II 

113TH CONGRESS 

1ST SESSION S. 740 

To amend title XVIII of the Social Security Act to require drug manufacturers to provide drug rebates for drugs dispensed to low-income individuals 

under the Medicare prescription drug benefit program. 

IN THE SENATE OF THE UNITED STATES 

APRIL 16, 2013 

Mr. ROCKEFELLER (for himself, Mr. NELSON, Ms. BALDWIN, Mr. 

BLUMENTHAL, Mrs. BOXER, Mr. BROWN, Mr. DURBIN, Mr. FRANKEN, 

Mr. KING, Ms. KLOBUCHAR, Mr. LEAHY, Mr. MERKLEY, Mr. REED, Mr. 

SANDERS, Mr. SCHATZ, Mrs. SHAHEEN, Ms. STABENOW, Mr. UDALL of 

New Mexico, and Mr. WHITEHOUSE) 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 require 

drug manufacturers to provide drug rebates for drugs 

dispensed to low-income individuals under the Medicare 

prescription drug benefit 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. 

4 This Act may be cited as the ‘‘Medicare Drug Savings 

5 Act of 2013’’. 

mstockstill on DSK4VPTVN1PROD with BILLS

2 

•S 740 IS

1 SEC. 2. REQUIRING DRUG MANUFACTURERS TO PROVIDE 

2 DRUG REBATES FOR DRUGS DISPENSED TO 

3 LOW-INCOME INDIVIDUALS. 

4 (a) IN GENERAL.—Section 1860D–2 of the Social 

5 Security Act (42 U.S.C. 1395w–102) is amended— 

6 (1) in subsection (e)(1), in the matter preceding 

7 subparagraph (A), by inserting ‘‘and subsection (f)’’ 

8 after ‘‘this subsection’’; and 

9 (2) by adding at the end the following new sub10 section: 

11 ‘‘(f) PRESCRIPTION DRUG REBATE AGREEMENT FOR

12 REBATE ELIGIBLE INDIVIDUALS.— 

13 ‘‘(1) REQUIREMENT.— 

14 ‘‘(A) IN GENERAL.—For plan years begin15 ning on or after January 1, 2015, in this part, 

16 the term ‘covered part D drug’ does not include 

17 any drug or biological product that is manufac18 tured by a manufacturer that has not entered 

19 into and have in effect a rebate agreement de20 scribed in paragraph (2). 

21 ‘‘(B) 2014 PLAN YEAR REQUIREMENT.— 

22 Any drug or biological product manufactured by 

23 a manufacturer that declines to enter into a re24 bate agreement described in paragraph (2) for 

25 the period beginning on January 1, 2014, and 

26 ending on December 31, 2014, shall not be inmstockstill on DSK4VPTVN1PROD with BILLS

3 

•S 740 IS

1 cluded as a ‘covered part D drug’ for the subse2 quent plan year. 

3 ‘‘(2) REBATE AGREEMENT.—A rebate agree4 ment under this subsection shall require the manu5 facturer to provide to the Secretary a rebate for 

6 each rebate period (as defined in paragraph (6)(B)) 

7 ending after December 31, 2013, in the amount 

8 specified in paragraph (3) for any covered part D 

9 drug of the manufacturer dispensed after December 

10 31, 2013, to any rebate eligible individual (as de11 fined in paragraph (6)(A)) for which payment was 

12 made by a PDP sponsor or MA organization under 

13 this part for such period, including payments passed 

14 through the low-income and reinsurance subsidies 

15 under sections 1860D–14 and 1860D–15(b), respec16 tively. Such rebate shall be paid by the manufac17 turer to the Secretary not later than 30 days after 

18 the date of receipt of the information described in 

19 section 1860D–12(b)(7), including as such section is 

20 applied under section 1857(f)(3), or 30 days after 

21 the receipt of information under subparagraph (D) 

22 of paragraph (3), as determined by the Secretary. 

23 Insofar as not inconsistent with this subsection, the 

24 Secretary shall establish terms and conditions of 

25 such agreement relating to compliance, penalties, 

mstockstill on DSK4VPTVN1PROD with BILLS

4 

•S 740 IS

1 and program evaluations, investigations, and audits 

2 that are similar to the terms and conditions for re3 bate agreements under paragraphs (3) and (4) of 

4 section 1927(b). 

5 ‘‘(3) REBATE FOR REBATE ELIGIBLE MEDICARE

6 DRUG PLAN ENROLLEES.— 

7 ‘‘(A) IN GENERAL.—The amount of the re8 bate specified under this paragraph for a manu9 facturer for a rebate period, with respect to 

10 each dosage form and strength of any covered 

11 part D drug provided by such manufacturer 

12 and dispensed to a rebate eligible individual, 

13 shall be equal to the product of— 

14 ‘‘(i) the total number of units of such 

15 dosage form and strength of the drug so 

16 provided and dispensed for which payment 

17 was made by a PDP sponsor or an MA or18 ganization under this part for the rebate 

19 period, including payments passed through 

20 the low-income and reinsurance subsidies 

21 under sections 1860D–14 and 1860D– 

22 15(b), respectively; and 

23 ‘‘(ii) the amount (if any) by which— 

24 ‘‘(I) the Medicaid rebate amount 

25 (as defined in subparagraph (B)) for 

mstockstill on DSK4VPTVN1PROD with BILLS

5 

•S 740 IS

1 such form, strength, and period, ex2 ceeds 

3 ‘‘(II) the average Medicare drug 

4 program rebate eligible rebate amount 

5 (as defined in subparagraph (C)) for 

6 such form, strength, and period. 

7 ‘‘(B) MEDICAID REBATE AMOUNT.—For 

8 purposes of this paragraph, the term ‘Medicaid 

9 rebate amount’ means, with respect to each 

10 dosage form and strength of a covered part D 

11 drug provided by the manufacturer for a rebate 

12 period— 

13 ‘‘(i) in the case of a single source 

14 drug or an innovator multiple source drug, 

15 the amount specified in paragraph 

16 (1)(A)(ii)(II) or (2)(C) of section 1927(c) 

17 plus the amount, if any, specified in sub18 paragraph (A)(ii) of paragraph (2) of such 

19 section, for such form, strength, and pe20 riod; or 

21 ‘‘(ii) in the case of any other covered 

22 outpatient drug, the amount specified in 

23 paragraph (3)(A)(i) of such section for 

24 such form, strength, and period. 

mstockstill on DSK4VPTVN1PROD with BILLS

6 

•S 740 IS

1 ‘‘(C) AVERAGE MEDICARE DRUG PROGRAM

2 REBATE ELIGIBLE REBATE AMOUNT.—For pur3 poses of this subsection, the term ‘average 

4 Medicare drug program rebate eligible rebate 

5 amount’ means, with respect to each dosage 

6 form and strength of a covered part D drug 

7 provided by a manufacturer for a rebate period, 

8 the sum, for all PDP sponsors under part D 

9 and MA organizations administering an MA– 

10 PD plan under part C, of— 

11 ‘‘(i) the product, for each such spon12 sor or organization, of— 

13 ‘‘(I) the sum of all rebates, dis14 counts, or other price concessions (not 

15 taking into account any rebate pro16 vided under paragraph (2) or any dis17 counts under the program under sec18 tion 1860D–14A) for such dosage 

19 form and strength of the drug dis20 pensed, calculated on a per-unit basis, 

21 but only to the extent that any such 

22 rebate, discount, or other price con23 cession applies equally to drugs dis24 pensed to rebate eligible Medicare 

25 drug plan enrollees and drugs dismstockstill on DSK4VPTVN1PROD with BILLS

7 

•S 740 IS

1 pensed to PDP and MA–PD enrollees 

2 who are not rebate eligible individuals; 

3 and 

4 ‘‘(II) the number of the units of 

5 such dosage and strength of the drug 

6 dispensed during the rebate period to 

7 rebate eligible individuals enrolled in 

8 the prescription drug plans adminis9 tered by the PDP sponsor or the MA– 

10 PD plans administered by the MA or11 ganization; divided by 

12 ‘‘(ii) the total number of units of such 

13 dosage and strength of the drug dispensed 

14 during the rebate period to rebate eligible 

15 individuals enrolled in all prescription drug 

16 plans administered by PDP sponsors and 

17 all MA–PD plans administered by MA or18 ganizations. 

19 ‘‘(D) USE OF ESTIMATES.—The Secretary 

20 may establish a methodology for estimating the 

21 average Medicare drug program rebate eligible 

22 rebate amounts for each rebate period based on 

23 bid and utilization information under this part 

24 and may use these estimates as the basis for 

25 determining the rebates under this section. If 

mstockstill on DSK4VPTVN1PROD with BILLS

8 

•S 740 IS

1 the Secretary elects to estimate the average 

2 Medicare drug program rebate eligible rebate 

3 amounts, the Secretary shall establish a rec4 onciliation process for adjusting manufacturer 

5 rebate payments not later than 3 months after 

6 the date that manufacturers receive the infor7 mation collected under section 1860D– 

8 12(b)(7)(B). 

9 ‘‘(4) LENGTH OF AGREEMENT.—The provisions 

10 of paragraph (4) of section 1927(b) (other than 

11 clauses (iv) and (v) of subparagraph (B)) shall apply 

12 to rebate agreements under this subsection in the 

13 same manner as such paragraph applies to a rebate 

14 agreement under such section. 

15 ‘‘(5) OTHER TERMS AND CONDITIONS.—The 

16 Secretary shall establish other terms and conditions 

17 of the rebate agreement under this subsection, in18 cluding terms and conditions related to compliance, 

19 that are consistent with this subsection. 

20 ‘‘(6) DEFINITIONS.—In this subsection and sec21 tion 1860D–12(b)(7): 

22 ‘‘(A) REBATE ELIGIBLE INDIVIDUAL.—The 

23 term ‘rebate eligible individual’ means— 

24 ‘‘(i) a subsidy eligible individual (as 

25 defined in section 1860D–14(a)(3)(A)); 

mstockstill on DSK4VPTVN1PROD with BILLS

9 

•S 740 IS

1 ‘‘(ii) a Medicaid beneficiary treated as 

2 a subsidy eligible individual under clause 

3 (v) of section 1860D–14(a)(3)(B); and 

4 ‘‘(iii) any part D eligible individual 

5 not described in clause (i) or (ii) who is de6 termined for purposes of the State plan 

7 under title XIX to be eligible for medical 

8 assistance under clause (i), (iii), or (iv) of 

9 section 1902(a)(10)(E). 

10 ‘‘(B) REBATE PERIOD.—The term ‘rebate 

11 period’ has the meaning given such term in sec12 tion 1927(k)(8).’’. 

13 (b) REPORTING REQUIREMENT FOR THE DETER14 MINATION AND PAYMENT OF REBATES BY MANUFACTUR15 ERS RELATED TO REBATE FOR REBATE ELIGIBLE MEDI16 CARE DRUG PLAN ENROLLEES.— 

17 (1) REQUIREMENTS FOR PDP SPONSORS.—Sec18 tion 1860D–12(b) of the Social Security Act (42 

19 U.S.C. 1395w–112(b)) is amended by adding at the 

20 end the following new paragraph: 

21 ‘‘(7) REPORTING REQUIREMENT FOR THE DE22 TERMINATION AND PAYMENT OF REBATES BY MANU23 FACTURERS RELATED TO REBATE FOR REBATE ELI24 GIBLE MEDICARE DRUG PLAN ENROLLEES.— 

mstockstill on DSK4VPTVN1PROD with BILLS

10 

•S 740 IS

1 ‘‘(A) IN GENERAL.—For purposes of the 

2 rebate under section 1860D–2(f) for contract 

3 years beginning on or after January 1, 2015, 

4 each contract entered into with a PDP sponsor 

5 under this part with respect to a prescription 

6 drug plan shall require that the sponsor comply 

7 with subparagraphs (B) and (C). 

8 ‘‘(B) REPORT FORM AND CONTENTS.—Not 

9 later than a date specified by the Secretary, a 

10 PDP sponsor of a prescription drug plan under 

11 this part shall report to each manufacturer— 

12 ‘‘(i) information (by National Drug 

13 Code number) on the total number of units 

14 of each dosage, form, and strength of each 

15 drug of such manufacturer dispensed to re16 bate eligible Medicare drug plan enrollees 

17 under any prescription drug plan operated 

18 by the PDP sponsor during the rebate pe19 riod; 

20 ‘‘(ii) information on the price dis21 counts, price concessions, and rebates for 

22 such drugs for such form, strength, and 

23 period; 

24 ‘‘(iii) information on the extent to 

25 which such price discounts, price concesmstockstill on DSK4VPTVN1PROD with BILLS

11 

•S 740 IS

1 sions, and rebates apply equally to rebate 

2 eligible Medicare drug plan enrollees and 

3 PDP enrollees who are not rebate eligible 

4 Medicare drug plan enrollees; and 

5 ‘‘(iv) any additional information that 

6 the Secretary determines is necessary to 

7 enable the Secretary to calculate the aver8 age Medicare drug program rebate eligible 

9 rebate amount (as defined in paragraph 

10 (3)(C) of such section), and to determine 

11 the amount of the rebate required under 

12 this section, for such form, strength, and 

13 period. 

14 Such report shall be in a form consistent with 

15 a standard reporting format established by the 

16 Secretary. 

17 ‘‘(C) SUBMISSION TO SECRETARY.—Each 

18 PDP sponsor shall promptly transmit a copy of 

19 the information reported under subparagraph 

20 (B) to the Secretary for the purpose of audit 

21 oversight and evaluation. 

22 ‘‘(D) CONFIDENTIALITY OF INFORMA23 TION.—The provisions of subparagraph (D) of 

24 section 1927(b)(3), relating to confidentiality of 

25 information, shall apply to information reported 

mstockstill on DSK4VPTVN1PROD with BILLS

12 

•S 740 IS

1 by PDP sponsors under this paragraph in the 

2 same manner that such provisions apply to in3 formation disclosed by manufacturers or whole4 salers under such section, except— 

5 ‘‘(i) that any reference to ‘this sec6 tion’ in clause (i) of such subparagraph 

7 shall be treated as being a reference to this 

8 section; 

9 ‘‘(ii) the reference to the Director of 

10 the Congressional Budget Office in clause 

11 (iii) of such subparagraph shall be treated 

12 as including a reference to the Medicare 

13 Payment Advisory Commission; and 

14 ‘‘(iii) clause (iv) of such subparagraph 

15 shall not apply. 

16 ‘‘(E) OVERSIGHT.—Information reported 

17 under this paragraph may be used by the In18 spector General of the Department of Health 

19 and Human Services for the statutorily author20 ized purposes of audit, investigation, and eval21 uations. 

22 ‘‘(F) PENALTIES FOR FAILURE TO PRO23 VIDE TIMELY INFORMATION AND PROVISION OF

24 FALSE INFORMATION.—In the case of a PDP 

25 sponsor— 

mstockstill on DSK4VPTVN1PROD with BILLS

13 

•S 740 IS

1 ‘‘(i) that fails to provide information 

2 required under subparagraph (B) on a 

3 timely basis, the sponsor is subject to a 

4 civil money penalty in the amount of 

5 $10,000 for each day in which such infor6 mation has not been provided; or 

7 ‘‘(ii) that knowingly (as defined in 

8 section 1128A(i)) provides false informa9 tion under such subparagraph, the sponsor 

10 is subject to a civil money penalty in an 

11 amount not to exceed $100,000 for each 

12 item of false information. 

13 Such civil money penalties are in addition to 

14 other penalties as may be prescribed by law. 

15 The provisions of section 1128A (other than 

16 subsections (a) and (b)) shall apply to a civil 

17 money penalty under this subparagraph in the 

18 same manner as such provisions apply to a pen19 alty or proceeding under section 1128A(a).’’. 

20 (2) APPLICATION TO MA ORGANIZATIONS.—Sec21 tion 1857(f)(3) of the Social Security Act (42 

22 U.S.C. 1395w–27(f)(3)) is amended by adding at 

23 the end the following: 

24 ‘‘(D) REPORTING REQUIREMENT RELATED

25 TO REBATE FOR REBATE ELIGIBLE MEDICARE

mstockstill on DSK4VPTVN1PROD with BILLS

14 

•S 740 IS

1 DRUG PLAN ENROLLEES.—Section 1860D– 

2 12(b)(7).’’. 

3 (c) DEPOSIT OF REBATES INTO MEDICARE PRE4 SCRIPTION DRUG ACCOUNT.—Section 1860D–16(c) of the 

5 Social Security Act (42 U.S.C. 1395w–116(c)) is amended 

6 by adding at the end the following new paragraph: 

7 ‘‘(6) REBATE FOR REBATE ELIGIBLE MEDICARE

8 DRUG PLAN ENROLLEES.—Amounts paid under a re9 bate agreement under section 1860D–2(f) shall be 

10 deposited into the Account.’’. 

11 (d) EXCLUSION FROM DETERMINATION OF BEST

12 PRICE AND AVERAGE MANUFACTURER PRICE UNDER

13 MEDICAID.— 

14 (1) EXCLUSION FROM BEST PRICE DETERMINA15 TION.—Section 1927(c)(1)(C)(ii)(I) of the Social Se16 curity Act (42 U.S.C. 1396r–8(c)(1)(C)(ii)(I)) is 

17 amended by inserting ‘‘and amounts paid under a 

18 rebate agreement under section 1860D–2(f)’’ after 

19 ‘‘this section’’. 

20 (2) EXCLUSION FROM AVERAGE MANUFAC21 TURER PRICE DETERMINATION.—Section 

22 1927(k)(1)(B)(i) of the Social Security Act (42 

23 U.S.C. 1396r–8(k)(1)(B)(i)) is amended— 

24 (A) in subclause (IV), by striking ‘‘and’’ 

25 after the semicolon; 

mstockstill on DSK4VPTVN1PROD with BILLS

15 

•S 740 IS

1 (B) in subclause (V), by striking the period 

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

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

4 ‘‘(VI) amounts paid under a re5 bate agreement under section 1860D– 

6 2(f).’’. 

Æ 

mstockstill on DSK4VPTVN1PROD with BILLS