II 

109TH CONGRESS 

1ST SESSION S. 1128 

To amend title XIX of the Social Security Act to provide for increased 

rebates under the medicaid program for prescription drugs that are 

directly advertised to consumers, to require other Federal programs purchasing or reimbursing for such drugs to establish payment and reimbursement mechanisms that reduce the costs of those drugs, and for 

other purposes. 

IN THE SENATE OF THE UNITED STATES 

MAY 26, 2005 

Mr. WYDEN (for himself and Mr. SUNUNU) introduced the following bill; 

which was read twice and referred to the Committee on Finance 

A BILL 

To amend title XIX of the Social Security Act to provide 

for increased rebates under the medicaid program for 

prescription drugs that are directly advertised to consumers, to require other Federal programs purchasing 

or reimbursing for such drugs to establish payment and 

reimbursement mechanisms that reduce the costs of 

those drugs, and for other purposes. 

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

2 This Act may be cited as the ‘‘Pharmaceutical Adver3 tising and Prudent Purchasing Act’’. 

4 SEC. 2. INCREASED REBATES UNDER THE MEDICAID PRO5 GRAM FOR PRESCRIPTION DRUGS DIRECTLY 

6 ADVERTISED TO CONSUMERS. 

7 (a) IN GENERAL.—Section 1927(b) of the Social Se8 curity Act (42 U.S.C. 1396r–8(b)) is amended by adding 

9 at the end the following: 

10 ‘‘(5) INCREASE IN AMOUNT OF REBATE FOR

11 COVERED OUTPATIENT DRUGS DIRECTLY ADVER12 TISED TO CONSUMERS.— 

13 ‘‘(A) IN GENERAL.—A rebate agreement 

14 under this subsection shall provide for an in15 crease in the amount of the rebate determined 

16 under subsection (c) with respect to each cov17 ered outpatient drug of a manufacturer for 

18 which payment is made under the State pro19 gram under this title if the manufacturer of 

20 such drug fails to certify to the Secretary that 

21 the drug was not directly advertised to con22 sumers during the rebate period applicable to 

23 such agreement. 

24 ‘‘(B) ADJUSTMENT OF REBATE FOR25 MULA.— 
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1 ‘‘(i) IN GENERAL.—Not later than 

2 180 days after the date of enactment of 

3 this paragraph, the Secretary shall deter4 mine appropriate adjustments to make to 

5 the formula used to calculate the amount 

6 of a rebate under subsection (c) to deter7 mine the increased amount of the rebate 

8 required under subparagraph (A), includ9 ing, to the extent the Secretary determines 

10 appropriate, to the application of the aver11 age manufacturer price and best price in 

12 such formula. 

13 ‘‘(ii) REQUIREMENTS.—In deter14 mining the adjustments required under 

15 clause (i), the Secretary shall— 

16 ‘‘(I) take into account the in17 creased costs to the State program es18 tablished under this title resulting 

19 from the purchase of covered out20 patient drugs that are directly adver21 tised to consumers; and 

22 ‘‘(II) consult with manufacturers. 

23 ‘‘(C) DEFINITION OF DIRECTLY ADVER24 TISED TO CONSUMERS.—In this section, the 

25 term ‘directly advertised to consumers’ means a 
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1 reminder ad or product claim regarding a cov2 ered outpatient drug that is disseminated 

3 through radio, television, or other electronic 

4 media, print media, or outdoor advertising.’’. 

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

6 this section applies to rebate agreements entered into or 

7 renewed under section 1927 of the Social Security Act (42 

8 U.S.C. 1396r–8) on or after the date that is 180 days 

9 after the date of enactment of this Act. 

10 SEC. 3. REDUCED PAYMENT AND REIMBURSEMENT MECHA11 NISMS FOR OTHER FEDERAL PROGRAMS 

12 THAT PURCHASE OR PROVIDE REIMBURSE13 MENT FOR PRESCRIPTION DRUGS THAT ARE 

14 DIRECTLY ADVERTISED TO CONSUMERS. 

15 (a) IN GENERAL.—Not later than 180 days after the 

16 date of enactment of this Act, the Secretary of Health and 

17 Human Services and the Secretary of Veterans Affairs 

18 each shall develop and implement procedures under which 

19 any master agreement, pricing agreement, or contract en20 tered into on or after that date for the procurement or 

21 purchase of a covered drug or a covered outpatient drug 

22 by a Federal agency or reimbursement program described 

23 in subsection (b) shall provide that the agency or program 

24 shall pay a negotiated reduced price for such drug unless 

25 the manufacturer has certified to the head of the agency 
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1 or program that the drug was not directly advertised to 

2 consumers during the 12-month period preceding the date 

3 of such procurement or purchase. 

4 (b) FEDERAL AGENCIES AND PROGRAMS DE5 SCRIBED.—For purposes of subsection (a), the Federal 

6 agencies and reimbursement programs described in this 

7 subsection are the following: 

8 (1) The Public Health Service, including health9 related programs administered by the Indian Health 

10 Service, and health-related programs funded under 

11 the Public Health Service Act, including the drug 

12 pricing agreement program established under section 

13 340B of such Act (42 U.S.C. 256b). 

14 (2) The Department of Veterans Affairs and 

15 the program of medical care furnished by the Sec16 retary of Veterans Affairs. 

17 (3) The Department of Defense and the De18 fense Health Program. 

19 (c) DEFINITIONS.—In this section: 

20 (1) COVERED DRUG.—The term ‘‘covered drug’’ 

21 has the meaning given that term in section 

22 8126(h)(2) of title 38, United States Code. 

23 (2) COVERED OUTPATIENT DRUG.—The term 

24 ‘‘covered outpatient drug’’ has the meaning given 
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1 that term in section 1927(k)(2) of the Social Secu2 rity Act (42 U.S.C. 1396r–8(k)(2)). 

3 (3) DIRECTLY ADVERTISED TO CONSUMERS.— 

4 The term ‘‘directly advertised to consumers’’ means 

5 a reminder ad or product claim regarding a covered 

6 drug or a covered outpatient drug that is dissemi7 nated through radio, television, or other electronic 

8 media, print media, or outdoor advertising. 

9 (4) MANUFACTURER.—The term ‘‘manufac10 turer’’ has the meaning given that term in section 

11 8126(h)(4) of title 38, United States Code, and sec12 tion 1927(k)(5) of the Social Security Act (42 

13 U.S.C. 1936r–8(k)(5)). 

14 (d) CONFORMING AMENDMENTS.— 

15 (1) PRESCRIPTION DRUGS PURCHASED BY COV16 ERED ENTITIES UNDER AGREEMENTS ENTERED

17 INTO UNDER THE PUBLIC HEALTH SERVICE ACT.— 

18 Section 340B(a) of the Public Health Service Act 

19 (42 U.S.C. 256b(a)) is amended— 

20 (A) in paragraph (1), by inserting ‘‘or re21 quired under paragraph (11)’’ after ‘‘as pro22 vided by the Secretary’’; and 

23 (B) by adding at the end the following: 
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1 ‘‘(11) REDUCED NEGOTIATED PRICE FOR COV2 ERED DRUGS ADVERTISED DIRECTLY TO CON3 SUMERS.— 

4 ‘‘(A) IN GENERAL.—An agreement entered 

5 into under paragraph (1) shall provide that 

6 with respect to each covered drug of the manu7 facturer that is purchased by a covered entity, 

8 the price charged shall not exceed the reduced 

9 negotiated price for that drug in accordance 

10 with the procedures established under section 

11 3(a) of the Pharmaceutical Advertising and 

12 Prudent Purchasing Act if the manufacturer 

13 fails to certify to the Secretary that the drug 

14 was not directly advertised to consumers during 

15 the 12-month period preceding the date of such 

16 purchase. 

17 ‘‘(B) DEFINITION OF DIRECTLY ADVER18 TISED TO CONSUMERS.—In subparagraph (A), 

19 the term ‘directly advertised to consumers’ 

20 means a reminder ad or product claim regard21 ing a covered outpatient drug that is dissemi22 nated through radio, television, or other elec23 tronic media, print media, or outdoor adver24 tising.’’. 
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1 (2) PROCUREMENT OF PRESCRIPTION DRUGS

2 BY THE DEPARTMENT OF VETERANS AFFAIRS, DE3 PARTMENT OF DEFENSE, THE PUBLIC HEALTH

4 SERVICE (INCLUDING THE INDIAN HEALTH SERVICE)

5 AND THE COAST GUARD.—Section 8126 of title 38, 

6 United States Code, is amended— 

7 (A) in subsection (a)— 

8 (i) in paragraph (3), by striking 

9 ‘‘and’’ at the end; 

10 (ii) by redesignating paragraph (4) as 

11 paragraph (5); 

12 (iii) in paragraph (5) (as redesignated 

13 by clause (ii)), by striking ‘‘and (3)’’ and 

14 inserting ‘‘(3), and (4)’’; and 

15 (iv) by inserting after paragraph (3), 

16 the following: 

17 ‘‘(4) with respect to each covered drug of the 

18 manufacturer that is procured by a Federal agency 

19 described in subsection (b) under depot contracting 

20 systems, a national contract entered into by the Sec21 retary, or under the Federal Supply Schedule, the 

22 price charged shall not exceed the reduced nego23 tiated price for that drug in accordance with the 

24 procedures established under section 3(a) of the 

25 Pharmaceutical Advertising and Prudent Purchasing 
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1 Act if the manufacturer fails to certify to the Sec2 retary or the head of the Federal agency involved 

3 that the drug was not directly advertised to con4 sumers during the 12-month period preceding the 

5 date of such procurement;’’; and 

6 (B) in subsection (h), by adding at the end 

7 the following: 

8 ‘‘(7) DIRECTLY ADVERTISED TO CONSUMERS.— 

9 The term ‘directly advertised to consumers’ means a 

10 reminder ad or product claim regarding a covered 

11 drug that is disseminated through radio, television, 

12 or other electronic media, print media, or outdoor 

13 advertising.’’. 

14 (e) EFFECTIVE DATE.—The amendments made by 

15 this section apply to master agreements, pricing agree16 ments, and contracts entered into or renewed on or after 

17 the date that is 180 days after the date of enactment of 

18 this Act. 

19 SEC. 4. REPORT TO CONGRESS ON STRATEGIES TO REDUCE 

20 THE COST OF PRESCRIPTION DRUGS COV21 ERED UNDER MEDICARE AND OTHER FED22 ERAL PROGRAMS THAT ARE DIRECTLY AD23 VERTISED TO CONSUMERS. 

24 (a) IN GENERAL.—Not later than January 1, 2007, 

25 the Secretary of Health and Human Services, in consulta-
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1 tion with the Secretary of Veterans Affairs, shall submit 

2 a report to Congress that contains the following informa3 tion: 

4 (1) The percentage of costs for prescription 

5 drugs that are directly advertised to consumers that 

6 are passed on to Federal agencies and programs 

7 that purchase or provide reimbursement for such 

8 drugs. 

9 (2) The 25 most frequently prescribed drugs 

10 that are directly advertised to consumers and are 

11 purchased or reimbursed by Federal agencies and 

12 programs. 

13 (3) The 25 most costly prescription drugs that 

14 are directly advertised to consumers and are pur15 chased or reimbursed by Federal agencies and pro16 grams. 

17 (4) The aggregate amount spent by manufac18 turers of prescription drugs— 

19 (A) to directly advertise to consumers; and 

20 (B) for the 25 most costly prescription 

21 drugs that are directly advertised to consumers. 

22 (5) Mechanisms for Federal agencies and pro23 grams to share information concerning— 

24 (A) which prescription drugs are directly 

25 advertised to consumers; 
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1 (B) the costs to Federal agencies and pro2 grams of such drugs; and 

3 (C) utilization, cost, and reimbursement 

4 data regarding the purchase of such drugs, sep5 arately identified with respect to the medicare 

6 program and other Federal agencies and pro7 grams, and disaggregated for age cohorts, gen8 der, and diagnoses of the individuals using such 

9 drugs. 

10 (6) Recommendations for legislative or adminis11 trative changes or alternative strategies, separately 

12 identified with respect to the medicare program and 

13 other Federal agencies and programs, to ensure that 

14 Federal payments for prescription drugs are reduced 

15 for prescription drugs directly advertised to con16 sumers. 

17 (7) Strategies to ensure that prescription drug 

18 utilization under Federal agencies and programs is 

19 based on health needs. 

20 (8) Such other recommendations for legislation 

21 or administrative action as the Secretary determines 

22 to be appropriate. 

23 (b) DEFINITIONS.—In this section: 

24 (1) DIRECTLY ADVERTISED TO CONSUMERS.— 

25 The term ‘‘directly advertised to consumers’’ has the 
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1 meaning given that term in section 1927(b)(5)(C) of 

2 the Social Security Act (as added by section 2(a)). 

3 (2) FEDERAL AGENCY AND PROGRAM.—The 

4 term ‘‘Federal agency and program’’ means the Fed5 eral agencies and programs described in section 3(b) 

6 and includes the medicare program established 

7 under title XVIII of the Social Security Act (42 

8 U.S.C. 1395 et seq.). 

9 (3) MANUFACTURER.—The term ‘‘manufac10 turer’’ has the meaning given that term in section 

11 8126(h)(4) of title 38, United States Code, and sec12 tion 1927(k)(5) of the Social Security Act (42 

13 U.S.C. 1396r–8(k)(5)). 

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