I 

111TH CONGRESS 

1ST SESSION H. R. 4138 

To amend title XVIII of the Social Security Act to provide for an update 

under the Medicare physician fee schedule, to be fully paid for through 

medical liability reform, a pathway for biosimilar biological products, 

and other means. 

IN THE HOUSE OF REPRESENTATIVES 

NOVEMBER 19, 2009 

Mr. GINGREY of Georgia (for himself, Mr. CASSIDY, Mr. FLEMING, Mr. 

BOOZMAN, Mr. HERGER, Mr. SESSIONS, Mr. CULBERSON, Mr. HALL of 

Texas, Mr. WHITFIELD, Mr. SHIMKUS, Mr. BUYER, Mrs. MYRICK, Mr. 

PAULSEN, Mr. ROONEY, Ms. GRANGER, Mr. ROSKAM, Mrs. BLACKBURN, 

Mr. PRICE of Georgia, and Mr. ROE of Tennessee) introduced the following bill; which was referred to the Committee on Energy and Commerce, and in addition to the Committees on Ways and Means and the 

Judiciary, for a period to be subsequently determined by the Speaker, in 

each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To amend title XVIII of the Social Security Act to provide 

for an update under the Medicare physician fee schedule, 

to be fully paid for through medical liability reform, 

a pathway for biosimilar biological products, and other 

means. 

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; TABLE OF CONTENTS. 

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

3 ‘‘Medicare SGR Improvement and Reform Act of 2009’’. 

4 (b) TABLE OF CONTENTS.—The table of contents of 

5 this Act is as follows: 

Sec. 1. Short title; table of contents. 

TITLE I—ENSURING CONTINUED ACCESS TO PHYSICIANS IN 

MEDICARE 

Sec. 101. Improving Medicare physician payments. 

Sec. 102. Statement of policy. 

TITLE II—DEFICIT PROTECTION AND FISCAL RESPONSIBILITY 

Subtitle A—Enacting Real Medical Liability Reform 

Sec. 201. Encouraging speedy resolution of claims. 

Sec. 202. Compensating patient injury. 

Sec. 203. Maximizing patient recovery. 

Sec. 204. Additional health benefits. 

Sec. 205. Punitive damages. 

Sec. 206. Authorization of payment of future damages to claimants in health 

care lawsuits. 

Sec. 207. Definitions. 

Sec. 208. Effect on other laws. 

Sec. 209. State flexibility and protection of states’ rights. 

Sec. 210. Applicability; effective date. 

Subtitle B—Application of Medicare Improvement Fund 

Sec. 211. Application of Medicare Improvement Fund. 

Subtitle C—Pathway for Biosimilar Biological Products 

Sec. 221. Licensure pathway for biosimilar biological products. 

Sec. 222. Fees relating to biosimilar biological products. 

Sec. 223. Amendments to certain patent provisions. 

Subtitle D—Administrative Simplification 

Sec. 231. Administrative simplification. 


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1 TITLE I—ENSURING CONTINUED 

2 ACCESS TO PHYSICIANS IN 

3 MEDICARE 

4 SEC. 101. IMPROVING MEDICARE PHYSICIAN PAYMENTS. 

5 Section 1848(d) of the Social Security Act (42 U.S.C. 

6 1395w–4(d)) is amended by adding at the end the fol7 lowing new paragraphs: 

8 ‘‘(10) 2 PERCENT ANNUAL UPDATE FOR YEARS

9 2010 THROUGH 2013.— 

10 ‘‘(A) IN GENERAL.—Subject to paragraphs 

11 (7)(B), (8)(B), and (9)(B) and subparagraph 

12 (B), in lieu of the update to the single conver13 sion factor established in paragraph (1)(C) that 

14 would otherwise apply for each of 2010, 2011, 

15 2012, and 2013, the update to the single con16 version factor shall be 2 percent. 

17 ‘‘(B) NO EFFECT ON COMPUTATION OF

18 CONVERSION FACTOR FOR 2014 AND SUBSE19 QUENT YEARS.—The conversion factor under 

20 this subsection shall be computed under para21 graph (1)(A) for 2014 and subsequent years as 

22 if subparagraph (A) had never applied, subject 

23 to paragraph (11). 

24 ‘‘(11) UPDATE FOR 2014 AND POSSIBLE SUBSE25 QUENT YEARS THROUGH 2019.— 


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1 ‘‘(A) IN GENERAL.—Subject to paragraphs 

2 (7)(B), (8)(B), and (9)(B) and subparagraph 

3 (B), in lieu of the update to the single conver4 sion factor established in paragraph (1)(C) that 

5 would otherwise apply for 2014 and, at the Sec6 retary’s discretion, for subsequent years ending 

7 not later than 2019, the update to the single 

8 conversion factor shall be such percentage for 

9 each such year as the Secretary determines will 

10 result in additional expenditures under this title 

11 in the aggregate for all such years of 

12 $26,400,000,000. Not later than October 1, 

13 2013, the Secretary shall establish by regula14 tion the method the Secretary will use in allo15 cating the $26,400,000,000 under the previous 

16 sentence between 2014 and subsequent years. 

17 Such allocation shall be designed in a manner 

18 so that the single conversion factor for a year 

19 is not less than 79 percent of the conversion 

20 factor for the previous year. 

21 ‘‘(B) LIMITED EFFECT ON COMPUTATION

22 OF CONVERSION FACTOR FOR SUBSEQUENT

23 YEARS.—The conversion factor under this sub24 section shall be computed under paragraph 

25 (1)(A) for subsequent years as if subparagraph 


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1 (A) had never applied, but taking into account 

2 the aggregate additional increase in expendi3 tures permitted under such subparagraph.’’. 

4 SEC. 102. STATEMENT OF POLICY. 

5 It is the policy of the Federal Government that the 

6 sustainable growth rate formula, upon which physician 

7 payments are based for the Medicare program, should be 

8 permanently repealed and replaced with a reimbursement 

9 policy that pays doctors an amount reflecting the true cost 

10 of services provided in a high-quality and efficient manner 

11 and uses a fiscally responsibly funding mechanism. 

12 TITLE II—DEFICIT PROTECTION 

13 AND FISCAL RESPONSIBILITY 

14 Subtitle A—Enacting Real Medical 

15 Liability Reform 

16 SEC. 201. ENCOURAGING SPEEDY RESOLUTION OF CLAIMS. 

17 The time for the commencement of a health care law18 suit shall be 3 years after the date of manifestation of 

19 injury or 1 year after the claimant discovers, or through 

20 the use of reasonable diligence should have discovered, the 

21 injury, whichever occurs first. In no event shall the time 

22 for commencement of a health care lawsuit exceed 3 years 

23 after the date of manifestation of injury unless tolled for 

24 any of the following— 

25 (1) upon proof of fraud; 


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1 (2) intentional concealment; or 

2 (3) the presence of a foreign body, which has no 

3 therapeutic or diagnostic purpose or effect, in the 

4 person of the injured person. 

5 Actions by a minor shall be commenced within 3 years 

6 from the date of the alleged manifestation of injury except 

7 that actions by a minor under the full age of 6 years shall 

8 be commenced within 3 years of manifestation of injury 

9 or prior to the minor’s 8th birthday, whichever provides 

10 a longer period. Such time limitation shall be tolled for 

11 minors for any period during which a parent or guardian 

12 and a health care provider or health care organization 

13 have committed fraud or collusion in the failure to bring 

14 an action on behalf of the injured minor. 

15 SEC. 202. COMPENSATING PATIENT INJURY. 

16 (a) UNLIMITED AMOUNT OF DAMAGES FOR ACTUAL

17 ECONOMIC LOSSES IN HEALTH CARE LAWSUITS.—In any 

18 health care lawsuit, nothing in this subtitle shall limit a 

19 claimant’s recovery of the full amount of the available eco20 nomic damages, notwithstanding the limitation in sub21 section (b). 

22 (b) ADDITIONAL NONECONOMIC DAMAGES.—In any 

23 health care lawsuit, the amount of noneconomic damages, 

24 if available, may be as much as $250,000, regardless of 

25 the number of parties against whom the action is brought 


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1 or the number of separate claims or actions brought with 

2 respect to the same injury. 

3 (c) NO DISCOUNT OF AWARD FOR NONECONOMIC

4 DAMAGES.—For purposes of applying the limitation in 

5 subsection (b), future noneconomic damages shall not be 

6 discounted to present value. The jury shall not be in7 formed about the maximum award for noneconomic dam8 ages. An award for noneconomic damages in excess of 

9 $250,000 shall be reduced either before the entry of judg10 ment, or by amendment of the judgment after entry of 

11 judgment, and such reduction shall be made before ac12 counting for any other reduction in damages required by 

13 law. If separate awards are rendered for past and future 

14 noneconomic damages and the combined awards exceed 

15 $250,000, the future noneconomic damages shall be re16 duced first. 

17 (d) FAIR SHARE RULE.—In any health care lawsuit, 

18 each party shall be liable for that party’s several share 

19 of any damages only and not for the share of any other 

20 person. Each party shall be liable only for the amount of 

21 damages allocated to such party in direct proportion to 

22 such party’s percentage of responsibility. Whenever a 

23 judgment of liability is rendered as to any party, a sepa24 rate judgment shall be rendered against each such party 

25 for the amount allocated to such party. For purposes of 


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1 this section, the trier of fact shall determine the propor2 tion of responsibility of each party for the claimant’s 

3 harm. 

4 SEC. 203. MAXIMIZING PATIENT RECOVERY. 

5 (a) COURT SUPERVISION OF SHARE OF DAMAGES

6 ACTUALLY PAID TO CLAIMANTS.—In any health care law7 suit, the court shall supervise the arrangements for pay8 ment of damages to protect against conflicts of interest 

9 that may have the effect of reducing the amount of dam10 ages awarded that are actually paid to claimants. In par11 ticular, in any health care lawsuit in which the attorney 

12 for a party claims a financial stake in the outcome by vir13 tue of a contingent fee, the court shall have the power 

14 to restrict the payment of a claimant’s damage recovery 

15 to such attorney, and to redirect such damages to the 

16 claimant based upon the interests of justice and principles 

17 of equity. In no event shall the total of all contingent fees 

18 for representing all claimants in a health care lawsuit ex19 ceed the following limits— 

20 (1) 40 percent of the first $50,000 recovered by 

21 the claimant(s). 

(2) 331 22 ⁄3 percent of the next $50,000 recovered 

23 by the claimant(s). 

24 (3) 25 percent of the next $500,000 recovered 

25 by the claimant(s). 


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1 (4) 15 percent of any amount by which the re2 covery by the claimant(s) is in excess of $600,000. 

3 (b) APPLICABILITY.—The limitations in this section 

4 shall apply whether the recovery is by judgment, settle5 ment, mediation, arbitration, or any other form of alter6 native dispute resolution. In a health care lawsuit involv7 ing a minor or incompetent person, a court retains the 

8 authority to authorize or approve a fee that is less than 

9 the maximum permitted under this section. The require10 ment for court supervision in the first two sentences of 

11 subsection (a) applies only in civil actions. 

12 SEC. 204. ADDITIONAL HEALTH BENEFITS. 

13 In any health care lawsuit involving injury or wrong14 ful death, any party may introduce evidence of collateral 

15 source benefits. If a party elects to introduce such evi16 dence, any opposing party may introduce evidence of any 

17 amount paid or contributed or reasonably likely to be paid 

18 or contributed in the future by or on behalf of the oppos19 ing party to secure the right to such collateral source bene20 fits. No provider of collateral source benefits shall recover 

21 any amount against the claimant or receive any lien or 

22 credit against the claimant’s recovery or be equitably or 

23 legally subrogated to the right of the claimant in a health 

24 care lawsuit involving injury or wrongful death. This sec25 tion shall apply to any health care lawsuit that is settled 


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1 as well as a health care lawsuit that is resolved by a fact 

2 finder. This section shall not apply to section 1862(b) (42 

3 U.S.C. 1395y(b)) or section 1902(a)(25) (42 U.S.C. 

4 1396a(a)(25)) of the Social Security Act. 

5 SEC. 205. PUNITIVE DAMAGES. 

6 (a) IN GENERAL.—Punitive damages may, if other7 wise permitted by applicable State or Federal law, be 

8 awarded against any person in a health care lawsuit only 

9 if it is proven by clear and convincing evidence that such 

10 person acted with malicious intent to injure the claimant, 

11 or that such person deliberately failed to avoid unneces12 sary injury that such person knew the claimant was sub13 stantially certain to suffer. In any health care lawsuit 

14 where no judgment for compensatory damages is rendered 

15 against such person, no punitive damages may be awarded 

16 with respect to the claim in such lawsuit. No demand for 

17 punitive damages shall be included in a health care lawsuit 

18 as initially filed. A court may allow a claimant to file an 

19 amended pleading for punitive damages only upon a mo20 tion by the claimant and after a finding by the court, upon 

21 review of supporting and opposing affidavits or after a 

22 hearing, after weighing the evidence, that the claimant has 

23 established by a substantial probability that the claimant 

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1 quest of any party in a health care lawsuit, the trier of 

2 fact shall consider in a separate proceeding— 

3 (1) whether punitive damages are to be award4 ed and the amount of such award; and 

5 (2) the amount of punitive damages following a 

6 determination of punitive liability. 

7 If a separate proceeding is requested, evidence relevant 

8 only to the claim for punitive damages, as determined by 

9 applicable State law, shall be inadmissible in any pro10 ceeding to determine whether compensatory damages are 

11 to be awarded. 

12 (b) DETERMINING AMOUNT OF PUNITIVE DAM13 AGES.— 

14 (1) FACTORS CONSIDERED.—In determining 

15 the amount of punitive damages, if awarded, in a 

16 health care lawsuit, the trier of fact shall consider 

17 only the following— 

18 (A) the severity of the harm caused by the 

19 conduct of such party; 

20 (B) the duration of the conduct or any 

21 concealment of it by such party; 

22 (C) the profitability of the conduct to such 

23 party; 

24 (D) the number of products sold or med25 ical procedures rendered for compensation, as 


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1 the case may be, by such party, of the kind 

2 causing the harm complained of by the claim3 ant; 

4 (E) any criminal penalties imposed on such 

5 party, as a result of the conduct complained of 

6 by the claimant; and 

7 (F) the amount of any civil fines assessed 

8 against such party as a result of the conduct 

9 complained of by the claimant. 

10 (2) MAXIMUM AWARD.—The amount of punitive 

11 damages, if awarded, in a health care lawsuit may 

12 be as much as $250,000 or as much as two times 

13 the amount of economic damages awarded, which14 ever is greater. The jury shall not be informed of 

15 this limitation. 

16 SEC. 206. AUTHORIZATION OF PAYMENT OF FUTURE DAM17 AGES TO CLAIMANTS IN HEALTH CARE LAW18 SUITS. 

19 (a) IN GENERAL.—In any health care lawsuit, if an 

20 award of future damages, without reduction to present 

21 value, equaling or exceeding $50,000 is made against a 

22 party with sufficient insurance or other assets to fund a 

23 periodic payment of such a judgment, the court shall, at 

24 the request of any party, enter a judgment ordering that 

25 the future damages be paid by periodic payments. In any 


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1 health care lawsuit, the court may be guided by the Uni2 form Periodic Payment of Judgments Act promulgated by 

3 the National Conference of Commissioners on Uniform 

4 State Laws. 

5 (b) APPLICABILITY.—This section applies to all ac6 tions which have not been first set for trial or retrial be7 fore the effective date of this subtitle. 

8 SEC. 207. DEFINITIONS. 

9 In this subtitle: 

10 (1) ALTERNATIVE DISPUTE RESOLUTION SYS11 TEM; ADR.—The term ‘‘alternative dispute resolution 

12 system’’ or ‘‘ADR’’ means a system that provides 

13 for the resolution of health care lawsuits in a man14 ner other than through a civil action brought in a 

15 State or Federal court. 

16 (2) CLAIMANT.—The term ‘‘claimant’’ means 

17 any person who brings a health care lawsuit, includ18 ing a person who asserts or claims a right to legal 

19 or equitable contribution, indemnity, or subrogation, 

20 arising out of a health care liability claim or action, 

21 and any person on whose behalf such a claim is as22 serted or such an action is brought, whether de23 ceased, incompetent, or a minor. 

24 (3) COLLATERAL SOURCE BENEFITS.—The 

25 term ‘‘collateral source benefits’’ means any amount 


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1 paid or reasonably likely to be paid in the future to 

2 or on behalf of the claimant, or any service, product, 

3 or other benefit provided or reasonably likely to be 

4 provided in the future to or on behalf of the claim5 ant, as a result of the injury or wrongful death, pur6 suant to— 

7 (A) any State or Federal health, sickness, 

8 income-disability, accident, or workers’ com9 pensation law; 

10 (B) any health, sickness, income-disability, 

11 or accident insurance that provides health bene12 fits or income-disability coverage; 

13 (C) any contract or agreement of any 

14 group, organization, partnership, or corporation 

15 to provide, pay for, or reimburse the cost of 

16 medical, hospital, dental, or income-disability 

17 benefits; and 

18 (D) any other publicly or privately funded 

19 program. 

20 (4) COMPENSATORY DAMAGES.—The term 

21 ‘‘compensatory damages’’ means objectively 

22 verifiable monetary losses incurred as a result of the 

23 provision of, use of, or payment for (or failure to 

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1 penses, loss of past and future earnings, cost of ob2 taining domestic services, loss of employment, and 

3 loss of business or employment opportunities, dam4 ages for physical and emotional pain, suffering, in5 convenience, physical impairment, mental anguish, 

6 disfigurement, loss of enjoyment of life, loss of soci7 ety and companionship, loss of consortium (other 

8 than loss of domestic service), hedonic damages, in9 jury to reputation, and all other nonpecuniary losses 

10 of any kind or nature. The term ‘‘compensatory 

11 damages’’ includes economic damages and non12 economic damages, as such terms are defined in this 

13 section. 

14 (5) CONTINGENT FEE.—The term ‘‘contingent 

15 fee’’ includes all compensation to any person or per16 sons which is payable only if a recovery is effected 

17 on behalf of one or more claimants. 

18 (6) ECONOMIC DAMAGES.—The term ‘‘economic 

19 damages’’ means objectively verifiable monetary 

20 losses incurred as a result of the provision of, use 

21 of, or payment for (or failure to provide, use, or pay 

22 for) health care services or medical products, such as 

23 past and future medical expenses, loss of past and 

24 future earnings, cost of obtaining domestic services, 


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1 loss of employment, and loss of business or employ2 ment opportunities. 

3 (7) HEALTH CARE LAWSUIT.—The term 

4 ‘‘health care lawsuit’’ means any health care liability 

5 claim concerning the provision of health care goods 

6 or services or any medical product affecting inter7 state commerce, or any health care liability action 

8 concerning the provision of health care goods or 

9 services or any medical product affecting interstate 

10 commerce, brought in a State or Federal court or 

11 pursuant to an alternative dispute resolution system, 

12 against a health care provider, a health care organi13 zation, or the manufacturer, distributor, supplier, 

14 marketer, promoter, or seller of a medical product, 

15 regardless of the theory of liability on which the 

16 claim is based, or the number of claimants, plain17 tiffs, defendants, or other parties, or the number of 

18 claims or causes of action, in which the claimant al19 leges a health care liability claim. Such term does 

20 not include a claim or action which is based on 

21 criminal liability; which seeks civil fines or penalties 

22 paid to Federal, State, or local government; or which 

23 is grounded in antitrust. 

24 (8) HEALTH CARE LIABILITY ACTION.—The 

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1 tion brought in a State or Federal court or pursuant 

2 to an alternative dispute resolution system, against 

3 a health care provider, a health care organization, or 

4 the manufacturer, distributor, supplier, marketer, 

5 promoter, or seller of a medical product, regardless 

6 of the theory of liability on which the claim is based, 

7 or the number of plaintiffs, defendants, or other par8 ties, or the number of causes of action, in which the 

9 claimant alleges a health care liability claim. 

10 (9) HEALTH CARE LIABILITY CLAIM.—The 

11 term ‘‘health care liability claim’’ means a demand 

12 by any person, whether or not pursuant to ADR, 

13 against a health care provider, health care organiza14 tion, or the manufacturer, distributor, supplier, mar15 keter, promoter, or seller of a medical product, in16 cluding, but not limited to, third-party claims, cross17 claims, counter-claims, or contribution claims, which 

18 are based upon the provision of, use of, or payment 

19 for (or the failure to provide, use, or pay for) health 

20 care services or medical products, regardless of the 

21 theory of liability on which the claim is based, or the 

22 number of plaintiffs, defendants, or other parties, or 

23 the number of causes of action. 

24 (10) HEALTH CARE ORGANIZATION.—The term 

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1 tity which is obligated to provide or pay for health 

2 benefits under any health plan, including any person 

3 or entity acting under a contract or arrangement 

4 with a health care organization to provide or admin5 ister any health benefit. 

6 (11) HEALTH CARE PROVIDER.—The term 

7 ‘‘health care provider’’ means any person or entity 

8 required by State or Federal laws or regulations to 

9 be licensed, registered, or certified to provide health 

10 care services, and being either so licensed, reg11 istered, or certified, or exempted from such require12 ment by other statute or regulation. 

13 (12) HEALTH CARE GOODS OR SERVICES.—The 

14 term ‘‘health care goods or services’’ means any 

15 goods or services provided by a health care organiza16 tion, provider, or by any individual working under 

17 the supervision of a health care provider, that relates 

18 to the diagnosis, prevention, or treatment of any 

19 human disease or impairment, or the assessment or 

20 care of the health of human beings. 

21 (13) MALICIOUS INTENT TO INJURE.—The 

22 term ‘‘malicious intent to injure’’ means inten23 tionally causing or attempting to cause physical in24 jury other than providing health care goods or serv25 ices. 


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1 (14) MEDICAL PRODUCT.—The term ‘‘medical 

2 product’’ means a drug, device, or biological product 

3 intended for humans, and the terms ‘‘drug’’, ‘‘de4 vice’’, and ‘‘biological product’’ have the meanings 

5 given such terms in sections 201(g)(1) and 201(h) 

6 of the Federal Food, Drug and Cosmetic Act (21 

7 U.S.C. 321(g)(1) and (h)) and section 351(a) of the 

8 Public Health Service Act (42 U.S.C. 262(a)), re9 spectively, including any component or raw material 

10 used therein, but excluding health care services. 

11 (15) NONECONOMIC DAMAGES.—The term 

12 ‘‘noneconomic damages’’ means damages for phys13 ical and emotional pain, suffering, inconvenience, 

14 physical impairment, mental anguish, disfigurement, 

15 loss of enjoyment of life, loss of society and compan16 ionship, loss of consortium (other than loss of do17 mestic service), hedonic damages, injury to reputa18 tion, and all other nonpecuniary losses of any kind 

19 or nature. 

20 (16) PUNITIVE DAMAGES.—The term ‘‘punitive 

21 damages’’ means damages awarded, for the purpose 

22 of punishment or deterrence, and not solely for com23 pensatory purposes, against a health care provider, 

24 health care organization, or a manufacturer, dis25 tributor, or supplier of a medical product. Punitive 


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1 damages are neither economic nor noneconomic 

2 damages. 

3 (17) RECOVERY.—The term ‘‘recovery’’ means 

4 the net sum recovered after deducting any disburse5 ments or costs incurred in connection with prosecu6 tion or settlement of the claim, including all costs 

7 paid or advanced by any person. Costs of health care 

8 incurred by the plaintiff and the attorneys’ office 

9 overhead costs or charges for legal services are not 

10 deductible disbursements or costs for such purpose. 

11 (18) STATE.—The term ‘‘State’’ means each of 

12 the several States, the District of Columbia, the 

13 Commonwealth of Puerto Rico, the Virgin Islands, 

14 Guam, American Samoa, the Northern Mariana Is15 lands, the Trust Territory of the Pacific Islands, and 

16 any other territory or possession of the United 

17 States, or any political subdivision thereof. 

18 SEC. 208. EFFECT ON OTHER LAWS. 

19 (a) VACCINE INJURY.— 

20 (1) To the extent that title XXI of the Public 

21 Health Service Act establishes a Federal rule of law 

22 applicable to a civil action brought for a vaccine-re23 lated injury or death— 

24 (A) this subtitle does not affect the appli25 cation of the rule of law to such an action; and 


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1 (B) any rule of law prescribed by this sub2 title in conflict with a rule of law of such title 

3 XXI shall not apply to such action. 

4 (2) If there is an aspect of a civil action 

5 brought for a vaccine-related injury or death to 

6 which a Federal rule of law under title XXI of the 

7 Public Health Service Act does not apply, then this 

8 subtitle or otherwise applicable law (as determined 

9 under this subtitle) will apply to such aspect of such 

10 action. 

11 (b) OTHER FEDERAL LAW.—Except as provided in 

12 this section, nothing in this subtitle shall be deemed to 

13 affect any defense available to a defendant in a health care 

14 lawsuit or action under any other provision of Federal law. 

15 SEC. 209. STATE FLEXIBILITY AND PROTECTION OF 

16 STATES’ RIGHTS. 

17 (a) HEALTH CARE LAWSUITS.—The provisions gov18 erning health care lawsuits set forth in this subtitle pre19 empt, subject to subsections (b) and (c), State law to the 

20 extent that State law prevents the application of any pro21 visions of law established by or under this subtitle. The 

22 provisions governing health care lawsuits set forth in this 

23 subtitle supersede chapter 171 of title 28, United States 

24 Code, to the extent that such chapter— 


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1 (1) provides for a greater amount of damages 

2 or contingent fees, a longer period in which a health 

3 care lawsuit may be commenced, or a reduced appli4 cability or scope of periodic payment of future dam5 ages, than provided in this subtitle; or 

6 (2) prohibits the introduction of evidence re7 garding collateral source benefits, or mandates or 

8 permits subrogation or a lien on collateral source 

9 benefits. 

10 (b) PROTECTION OF STATES’ RIGHTS AND OTHER

11 LAWS.—(1) Any issue that is not governed by any provi12 sion of law established by or under this subtitle (including 

13 State standards of negligence) shall be governed by other14 wise applicable State or Federal law. 

15 (2) This subtitle shall not preempt or supersede any 

16 State or Federal law that imposes greater procedural or 

17 substantive protections for health care providers and 

18 health care organizations from liability, loss, or damages 

19 than those provided by this subtitle or create a cause of 

20 action. 

21 (c) STATE FLEXIBILITY.—No provision of this sub22 title shall be construed to preempt— 

23 (1) any State law (whether effective before, on, 

24 or after the date of the enactment of this Act) that 

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1 satory or punitive damages (or the total amount of 

2 damages) that may be awarded in a health care law3 suit, regardless of whether such monetary amount is 

4 greater or lesser than is provided for under this sub5 title, notwithstanding section 202(a); or 

6 (2) any defense available to a party in a health 

7 care lawsuit under any other provision of State or 

8 Federal law. 

9 SEC. 210. APPLICABILITY; EFFECTIVE DATE. 

10 This subtitle shall apply to any health care lawsuit 

11 brought in a Federal or State court, or subject to an alter12 native dispute resolution system, that is initiated on or 

13 after the date of the enactment of this Act, except that 

14 any health care lawsuit arising from an injury occurring 

15 prior to the date of the enactment of this Act shall be 

16 governed by the applicable statute of limitations provisions 

17 in effect at the time the injury occurred. 

18 Subtitle B—Application of 

19 Medicare Improvement Fund 

20 SEC. 211. APPLICATION OF MEDICARE IMPROVEMENT 

21 FUND. 

22 Section 1898(b)(1) of the Social Security Act (42 

23 U.S.C. 1395iii(b)(1)) is amended by striking ‘‘for services 

24 furnished’’ and all that follows and inserting ‘‘for services 

25 furnished on or after January 1, 2010, $0.’’. 


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1 Subtitle C—Pathway for Biosimilar 

2 Biological Products 

3 SEC. 221. LICENSURE PATHWAY FOR BIOSIMILAR BIOLOGI4 CAL PRODUCTS. 

5 (a) LICENSURE OF BIOLOGICAL PRODUCTS AS BIO6 SIMILAR OR INTERCHANGEABLE.—Section 351 of the 

7 Public Health Service Act (42 U.S.C. 262) is amended— 

8 (1) in subsection (a)(1)(A), by inserting ‘‘under 

9 this subsection or subsection (k)’’ after ‘‘biologics li10 cense’’; and 

11 (2) by adding at the end the following: 

12 ‘‘(k) LICENSURE OF BIOLOGICAL PRODUCTS AS BIO13 SIMILAR OR INTERCHANGEABLE.— 

14 ‘‘(1) IN GENERAL.—Any person may submit an 

15 application for licensure of a biological product 

16 under this subsection. 

17 ‘‘(2) CONTENT.— 

18 ‘‘(A) IN GENERAL.— 

19 ‘‘(i) REQUIRED INFORMATION.—An 

20 application submitted under this subsection 

21 shall include information demonstrating 

22 that— 

23 ‘‘(I) the biological product is bio24 similar to a reference product based 

25 upon data derived from— 


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1 ‘‘(aa) analytical studies that 

2 demonstrate that the biological 

3 product is highly similar to the 

4 reference product notwith5 standing minor differences in 

6 clinically inactive components; 

7 ‘‘(bb) animal studies (includ8 ing the assessment of toxicity); 

9 and 

10 ‘‘(cc) a clinical study or 

11 studies (including the assessment 

12 of immunogenicity and phar13 macokinetics or 

14 pharmacodynamics) that are suf15 ficient to demonstrate safety, pu16 rity, and potency in 1 or more 

17 appropriate conditions of use for 

18 which the reference product is li19 censed and intended to be used 

20 and for which licensure is sought 

21 for the biological product; 

22 ‘‘(II) the biological product and 

23 reference product utilize the same 

24 mechanism or mechanisms of action 

25 for the condition or conditions of use 


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1 prescribed, recommended, or sug2 gested in the proposed labeling, but 

3 only to the extent the mechanism or 

4 mechanisms of action are known for 

5 the reference product; 

6 ‘‘(III) the condition or conditions 

7 of use prescribed, recommended, or 

8 suggested in the labeling proposed for 

9 the biological product have been pre10 viously approved for the reference 

11 product; 

12 ‘‘(IV) the route of administra13 tion, the dosage form, and the 

14 strength of the biological product are 

15 the same as those of the reference 

16 product; and 

17 ‘‘(V) the facility in which the bio18 logical product is manufactured, proc19 essed, packed, or held meets stand20 ards designed to assure that the bio21 logical product continues to be safe, 

22 pure, and potent. 

23 ‘‘(ii) DETERMINATION BY SEC24 RETARY.—The Secretary may determine, 

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1 ment described in clause (i)(I) is unneces2 sary in an application submitted under this 

3 subsection. 

4 ‘‘(iii) ADDITIONAL INFORMATION.— 

5 An application submitted under this sub6 section— 

7 ‘‘(I) shall include publicly avail8 able information regarding the Sec9 retary’s previous determination that 

10 the reference product is safe, pure, 

11 and potent; and 

12 ‘‘(II) may include any additional 

13 information in support of the applica14 tion, including publicly available infor15 mation with respect to the reference 

16 product or another biological product. 

17 ‘‘(B) INTERCHANGEABILITY.—An applica18 tion (or a supplement to an application) sub19 mitted under this subsection may include infor20 mation demonstrating that the biological prod21 uct meets the standards described in paragraph 

22 (4). 

23 ‘‘(3) EVALUATION BY SECRETARY.—Upon re24 view of an application (or a supplement to an appli25 cation) submitted under this subsection, the SecVerDate Nov 24 2008 02:39 Nov 21, 2009 Jkt 089200 PO 00000 Frm 00027 Fmt 6652 Sfmt 6201 E:\BILLS\H4138.IH H4138

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1 retary shall license the biological product under this 

2 subsection if— 

3 ‘‘(A) the Secretary determines that the in4 formation submitted in the application (or the 

5 supplement) is sufficient to show that the bio6 logical product— 

7 ‘‘(i) is biosimilar to the reference 

8 product; or 

9 ‘‘(ii) meets the standards described in 

10 paragraph (4), and therefore is inter11 changeable with the reference product; and 

12 ‘‘(B) the applicant (or other appropriate 

13 person) consents to the inspection of the facility 

14 that is the subject of the application, in accord15 ance with subsection (c). 

16 ‘‘(4) SAFETY STANDARDS FOR DETERMINING

17 INTERCHANGEABILITY.—Upon review of an applica18 tion submitted under this subsection or any supple19 ment to such application, the Secretary shall deter20 mine the biological product to be interchangeable 

21 with the reference product if the Secretary deter22 mines that the information submitted in the applica23 tion (or a supplement to such application) is suffi24 cient to show that— 

25 ‘‘(A) the biological product— 


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1 ‘‘(i) is biosimilar to the reference 

2 product; and 

3 ‘‘(ii) can be expected to produce the 

4 same clinical result as the reference prod5 uct in any given patient; and 

6 ‘‘(B) for a biological product that is ad7 ministered more than once to an individual, the 

8 risk in terms of safety or diminished efficacy of 

9 alternating or switching between use of the bio10 logical product and the reference product is not 

11 greater than the risk of using the reference 

12 product without such alternation or switch. 

13 ‘‘(5) GENERAL RULES.— 

14 ‘‘(A) ONE REFERENCE PRODUCT PER AP15 PLICATION.—A biological product, in an appli16 cation submitted under this subsection, may not 

17 be evaluated against more than 1 reference 

18 product. 

19 ‘‘(B) REVIEW.—An application submitted 

20 under this subsection shall be reviewed by the 

21 division within the Food and Drug Administra22 tion that is responsible for the review and ap23 proval of the application under which the ref24 erence product is licensed. 


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1 ‘‘(C) RISK EVALUATION AND MITIGATION

2 STRATEGIES.—The authority of the Secretary 

3 with respect to risk evaluation and mitigation 

4 strategies under the Federal Food, Drug, and 

5 Cosmetic Act shall apply to biological products 

6 licensed under this subsection in the same man7 ner as such authority applies to biological prod8 ucts licensed under subsection (a). 

9 ‘‘(D) RESTRICTIONS ON BIOLOGICAL PROD10 UCTS CONTAINING DANGEROUS INGREDI11 ENTS.—If information in an application sub12 mitted under this subsection, in a supplement 

13 to such an application, or otherwise available to 

14 the Secretary shows that a biological product— 

15 ‘‘(i) is, bears, or contains a select 

16 agent or toxin listed in section 73.3 or 

17 73.4 of title 42, section 121.3 or 121.4 of 

18 title 9, or section 331.3 of title 7, Code of 

19 Federal Regulations (or any successor reg20 ulations); or 

21 ‘‘(ii) is, bears, or contains a controlled 

22 substance in schedule I or II of section 

23 202 of the Controlled Substances Act, as 

24 listed in part 1308 of title 21, Code of 


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1 Federal Regulations (or any successor reg2 ulations); 

3 the Secretary shall not license the biological 

4 product under this subsection unless the Sec5 retary determines, after consultation with ap6 propriate national security and drug enforce7 ment agencies, that there would be no increased 

8 risk to the security or health of the public from 

9 licensing such biological product under this sub10 section. 

11 ‘‘(6) EXCLUSIVITY FOR FIRST INTERCHANGE12 ABLE BIOLOGICAL PRODUCT.—Upon review of an 

13 application submitted under this subsection relying 

14 on the same reference product for which a prior bio15 logical product has received a determination of inter16 changeability for any condition of use, the Secretary 

17 shall not make a determination under paragraph (4) 

18 that the second or subsequent biological product is 

19 interchangeable for any condition of use until the 

20 earlier of— 

21 ‘‘(A) 1 year after the first commercial 

22 marketing of the first interchangeable bio23 similar biological product to be approved as 

24 interchangeable for that reference product; 

25 ‘‘(B) 18 months after— 


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1 ‘‘(i) a final court decision on all pat2 ents in suit in an action instituted under 

3 subsection (l)(5) against the applicant that 

4 submitted the application for the first ap5 proved interchangeable biosimilar biological 

6 product; or 

7 ‘‘(ii) the dismissal with or without 

8 prejudice of an action instituted under sub9 section (l)(5) against the applicant that 

10 submitted the application for the first ap11 proved interchangeable biosimilar biological 

12 product; or 

13 ‘‘(C)(i) 42 months after approval of the 

14 first interchangeable biosimilar biological prod15 uct if the applicant that submitted such appli16 cation has been sued under subsection (l)(5) 

17 and such litigation is still ongoing within such 

18 42-month period; or 

19 ‘‘(ii) 18 months after approval of the first 

20 interchangeable biosimilar biological product if 

21 the applicant that submitted such application 

22 has not been sued under subsection (l)(5). 

23 For purposes of this paragraph, the term ‘final court 

24 decision’ means a final decision of a court from 

25 which no appeal (other than a petition to the United 


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1 States Supreme Court for a writ of certiorari) has 

2 been or can be taken. 

3 ‘‘(7) EXCLUSIVITY FOR REFERENCE PROD4 UCT.— 

5 ‘‘(A) EFFECTIVE DATE OF BIOSIMILAR AP6 PLICATION APPROVAL.—Approval of an applica7 tion under this subsection may not be made ef8 fective by the Secretary until the date that is 

9 12 years after the date on which the reference 

10 product was first licensed under subsection (a). 

11 ‘‘(B) FILING PERIOD.—An application 

12 under this subsection may not be submitted to 

13 the Secretary until the date that is 4 years 

14 after the date on which the reference product 

15 was first licensed under subsection (a). 

16 ‘‘(C) FIRST LICENSURE.—Subparagraphs 

17 (A) and (B) shall not apply to a license for or 

18 approval of— 

19 ‘‘(i) a supplement for the biological 

20 product that is the reference product; or 

21 ‘‘(ii) a subsequent application filed by 

22 the same sponsor or manufacturer of the 

23 biological product that is the reference 

24 product (or a licensor, predecessor in inter25 est, or other related entity) for— 


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1 ‘‘(I) a change (not including a 

2 modification to the structure of the bi3 ological product) that results in a new 

4 indication, route of administration, 

5 dosing schedule, dosage form, delivery 

6 system, delivery device, or strength; or 

7 ‘‘(II) a modification to the struc8 ture of the biological product that 

9 does not result in a change in safety, 

10 purity, or potency. 

11 ‘‘(8) PEDIATRIC STUDIES.— 

12 ‘‘(A) EXCLUSIVITY.—If, before or after li13 censure of the reference product under sub14 section (a) of this section, the Secretary deter15 mines that information relating to the use of 

16 such product in the pediatric population may 

17 produce health benefits in that population, the 

18 Secretary makes a written request for pediatric 

19 studies (which shall include a timeframe for 

20 completing such studies), the applicant or hold21 er of the approved application agrees to the re22 quest, such studies are completed using appro23 priate formulations for each age group for 

24 which the study is requested within any such 

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1 mitted and accepted in accordance with section 

2 505A(d)(3) of the Federal Food, Drug, and 

3 Cosmetic Act the period referred to in para4 graph (7)(A) of this subsection is deemed to be 

5 12 years and 6 months rather than 12 years. 

6 ‘‘(B) EXCEPTION.—The Secretary shall 

7 not extend the period referred to in subpara8 graph (A) of this paragraph if the determina9 tion under section 505A(d)(3) of the Federal 

10 Food, Drug, and Cosmetic Act is made later 

11 than 9 months prior to the expiration of such 

12 period. 

13 ‘‘(C) APPLICATION OF CERTAIN PROVI14 SIONS.—The provisions of subsections (a), (d), 

15 (e), (f), (h), (j), (k), and (l) of section 505A of 

16 the Federal Food, Drug, and Cosmetic Act 

17 shall apply with respect to the extension of a 

18 period under subparagraph (A) of this para19 graph to the same extent and in the same man20 ner as such provisions apply with respect to the 

21 extension of a period under subsection (b) or 

22 (c) of section 505A of the Federal Food, Drug, 

23 and Cosmetic Act. 

24 ‘‘(9) GUIDANCE DOCUMENTS.— 


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1 ‘‘(A) IN GENERAL.—The Secretary may, 

2 after opportunity for public comment, issue 

3 guidance in accordance, except as provided in 

4 subparagraph (B)(i), with section 701(h) of the 

5 Federal Food, Drug, and Cosmetic Act with re6 spect to the licensure of a biological product 

7 under this subsection. Any such guidance may 

8 be general or specific. 

9 ‘‘(B) PUBLIC COMMENT.— 

10 ‘‘(i) IN GENERAL.—The Secretary 

11 shall provide the public an opportunity to 

12 comment on any proposed guidance issued 

13 under subparagraph (A) before issuing 

14 final guidance. 

15 ‘‘(ii) INPUT REGARDING MOST VALU16 ABLE GUIDANCE.—The Secretary shall es17 tablish a process through which the public 

18 may provide the Secretary with input re19 garding priorities for issuing guidance. 

20 ‘‘(C) NO REQUIREMENT FOR APPLICATION

21 CONSIDERATION.—The issuance (or non22 issuance) of guidance under subparagraph (A) 

23 shall not preclude the review of, or action on, 

24 an application submitted under this subsection. 


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1 ‘‘(D) REQUIREMENT FOR PRODUCT CLASS2 SPECIFIC GUIDANCE.—If the Secretary issues 

3 product class-specific guidance under subpara4 graph (A), such guidance shall include a de5 scription of— 

6 ‘‘(i) the criteria that the Secretary will 

7 use to determine whether a biological prod8 uct is highly similar to a reference product 

9 in such product class; and 

10 ‘‘(ii) the criteria, if available, that the 

11 Secretary will use to determine whether a 

12 biological product meets the standards de13 scribed in paragraph (4). 

14 ‘‘(E) CERTAIN PRODUCT CLASSES.— 

15 ‘‘(i) GUIDANCE.—The Secretary may 

16 indicate in a guidance document that the 

17 science and experience, as of the date of 

18 such guidance, with respect to a product or 

19 product class (not including any recom20 binant protein) does not allow approval of 

21 an application for a license as provided 

22 under this subsection for such product or 

23 product class. 

24 ‘‘(ii) MODIFICATION OR REVERSAL.— 

25 The Secretary may issue a subsequent 


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1 guidance document under subparagraph 

2 (A) to modify or reverse a guidance docu3 ment under clause (i). 

4 ‘‘(iii) NO EFFECT ON ABILITY TO

5 DENY LICENSE.—Clause (i) shall not be 

6 construed to require the Secretary to ap7 prove a product with respect to which the 

8 Secretary has not indicated in a guidance 

9 document that the science and experience, 

10 as described in clause (i), does not allow 

11 approval of such an application. 

12 ‘‘(10) NAMING.—The Secretary shall ensure 

13 that the labeling and packaging of each biological 

14 product licensed under this subsection bears a name 

15 that uniquely identifies the biological product and 

16 distinguishes it from the reference product and any 

17 other biological products licensed under this sub18 section following evaluation against such reference 

19 product. 

20 ‘‘(l) PATENT NOTICES; RELATIONSHIP TO FINAL AP21 PROVAL.— 

22 ‘‘(1) DEFINITIONS.—For the purposes of this 

23 subsection, the term— 


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1 ‘‘(A) ‘biosimilar product’ means the bio2 logical product that is the subject of the appli3 cation under subsection (k); 

4 ‘‘(B) ‘relevant patent’ means a patent 

5 that— 

6 ‘‘(i) expires after the date specified in 

7 subsection (k)(7)(A) that applies to the 

8 reference product; and 

9 ‘‘(ii) could reasonably be asserted 

10 against the applicant due to the unauthor11 ized making, use, sale, or offer for sale 

12 within the United States, or the importa13 tion into the United States of the bio14 similar product, or materials used in the 

15 manufacture of the biosimilar product, or 

16 due to a use of the biosimilar product in 

17 a method of treatment that is indicated in 

18 the application; 

19 ‘‘(C) ‘reference product sponsor’ means the 

20 holder of an approved application or license for 

21 the reference product; and 

22 ‘‘(D) ‘interested third party’ means a per23 son other than the reference product sponsor 

24 that owns a relevant patent, or has the right to 


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1 commence or participate in an action for in2 fringement of a relevant patent. 

3 ‘‘(2) HANDLING OF CONFIDENTIAL INFORMA4 TION.—Any entity receiving confidential information 

5 pursuant to this subsection shall designate one or 

6 more individuals to receive such information. Each 

7 individual so designated shall execute an agreement 

8 in accordance with regulations promulgated by the 

9 Secretary. The regulations shall require each such 

10 individual to take reasonable steps to maintain the 

11 confidentiality of information received pursuant to 

12 this subsection and use the information solely for 

13 purposes authorized by this subsection. The obliga14 tions imposed on an individual who has received con15 fidential information pursuant to this subsection 

16 shall continue until the individual returns or de17 stroys the confidential information, a court imposes 

18 a protective order that governs the use or handling 

19 of the confidential information, or the party pro20 viding the confidential information agrees to other 

21 terms or conditions regarding the handling or use of 

22 the confidential information. 

23 ‘‘(3) PUBLIC NOTICE BY SECRETARY.—Within 

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1 cation filed under subsection (k), the Secretary shall 

2 publish a notice identifying— 

3 ‘‘(A) the reference product identified in the 

4 application; and 

5 ‘‘(B) the name and address of an agent 

6 designated by the applicant to receive notices 

7 pursuant to paragraph (4)(B). 

8 ‘‘(4) EXCHANGES CONCERNING PATENTS.— 

9 ‘‘(A) EXCHANGES WITH REFERENCE

10 PRODUCT SPONSOR.— 

11 ‘‘(i) Within 30 days of the date of ac12 ceptance of the application by the Sec13 retary, the applicant shall provide the ref14 erence product sponsor with a copy of the 

15 application and information concerning the 

16 biosimilar product and its production. This 

17 information shall include a detailed de18 scription of the biosimilar product, its 

19 method of manufacture, and the materials 

20 used in the manufacture of the product. 

21 ‘‘(ii) Within 60 days of the date of re22 ceipt of the information required to be pro23 vided under clause (i), the reference prod24 uct sponsor shall provide to the applicant 

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1 erence product sponsor, or in respect of 

2 which the reference product sponsor has 

3 the right to commence an action of in4 fringement or otherwise has an interest in 

5 the patent as such patent concerns the bio6 similar product. 

7 ‘‘(iii) If the reference product sponsor 

8 is issued or acquires an interest in a rel9 evant patent after the date on which the 

10 reference product sponsor provides the list 

11 required by clause (ii) to the applicant, the 

12 reference product sponsor shall identify 

13 that patent to the applicant within 30 days 

14 of the date of issue of the patent, or the 

15 date of acquisition of the interest in the 

16 patent, as applicable. 

17 ‘‘(B) EXCHANGES WITH INTERESTED

18 THIRD PARTIES.— 

19 ‘‘(i) At any time after the date on 

20 which the Secretary publishes a notice for 

21 an application under paragraph (3), any 

22 interested third party may provide notice 

23 to the designated agent of the applicant 

24 that the interested third party owns or has 

25 rights under 1 or more patents that may 


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1 be relevant patents. The notice shall iden2 tify at least 1 patent and shall designate 

3 an individual who has executed an agree4 ment in accordance with paragraph (2) to 

5 receive confidential information from the 

6 applicant. 

7 ‘‘(ii) Within 30 days of the date of re8 ceiving notice pursuant to clause (i), the 

9 applicant shall send to the individual des10 ignated by the interested third party the 

11 information specified in subparagraph 

12 (A)(i), unless the applicant and interested 

13 third party otherwise agree. 

14 ‘‘(iii) Within 90 days of the date of 

15 receiving information pursuant to clause 

16 (ii), the interested third party shall provide 

17 to the applicant a list of relevant patents 

18 which the interested third party owns, or 

19 in respect of which the interested third 

20 party has the right to commence or partici21 pate in an action for infringement. 

22 ‘‘(iv) If the interested third party is 

23 issued or acquires an interest in a relevant 

24 patent after the date on which the inter25 ested third party provides the list required 


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1 by clause (iii), the interested third party 

2 shall identify that patent within 30 days of 

3 the date of issue of the patent, or the date 

4 of acquisition of the interest in the patent, 

5 as applicable. 

6 ‘‘(C) IDENTIFICATION OF BASIS FOR IN7 FRINGEMENT.—For any patent identified under 

8 clause (ii) or (iii) of subparagraph (A) or under 

9 clause (iii) or (iv) of subparagraph (B), the ref10 erence product sponsor or the interested third 

11 party, as applicable— 

12 ‘‘(i) shall explain in writing why the 

13 sponsor or the interested third party be14 lieves the relevant patent would be in15 fringed by the making, use, sale, or offer 

16 for sale within the United States, or im17 portation into the United States, of the 

18 biosimilar product or by a use of the bio19 similar product in treatment that is indi20 cated in the application; 

21 ‘‘(ii) may specify whether the relevant 

22 patent is available for licensing; and 

23 ‘‘(iii) shall specify the number and 

24 date of expiration of the relevant patent. 


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1 ‘‘(D) CERTIFICATION BY APPLICANT CON2 CERNING IDENTIFIED RELEVANT PATENTS.— 

3 Not later than 45 days after the date on which 

4 a patent is identified under clause (ii) or (iii) of 

5 subparagraph (A) or under clause (iii) or (iv) of 

6 subparagraph (B), the applicant shall send a 

7 written statement regarding each identified pat8 ent to the party that identified the patent. Such 

9 statement shall either— 

10 ‘‘(i) state that the applicant will not 

11 commence marketing of the biosimilar 

12 product and has requested the Secretary to 

13 not grant final approval of the application 

14 before the date of expiration of the noticed 

15 patent; or 

16 ‘‘(ii) provide a detailed written expla17 nation setting forth the reasons why the 

18 applicant believes— 

19 ‘‘(I) the making, use, sale, or 

20 offer for sale within the United 

21 States, or the importation into the 

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1 plication, would not infringe the pat2 ent; or 

3 ‘‘(II) the patent is invalid or un4 enforceable. 

5 ‘‘(5) ACTION FOR INFRINGEMENT INVOLVING

6 REFERENCE PRODUCT SPONSOR.—If an action for 

7 infringement concerning a relevant patent identified 

8 by the reference product sponsor under clause (ii) or 

9 (iii) of paragraph (4)(A), or by an interested third 

10 party under clause (iii) or (iv) of paragraph (4)(B), 

11 is brought within 60 days of the date of receipt of 

12 a statement under paragraph (4)(D)(ii), and the 

13 court in which such action has been commenced de14 termines the patent is infringed prior to the date ap15 plicable under subsection (k)(7)(A) or (k)(8), the 

16 Secretary shall make approval of the application ef17 fective on the day after the date of expiration of the 

18 patent that has been found to be infringed. If more 

19 than one such patent is found to be infringed by the 

20 court, the approval of the application shall be made 

21 effective on the day after the date that the last such 

22 patent expires. 

23 ‘‘(6) NOTIFICATION OF AGREEMENTS.— 

24 ‘‘(A) REQUIREMENTS.— 


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1 ‘‘(i) AGREEMENT BETWEEN BIO2 SIMILAR PRODUCT APPLICANT AND REF3 ERENCE PRODUCT SPONSOR.—If a bio4 similar product applicant under subsection 

5 (k) and the reference product sponsor 

6 enter into an agreement described in sub7 paragraph (B), the applicant and sponsor 

8 shall each file the agreement in accordance 

9 with subparagraph (C). 

10 ‘‘(ii) AGREEMENT BETWEEN BIO11 SIMILAR PRODUCT APPLICANTS.—If 2 or 

12 more biosimilar product applicants submit 

13 an application under subsection (k) for bio14 similar products with the same reference 

15 product and enter into an agreement de16 scribed in subparagraph (B), the appli17 cants shall each file the agreement in ac18 cordance with subparagraph (C). 

19 ‘‘(B) SUBJECT MATTER OF AGREEMENT.— 

20 An agreement described in this subparagraph— 

21 ‘‘(i) is an agreement between the bio22 similar product applicant under subsection 

23 (k) and the reference product sponsor or 

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1 plicants under subsection (k) regarding the 

2 manufacture, marketing, or sale of— 

3 ‘‘(I) the biosimilar product (or 

4 biosimilar products) for which an ap5 plication was submitted; or 

6 ‘‘(II) the reference product; 

7 ‘‘(ii) includes any agreement between 

8 the biosimilar product applicant under sub9 section (k) and the reference product spon10 sor or between 2 or more biosimilar prod11 uct applicants under subsection (k) that is 

12 contingent upon, provides a contingent 

13 condition for, or otherwise relates to an 

14 agreement described in clause (i); and 

15 ‘‘(iii) excludes any agreement that 

16 solely concerns— 

17 ‘‘(I) purchase orders for raw ma18 terial supplies; 

19 ‘‘(II) equipment and facility con20 tracts; 

21 ‘‘(III) employment or consulting 

22 contracts; or 

23 ‘‘(IV) packaging and labeling 

24 contracts. 

25 ‘‘(C) FILING.— 


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1 ‘‘(i) IN GENERAL.—The text of an 

2 agreement required to be filed by subpara3 graph (A) shall be filed with the Assistant 

4 Attorney General and the Federal Trade 

5 Commission not later than— 

6 ‘‘(I) 10 business days after the 

7 date on which the agreement is exe8 cuted; and 

9 ‘‘(II) prior to the date of the first 

10 commercial marketing of, for agree11 ments described in subparagraph 

12 (A)(i), the biosimilar product that is 

13 the subject of the application or, for 

14 agreements described in subparagraph 

15 (A)(ii), any biosimilar product that is 

16 the subject of an application described 

17 in such subparagraph. 

18 ‘‘(ii) IF AGREEMENT NOT REDUCED

19 TO TEXT.—If an agreement required to be 

20 filed by subparagraph (A) has not been re21 duced to text, the persons required to file 

22 the agreement shall each file written de23 scriptions of the agreement that are suffi24 cient to disclose all the terms and condi25 tions of the agreement. 


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1 ‘‘(iii) CERTIFICATION.—The chief ex2 ecutive officer or the company official re3 sponsible for negotiating any agreement re4 quired to be filed by subparagraph (A) 

5 shall include in any filing under this para6 graph a certification as follows: ‘I declare 

7 under penalty of perjury that the following 

8 is true and correct: The materials filed 

9 with the Federal Trade Commission and 

10 the Department of Justice under section 

11 351(l)(6) of the Public Health Service Act, 

12 with respect to the agreement referenced in 

13 this certification: (1) represent the com14 plete, final, and exclusive agreement be15 tween the parties; (2) include any ancillary 

16 agreements that are contingent upon, pro17 vide a contingent condition for, or are oth18 erwise related to, the referenced agree19 ment; and (3) include written descriptions 

20 of any oral agreements, representations, 

21 commitments, or promises between the 

22 parties that are responsive to such section 

23 and have not been reduced to writing.’. 

24 ‘‘(D) DISCLOSURE EXEMPTION.—Any in25 formation or documentary material filed with 


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1 the Assistant Attorney General or the Federal 

2 Trade Commission pursuant to this paragraph 

3 shall be exempt from disclosure under section 

4 552 of title 5, United States Code, and no such 

5 information or documentary material may be 

6 made public, except as may be relevant to any 

7 administrative or judicial action or proceeding. 

8 Nothing in this subparagraph prevents disclo9 sure of information or documentary material to 

10 either body of the Congress or to any duly au11 thorized committee or subcommittee of the Con12 gress. 

13 ‘‘(E) ENFORCEMENT.— 

14 ‘‘(i) CIVIL PENALTY.—Any person 

15 that violates a provision of this paragraph 

16 shall be liable for a civil penalty of not 

17 more than $11,000 for each day on which 

18 the violation occurs. Such penalty may be 

19 recovered in a civil action— 

20 ‘‘(I) brought by the United 

21 States; or 

22 ‘‘(II) brought by the Federal 

23 Trade Commission in accordance with 

24 the procedures established in section 


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1 16(a)(1) of the Federal Trade Com2 mission Act. 

3 ‘‘(ii) COMPLIANCE AND EQUITABLE

4 RELIEF.—If any person violates any provi5 sion of this paragraph, the United States 

6 district court may order compliance, and 

7 may grant such other equitable relief as 

8 the court in its discretion determines nec9 essary or appropriate, upon application of 

10 the Assistant Attorney General or the Fed11 eral Trade Commission. 

12 ‘‘(F) RULEMAKING.—The Federal Trade 

13 Commission, with the concurrence of the Assist14 ant Attorney General and by rule in accordance 

15 with section 553 of title 5, United States Code, 

16 consistent with the purposes of this para17 graph— 

18 ‘‘(i) may define the terms used in this 

19 paragraph; 

20 ‘‘(ii) may exempt classes of persons or 

21 agreements from the requirements of this 

22 paragraph; and 

23 ‘‘(iii) may prescribe such other rules 

24 as may be necessary and appropriate to 

25 carry out the purposes of this paragraph. 


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1 ‘‘(G) SAVINGS CLAUSE.—Any action taken 

2 by the Assistant Attorney General or the Fed3 eral Trade Commission, or any failure of the 

4 Assistant Attorney General or the Commission 

5 to take action, under this paragraph shall not 

6 at any time bar any proceeding or any action 

7 with respect to any agreement between a bio8 similar product applicant under subsection (k) 

9 and the reference product sponsor, or any 

10 agreement between biosimilar product appli11 cants under subsection (k), under any other 

12 provision of law, nor shall any filing under this 

13 paragraph constitute or create a presumption of 

14 any violation of any competition laws.’’. 

15 (b) DEFINITIONS.—Section 351(i) of the Public 

16 Health Service Act (42 U.S.C. 262(i)) is amended— 

17 (1) by striking ‘‘In this section, the term ‘bio18 logical product’ means’’ and inserting the following: 

19 ‘‘In this section: 

20 ‘‘(1) The term ‘biological product’ means’’; 

21 (2) in paragraph (1), as so designated, by in22 serting ‘‘protein (except any chemically synthesized 

23 polypeptide),’’ after ‘‘allergenic product,’’; and 

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


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1 ‘‘(2) The term ‘biosimilar’ or ‘biosimilarity’, in 

2 reference to a biological product that is the subject 

3 of an application under subsection (k), means— 

4 ‘‘(A) that the biological product is highly 

5 similar to the reference product notwith6 standing minor differences in clinically inactive 

7 components; and 

8 ‘‘(B) there are no clinically meaningful dif9 ferences between the biological product and the 

10 reference product in terms of the safety, purity, 

11 and potency of the product. 

12 ‘‘(3) The term ‘interchangeable’ or ‘inter13 changeability’, in reference to a biological product 

14 that is shown to meet the standards described in 

15 subsection (k)(4), means that the biological product 

16 may be substituted for the reference product without 

17 the intervention of the health care provider who pre18 scribed the reference product. 

19 ‘‘(4) The term ‘reference product’ means the 

20 single biological product licensed under subsection 

21 (a) against which a biological product is evaluated in 

22 an application submitted under subsection (k).’’. 

23 (c) PRODUCTS PREVIOUSLY APPROVED UNDER SEC24 TION 505.— 


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1 (1) REQUIREMENT TO FOLLOW SECTION 351.— 

2 Except as provided in paragraph (2), an application 

3 for a biological product shall be submitted under 

4 section 351 of the Public Health Service Act (42 

5 U.S.C. 262) (as amended by this Act). 

6 (2) EXCEPTION.—An application for a biologi7 cal product may be submitted under section 505 of 

8 the Federal Food, Drug, and Cosmetic Act (21 

9 U.S.C. 355) if— 

10 (A) such biological product is in a product 

11 class for which a biological product in such 

12 product class is the subject of an application 

13 approved under such section 505 not later than 

14 the date of enactment of this Act; and 

15 (B) such application— 

16 (i) has been submitted to the Sec17 retary of Health and Human Services (re18 ferred to in this Act as the ‘‘Secretary’’) 

19 before the date of enactment of this Act; 

20 or 

21 (ii) is submitted to the Secretary not 

22 later than the date that is 10 years after 

23 the date of enactment of this Act. 

24 (3) LIMITATION.—Notwithstanding paragraph 

25 (2), an application for a biological product may not 


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1 be submitted under section 505 of the Federal Food, 

2 Drug, and Cosmetic Act (21 U.S.C. 355) if there is 

3 another biological product approved under sub4 section (a) of section 351 of the Public Health Serv5 ice Act that could be a reference product with re6 spect to such application (within the meaning of 

7 such section 351) if such application were submitted 

8 under subsection (k) of such section 351. 

9 (4) DEEMED APPROVED UNDER SECTION 351.— 

10 An approved application for a biological product 

11 under section 505 of the Federal Food, Drug, and 

12 Cosmetic Act (21 U.S.C. 355) shall be deemed to be 

13 a license for the biological product under such sec14 tion 351 on the date that is 10 years after the date 

15 of enactment of this Act. 

16 (5) DEFINITIONS.—For purposes of this sub17 section, the term ‘‘biological product’’ has the mean18 ing given such term under section 351 of the Public 

19 Health Service Act (42 U.S.C. 262) (as amended by 

20 this Act). 

21 SEC. 222. FEES RELATING TO BIOSIMILAR BIOLOGICAL 

22 PRODUCTS. 

23 Subparagraph (B) of section 735(1) of the Federal 

24 Food, Drug, and Cosmetic Act (21 U.S.C. 379g(1)) is 

25 amended by inserting ‘‘, including licensure of a biological 


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1 product under section 351(k) of such Act’’ before the pe2 riod at the end. 

3 SEC. 223. AMENDMENTS TO CERTAIN PATENT PROVISIONS. 

4 (a) Section 271(e)(2) of title 35, United States Code 

5 is amended— 

6 (1) in subparagraph (A), by striking ‘‘or’’ after 

7 ‘‘patent,’’; 

8 (2) in subparagraph (B), by adding ‘‘or’’ after 

9 the comma at the end; 

10 (3) by inserting the following after subpara11 graph (B): 

12 ‘‘(C) a statement under section 

13 351(l)(4)(D)(ii) of the Public Health Service 

14 Act,’’; and 

15 (4) in the matter following subparagraph (C) 

16 (as added by paragraph (3)), by inserting before the 

17 period the following: ‘‘, or if the statement described 

18 in subparagraph (C) is provided in connection with 

19 an application to obtain a license to engage in the 

20 commercial manufacture, use, or sale of a biological 

21 product claimed in a patent or the use of which is 

22 claimed in a patent before the expiration of such 

23 patent’’. 


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1 (b) Section 271(e)(4) of title 35, United States Code, 

2 is amended by striking ‘‘in paragraph (2)’’ in both places 

3 it appears and inserting ‘‘in paragraph (2)(A) or (2)(B)’’. 

4 Subtitle D—Administrative 

5 Simplification 

6 SEC. 231. ADMINISTRATIVE SIMPLIFICATION. 

7 (a) OPERATING RULES FOR HEALTH INFORMATION

8 TRANSACTIONS.— 

9 (1) DEFINITION OF OPERATING RULES.—Sec10 tion 1171 of the Social Security Act (42 U.S.C. 

11 1320d) is amended by adding at the end the fol12 lowing: 

13 ‘‘(9) OPERATING RULES.—The term ‘operating 

14 rules’ means the necessary business rules and guide15 lines for the electronic exchange of information that 

16 are not defined by a standard or its implementation 

17 specifications as adopted for purposes of this part.’’. 

18 (2) OPERATING RULES AND COMPLIANCE.— 

19 Section 1173 of the Social Security Act (42 U.S.C. 

20 1320d–2) is amended— 

21 (A) in subsection (a)(2), by adding at the 

22 end the following new subparagraph: 

23 ‘‘(J) Electronic funds transfers.’’; and 

24 (B) by adding at the end the following new 

25 subsections: 


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1 ‘‘(g) OPERATING RULES.— 

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

3 a single set of operating rules for each transaction 

4 described in subsection (a)(2) with the goal of cre5 ating as much uniformity in the implementation of 

6 the electronic standards as possible. Such operating 

7 rules shall be consensus-based and reflect the nec8 essary business rules affecting health plans and 

9 health care providers and the manner in which they 

10 operate pursuant to standards issued under Health 

11 Insurance Portability and Accountability Act of 

12 1996. 

13 ‘‘(2) OPERATING RULES DEVELOPMENT.—In 

14 adopting operating rules under this subsection, the 

15 Secretary shall rely on recommendations for oper16 ating rules developed by a qualified nonprofit entity, 

17 as selected by the Secretary, that meets the fol18 lowing requirements: 

19 ‘‘(A) The entity focuses its mission on ad20 ministrative simplification. 

21 ‘‘(B) The entity demonstrates an estab22 lished multi-stakeholder and consensus-based 

23 process for development of operating rules, in24 cluding representation by or participation from 

25 health plans, health care providers, vendors, relVerDate Nov 24 2008 02:39 Nov 21, 2009 Jkt 089200 PO 00000 Frm 00059 Fmt 6652 Sfmt 6201 E:\BILLS\H4138.IH H4138

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1 evant Federal agencies, and other standard de2 velopment organizations. 

3 ‘‘(C) The entity has established a public 

4 set of guiding principles that ensure the oper5 ating rules and process are open and trans6 parent. 

7 ‘‘(D) The entity coordinates its activities 

8 with the HIT Policy Committee and the HIT 

9 Standards Committee (as established under 

10 title XXX of the Public Health Service Act) 

11 and complements the efforts of the Office of the 

12 National Healthcare Coordinator and its related 

13 health information exchange goals. 

14 ‘‘(E) The entity incorporates national 

15 standards, including the transaction standards 

16 issued under Health Insurance Portability and 

17 Accountability Act of 1996. 

18 ‘‘(F) The entity supports nondiscrimina19 tion and conflict of interest policies that dem20 onstrate a commitment to open, fair, and non21 discriminatory practices. 

22 ‘‘(G) The entity allows for public review 

23 and updates of the operating rules. 


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1 ‘‘(3) REVIEW AND RECOMMENDATIONS.—The 

2 National Committee on Vital and Health Statistics 

3 shall— 

4 ‘‘(A) review the operating rules developed 

5 by a nonprofit entity described under paragraph 

6 (2); 

7 ‘‘(B) determine whether such rules rep8 resent a consensus view of the health care in9 dustry and are consistent with and do not alter 

10 current standards; 

11 ‘‘(C) evaluate whether such rules are con12 sistent with electronic standards adopted for 

13 health information technology; and 

14 ‘‘(D) submit to the Secretary a rec15 ommendation as to whether the Secretary 

16 should adopt such rules. 

17 ‘‘(4) IMPLEMENTATION.— 

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

19 adopt operating rules under this subsection, by 

20 regulation in accordance with subparagraph 

21 (C), following consideration of the rules devel22 oped by the non-profit entity described in para23 graph (2) and the recommendation submitted 

24 by the National Committee on Vital and Health 


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1 Statistics under paragraph (3)(D) and having 

2 ensured consultation with providers. 

3 ‘‘(B) ADOPTION REQUIREMENTS; EFFEC4 TIVE DATES.— 

5 ‘‘(i) ELIGIBILITY FOR A HEALTH

6 PLAN AND HEALTH CLAIM STATUS.—The 

7 set of operating rules for transactions for 

8 eligibility for a health plan and health 

9 claim status shall be adopted not later 

10 than July 1, 2011, in a manner ensuring 

11 that such rules are effective not later than 

12 January 1, 2013, and may allow for the 

13 use of a machine readable identification 

14 card. 

15 ‘‘(ii) ELECTRONIC FUNDS TRANSFERS

16 AND HEALTH CARE PAYMENT AND REMIT17 TANCE ADVICE.—The set of operating 

18 rules for electronic funds transfers and 

19 health care payment and remittance advice 

20 shall be adopted not later than July 1, 

21 2012, in a manner ensuring that such 

22 rules are effective not later than January 

23 1, 2014. 

24 ‘‘(iii) OTHER COMPLETED TRANS25 ACTIONS.—The set of operating rules for 


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1 the remainder of the completed trans2 actions described in subsection (a)(2), in3 cluding health claims or equivalent encoun4 ter information, enrollment and 

5 disenrollment in a health plan, health plan 

6 premium payments, and referral certifi7 cation and authorization, shall be adopted 

8 not later than July 1, 2014, in a manner 

9 ensuring that such rules are effective not 

10 later than January 1, 2016. 

11 ‘‘(C) EXPEDITED RULEMAKING.—The Sec12 retary shall promulgate an interim final rule 

13 applying any standard or operating rule rec14 ommended by the National Committee on Vital 

15 and Health Statistics pursuant to paragraph 

16 (3). The Secretary shall accept public comments 

17 on any interim final rule published under this 

18 subparagraph for 60 days after the date of such 

19 publication. 

20 ‘‘(h) COMPLIANCE.— 

21 ‘‘(1) HEALTH PLAN CERTIFICATION.— 

22 ‘‘(A) ELIGIBILITY FOR A HEALTH PLAN, 

23 HEALTH CLAIM STATUS, ELECTRONIC FUNDS

24 TRANSFERS, HEALTH CARE PAYMENT AND RE25 MITTANCE ADVICE.—Not later than December 


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1 31, 2013, a health plan shall file a statement 

2 with the Secretary, in such form as the Sec3 retary may require, certifying that the data and 

4 information systems for such plan are in com5 pliance with any applicable standards (as de6 scribed under paragraph (7) of section 1171) 

7 and operating rules (as described under para8 graph (9) of such section) for electronic funds 

9 transfers, eligibility for a health plan, health 

10 claim status, and health care payment and re11 mittance advice, respectively. 

12 ‘‘(B) OTHER COMPLETED TRANS13 ACTIONS.—Not later than December 31, 2015, 

14 a health plan shall file a statement with the 

15 Secretary, in such form as the Secretary may 

16 require, certifying that the data and informa17 tion systems for such plan are in compliance 

18 with any applicable standards and operating 

19 rules for the remainder of the completed trans20 actions described in subsection (a)(2), including 

21 health claims or equivalent encounter informa22 tion, enrollment and disenrollment in a health 

23 plan, health plan premium payments, and refer24 ral certification and authorization, respectively. 

25 A health plan shall provide the same level of 


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1 documentation to certify compliance with such 

2 transactions as is required to certify compliance 

3 with the transactions specified in subparagraph 

4 (A). 

5 ‘‘(2) DOCUMENTATION OF COMPLIANCE.—A 

6 health plan shall provide the Secretary, in such form 

7 as the Secretary may require, with adequate docu8 mentation of compliance with the standards and op9 erating rules described under paragraph (1). A 

10 health plan shall not be considered to have provided 

11 adequate documentation and shall not be certified as 

12 being in compliance with such standards, unless the 

13 health plan— 

14 ‘‘(A) demonstrates to the Secretary that 

15 the plan conducts the electronic transactions 

16 specified in paragraph (1) in a manner that 

17 fully complies with the regulations of the Sec18 retary; and 

19 ‘‘(B) provides documentation showing that 

20 the plan has completed end-to-end testing for 

21 such transactions with their partners, such as 

22 hospitals and physicians. 

23 ‘‘(3) SERVICE CONTRACTS.—A health plan shall 

24 be required to comply with any applicable certifi25 cation and compliance requirements (and provide the 


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1 Secretary with adequate documentation of such com2 pliance) under this subsection for any entities that 

3 provide services pursuant to a contract with such 

4 health plan. 

5 ‘‘(4) CERTIFICATION BY OUTSIDE ENTITY.— 

6 The Secretary may contract with an independent, 

7 outside entity to certify that a health plan has com8 plied with the requirements under this subsection, 

9 provided that the certification standards employed 

10 by such entities are in accordance with any stand11 ards or rules issued by the Secretary. 

12 ‘‘(5) COMPLIANCE WITH REVISED STANDARDS

13 AND RULES.—A health plan (including entities de14 scribed under paragraph (3)) shall comply with the 

15 certification and documentation requirements under 

16 this subsection for any interim final rule promul17 gated by the Secretary under subsection (i) that 

18 amends any standard or operating rule described 

19 under paragraph (1) of this subsection. A health 

20 plan shall comply with such requirements not later 

21 than the effective date of the applicable interim final 

22 rule. 

23 ‘‘(6) AUDITS OF HEALTH PLANS.—The Sec24 retary shall conduct periodic audits to ensure that 

25 health plans (including entities described under 


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1 paragraph (3)) are in compliance with any standards 

2 and operating rules that are described under para3 graph (1). 

4 ‘‘(i) REVIEW AND AMENDMENT OF STANDARDS AND

5 RULES.— 

6 ‘‘(1) ESTABLISHMENT.—Not later than Janu7 ary 1, 2014, the Secretary shall establish a review 

8 committee (as described under paragraph (4)). 

9 ‘‘(2) EVALUATIONS AND REPORTS.— 

10 ‘‘(A) HEARINGS.—Not later than April 1, 

11 2014, and not less than biennially thereafter, 

12 the Secretary, acting through the review com13 mittee, shall conduct hearings to evaluate and 

14 review the existing standards and operating 

15 rules established under this section. 

16 ‘‘(B) REPORT.—Not later than July 1, 

17 2014, and not less than biennially thereafter, 

18 the review committee shall provide rec19 ommendations for updating and improving such 

20 standards and rules. The review committee 

21 shall recommend a single set of operating rules 

22 per transaction standard and maintain the goal 

23 of creating as much uniformity as possible in 

24 the implementation of the electronic standards. 

25 ‘‘(3) INTERIM FINAL RULEMAKING.— 


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1 ‘‘(A) IN GENERAL.—Any recommendations 

2 to amend existing standards and operating 

3 rules that have been approved by the review 

4 committee and reported to the Secretary under 

5 paragraph (2)(B) shall be adopted by the Sec6 retary through promulgation of an interim final 

7 rule not later than 90 days after receipt of the 

8 committee’s report. 

9 ‘‘(B) PUBLIC COMMENT.— 

10 ‘‘(i) PUBLIC COMMENT PERIOD.—The 

11 Secretary shall accept public comments on 

12 any interim final rule published under this 

13 paragraph for 60 days after the date of 

14 such publication. 

15 ‘‘(ii) EFFECTIVE DATE.—The effective 

16 date of any amendment to existing stand17 ards or operating rules that is adopted 

18 through an interim final rule published 

19 under this paragraph shall be 25 months 

20 following the close of such public comment 

21 period. 

22 ‘‘(4) REVIEW COMMITTEE.— 

23 ‘‘(A) DEFINITION.—For the purposes of 

24 this subsection, the term ‘review committee’ 

25 means a committee within the Department of 


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1 Health and Human services that has been des2 ignated by the Secretary to carry out this sub3 section, including— 

4 ‘‘(i) the National Committee on Vital 

5 and Health Statistics; or 

6 ‘‘(ii) any appropriate committee as de7 termined by the Secretary. 

8 ‘‘(B) COORDINATION OF HIT STAND9 ARDS.—In developing recommendations under 

10 this subsection, the review committee shall con11 sider the standards approved by the Office of 

12 the National Coordinator for Health Informa13 tion Technology. 

14 ‘‘(j) PENALTIES.— 

15 ‘‘(1) PENALTY FEE.— 

16 ‘‘(A) IN GENERAL.—Not later than April 

17 1, 2014, and annually thereafter, the Secretary 

18 shall assess a penalty fee (as determined under 

19 subparagraph (B)) against a health plan that 

20 has failed to meet the requirements under sub21 section (h) with respect to certification and doc22 umentation of compliance with the standards 

23 (and their operating rules) as described under 

24 paragraph (1) of such subsection. 


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1 ‘‘(B) FEE AMOUNT.—Subject to subpara2 graphs (C), (D), and (E), the Secretary shall 

3 assess a penalty fee against a health plan in the 

4 amount of $1 per covered life until certification 

5 is complete. The penalty shall be assessed per 

6 person covered by the plan for which its data 

7 systems for major medical policies are not in 

8 compliance and shall be imposed against the 

9 health plan for each day that the plan is not in 

10 compliance with the requirements under sub11 section (h). 

12 ‘‘(C) ADDITIONAL PENALTY FOR MIS13 REPRESENTATION.—A health plan that know14 ingly provides inaccurate or incomplete informa15 tion in a statement of certification or docu16 mentation of compliance under subsection (h) 

17 shall be subject to a penalty fee that is double 

18 the amount that would otherwise be imposed 

19 under this subsection. 

20 ‘‘(D) ANNUAL FEE INCREASE.—The 

21 amount of the penalty fee imposed under this 

22 subsection shall be increased on an annual basis 

23 by the annual percentage increase in total na24 tional health care expenditures, as determined 

25 by the Secretary. 


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1 ‘‘(E) PENALTY LIMIT.—A penalty fee as2 sessed against a health plan under this sub3 section shall not exceed, on an annual basis— 

4 ‘‘(i) an amount equal to $20 per cov5 ered life under such plan; or 

6 ‘‘(ii) an amount equal to $40 per cov7 ered life under the plan if such plan has 

8 knowingly provided inaccurate or incom9 plete information (as described under sub10 paragraph (C)). 

11 ‘‘(F) DETERMINATION OF COVERED INDI12 VIDUALS.—The Secretary shall determine the 

13 number of covered lives under a health plan 

14 based upon the most recent statements and fil15 ings that have been submitted by such plan to 

16 the Securities and Exchange Commission. 

17 ‘‘(2) NOTICE AND DISPUTE PROCEDURE.—The 

18 Secretary shall establish a procedure for assessment 

19 of penalty fees under this subsection that provides a 

20 health plan with reasonable notice and a dispute res21 olution procedure prior to provision of a notice of as22 sessment by the Secretary of the Treasury (as de23 scribed under paragraph (4)(B)). 

24 ‘‘(3) PENALTY FEE REPORT.—Not later than 

25 May 1, 2014, and annually thereafter, the Secretary 


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1 shall provide the Secretary of the Treasury with a 

2 report identifying those health plans that have been 

3 assessed a penalty fee under this subsection. 

4 ‘‘(4) COLLECTION OF PENALTY FEE.— 

5 ‘‘(A) IN GENERAL.—The Secretary of the 

6 Treasury, acting through the Financial Man7 agement Service, shall administer the collection 

8 of penalty fees from health plans that have been 

9 identified by the Secretary in the penalty fee re10 port provided under paragraph (3). 

11 ‘‘(B) NOTICE.—Not later than August 1, 

12 2014, and annually thereafter, the Secretary of 

13 the Treasury shall provide notice to each health 

14 plan that has been assessed a penalty fee by the 

15 Secretary under this subsection. Such notice 

16 shall include the amount of the penalty fee as17 sessed by the Secretary and the due date for 

18 payment of such fee to the Secretary of the 

19 Treasury (as described in subparagraph (C)). 

20 ‘‘(C) PAYMENT DUE DATE.—Payment by a 

21 health plan for a penalty fee assessed under 

22 this subsection shall be made to the Secretary 

23 of the Treasury not later than November 1, 

24 2014, and annually thereafter. 


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1 ‘‘(D) UNPAID PENALTY FEES.—Any 

2 amount of a penalty fee assessed against a 

3 health plan under this subsection for which pay4 ment has not been made by the due date pro5 vided under subparagraph (C) shall be— 

6 ‘‘(i) increased by the interest accrued 

7 on such amount, as determined pursuant 

8 to the underpayment rate established 

9 under section 6601 of the Internal Rev10 enue Code of 1986; and 

11 ‘‘(ii) treated as a past-due, legally en12 forceable debt owed to a Federal agency 

13 for purposes of section 6402(d) of the In14 ternal Revenue Code of 1986. 

15 ‘‘(E) ADMINISTRATIVE FEES.—Any fee 

16 charged or allocated for collection activities con17 ducted by the Financial Management Service 

18 will be passed on to a health plan on a pro-rata 

19 basis and added to any penalty fee collected 

20 from the plan.’’. 

21 (b) PROMULGATION OF RULES.— 

22 (1) UNIQUE HEALTH PLAN IDENTIFIER.—The 

23 Secretary shall promulgate a final rule to establish 

24 a unique health plan identifier (as described in sec25 tion 1173(b) of the Social Security Act (42 U.S.C. 


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1 1320d–2(b))) based on the input of the National 

2 Committee of Vital and Health Statistics. The Sec3 retary may do so on an interim final basis and such 

4 rule shall be effective not later than October 1, 

5 2012. 

6 (2) ELECTRONIC FUNDS TRANSFER.—The Sec7 retary shall promulgate a final rule to establish a 

8 standard for electronic funds transfers (as described 

9 in section 1173(a)(2)(J) of the Social Security Act, 

10 as added by subsection (a)(2)(A)). The Secretary 

11 may do so on an interim final basis and shall adopt 

12 such standard not later than January 1, 2012, in a 

13 manner ensuring that such standard is effective not 

14 later than January 1, 2014. 

15 (c) EXPANSION OF ELECTRONIC TRANSACTIONS IN

16 MEDICARE.—Section 1862(a) of the Social Security Act 

17 (42 U.S.C. 1395y(a)) is amended— 

18 (1) in paragraph (23), by striking the ‘‘or’’ at 

19 the end; 

20 (2) in paragraph (24), by striking the period 

21 and inserting ‘‘; or’’; and 

22 (3) by inserting after paragraph (24) the fol23 lowing new paragraph: 

24 ‘‘(25) not later than January 1, 2014, for 

25 which the payment is other than by electronic funds 


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1 transfer (EFT) or an electronic remittance in a form 

2 as specified in ASC X12 835 Health Care Payment 

3 and Remittance Advice or subsequent standard.’’. 

4 (d) MEDICARE AND MEDICAID COMPLIANCE RE5 PORTS.—Not later than July 1, 2013, the Secretary of 

6 Health and Human Services shall submit a report to the 

7 Chairs and Ranking Members of the Committee on Ways 

8 and Means and the Committee on Energy and Commerce 

9 of the House of Representatives and the Chairs and Rank10 ing Members of the Committee on Health, Education, 

11 Labor, and Pensions and the Committee on Finance of 

12 the Senate on the extent to which the Medicare program 

13 and providers that serve beneficiaries under that program, 

14 and State Medicaid programs and providers that serve 

15 beneficiaries under those programs, transact electronically 

16 in accordance with transaction standards issued under the 

17 Health Insurance Portability and Accountability Act of 

18 1996, part C of title XI of the Social Security Act, and 

19 regulations promulgated under such Acts. 

Æ 


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