT PENALTY.—The feasibility and advisability of

22 establishing an annual open enrollment period under

23 the outpatient prescription drug benefit program

24 under part D of title XVIII of the Social Security

25 Act (as added by section 3) in which the late enroll26 ment penalty under section 1860B(a)(2)(A) of the
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1 Social Security Act (as so added) would be reduced

2 or would not be applied. Such study shall include a

3 projection of the costs if open enrollment was al4 lowed with a reduced penalty or without a penalty.

5 (2) UNIFORM FORMAT FOR PHARMACY BENEFIT

6 CARDS.—The feasibility and advisability of estab7 lishing a uniform format for pharmacy benefit cards

8 provided to beneficiaries by eligible entities under

9 such outpatient prescription drug benefit program.

10 (3) DEVELOPMENT OF SYSTEMS TO ELEC11 TRONICALLY TRANSFER PRESCRIPTIONS.—The feasi12 bility and advisability of developing systems to elec13 tronically transfer prescriptions under such out14 patient prescription drug benefit program from the

15 prescriber to the pharmacist.

16 (b) REPORT.—Not later than 9 months after the date

17 of enactment of this Act, the Secretary of Health and

18 Human Services shall submit to Congress a report on the

19 results of the studies conducted under subsection (a), to20 gether with any recommendations for legislation that the

21 Secretary determines to be appropriate as a result of such

22 studies.
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1 SEC. 10. GAO STUDY AND BIENNIAL REPORTS ON COMPETI2 TION AND SAVINGS.

3 (a) ONGOING STUDY.—The Comptroller General of

4 the United States shall conduct an ongoing study and

5 analysis of the outpatient prescription drug benefit pro6 gram under part D of title XVIII of the Social Security

7 Act (as added by section 3), including an analysis of—

8 (1) the extent to which the competitive bidding

9 process under such program fosters maximum com10 petition and efficiency; and

11 (2) the savings to the medicare program result12 ing from such outpatient prescription drug benefit

13 program, including the reduction in the number or

14 length of hospital visits.

15 (b) INITIAL REPORT ON COMPETITIVE BIDDING

16 PROCESS.—Not later than 9 months after the date of en17 actment of this Act, the Comptroller General shall submit

18 to Congress a report on the extent to which the competi19 tive bidding process under the outpatient prescription

20 drug benefit program under part D of title XVIII of the

21 Social Security Act (as added by section 3) is expected

22 to foster maximum competition and efficiency.

23 (c) BIENNIAL REPORTS.—Not later than January 1,

24 2004, and biennially thereafter, the Comptroller General

25 of the United States shall submit to Congress a report

26 on the results of the study conducted under subsection (a),
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1 together with any recommendations for legislation that the

2 Comptroller General determines to be appropriate as a re3 sult of such study.

4 SEC. 11. MEDPAC STUDY AND ANNUAL REPORTS ON THE

5 PHARMACEUTICAL MARKET, PHARMACIES,

6 AND BENEFICIARY ACCESS.

7 (a) ONGOING STUDY.—The Medicare Payment Advi8 sory Commission shall conduct an ongoing study and anal9 ysis of the outpatient prescription drug benefit program

10 under part D of title XVIII of the Social Security Act (as

11 added by section 3), including an analysis of the impact

12 of such program on—

13 (1) the pharmaceutical market, including costs

14 and pricing of pharmaceuticals, beneficiary access to

15 such pharmaceuticals, and trends in research and

16 development;

17 (2) franchise, independent, and rural phar18 macies; and

19 (3) beneficiary access to outpatient prescription

20 drugs, including an assessment of—

21 (A) out-of-pocket spending;

22 (B) generic and brand-name utilization;

23 and

24 (C) pharmacists’ services.
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1 (b) REPORT.—Not later than January 1, 2004, and

2 annually thereafter, the Medicare Payment Advisory Com3 mission shall submit to Congress a report on the results

4 of the study conducted under subsection (a), together with

5 any recommendations for legislation that such Commis6 sion determines to be appropriate as a result of such

7 study.

8 SEC. 12. APPROPRIATIONS.

9 In addition to amounts otherwise appropriated to the

10 Secretary of Health and Human Services, there are au11 thorized to be appropriated to the Secretary for fiscal year

12 2002 and each subsequent fiscal year such sums as may

13 be necessary to administer the outpatient prescription

14 drug benefit program under part D of title XVIII of the

15 Social Security Act (as added by section 3).

Æ