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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 2239 Introduced in Senate (IS)]

103d CONGRESS
  2d Session
                                S. 2239

To implement pharmaceutical marketplace reform, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                June 24 (legislative day, June 7), 1994

 Mr. Pryor (for himself and Mr. Sasser) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL

 
To implement pharmaceutical marketplace reform, and for other purposes.

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

SECTION 1. SHORT TITLE; REFERENCE TO ACT; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Pharmaceutical 
Marketplace Reform Act of 1994''.
    (b) Amendments to Social Security Act.--Except as otherwise 
specifically provided, whenever in this Act an amendment is expressed 
in terms of an amendment to or repeal of a section or other provision, 
the reference shall be considered to be made to that section or other 
provision of the Social Security Act.
    (c) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; reference to Act; table of contents.
Sec. 2. Findings.
Sec. 3. Purposes.
                       TITLE I--MEDICARE PROGRAM

     Subtitle A--Covered Outpatient Prescription Drugs and Rebates

Sec. 101. Covered outpatient prescription drugs.
Sec. 102. Rebates for covered outpatient drugs.
                      Subtitle B--Drug Use Review

Sec. 111. Medicare drug use review.
                       Subtitle C--Effective Date

Sec. 121. Effective date.
                       TITLE II--MEDICAID PROGRAM

Sec. 201. No Federal financial participation with respect to certain 
                            innovator multiple source drugs.
Sec. 202. Rebate for certain covered outpatient drugs.
Sec. 203. State regulation of outpatient prescription drug benefits 
                            covered by health care plans.
                         TITLE III--COMMISSIONS

Sec. 301. Pharmaceutical Marketplace Information Commission.
Sec. 302. Prescription Drug Payment Review Commission.
              TITLE IV--ADDITIONS TO THE MASTER AGREEMENT

Sec. 401. Equal access to discounts.
Sec. 402. Provision of information to the Pharmaceutical Marketplace 
                            Information Commission.
Sec. 403. Conforming amendments.
Sec. 404. Effective date.

SEC. 2. FINDINGS.

    The Congress finds that--
            (1) any medicare outpatient prescription drug benefit 
        should be structured to take advantage of market forces and 
        should use the same principles as other managed care pharmacy 
        benefit programs;
            (2) there is a lack of information in the health care 
        system about the price and quality of pharmaceutical products, 
        resulting in a significant level of market distortions and a 
        lack of price competition;
            (3) the availability of more information about price and 
        quality of medications would make the pharmaceutical 
        marketplace more competitive, and minimize the need for more 
        regulatory pharmaceutical cost containment mechanisms;
            (4) in the absence of competing new pharmaceutical products 
        in the market, there is a need for the health care system to 
        have information about the price of new pharmaceutical products 
        to assure that the prices are reasonable;
            (5) price concessions and discounting offered by 
        pharmaceutical manufacturers have not been offered on equal 
        terms to all purchasers, resulting in higher prices for 
        pharmaceutical products at the retail level, and ultimately for 
        consumers; and
            (6) under health care reform, all Americans should have 
        access to high quality drug use review and coordinated 
        pharmaceutical care services.

SEC. 3. PURPOSES.

    The purposes of this Act are--
            (1) to establish the medicare outpatient prescription drug 
        program as a pharmaceutical care benefit using principles of 
        managed care;
            (2) to improve the quality and timeliness of information 
        provided in the health care marketplace about the relative 
        price and value of currently marketed and new pharmaceutical 
        products;
            (3) to assure that prices for new breakthrough 
        pharmaceutical products in the United States are reasonable;
            (4) to provide that all pharmaceutical buyers have access 
        to manufacturer price discounts and concessions on equal terms 
        and conditions; and
            (5) to assure that drug use review and pharmaceutical care 
        becomes an integral part of the delivery of prescription drugs 
        in health care programs.

                       TITLE I--MEDICARE PROGRAM

     Subtitle A--Covered Outpatient Prescription Drugs and Rebates

SEC. 101. COVERED OUTPATIENT PRESCRIPTION DRUGS.

    (a) Covered Outpatient Drugs as Medical and Other Health 
Services.--
            (1) In general.--Section 1861(s)(2)(J) (42 U.S.C. 
        1395x(s)(2)(J)) is amended to read as follows:
            ``(J) covered outpatient drugs;''.
            (2) Definition of covered outpatient drugs.--Section 
        1861(t) (42 U.S.C. 1395x(t)), as amended by section 13553(b) of 
        the Omnibus Budget Reconciliation Act of 1993 (hereafter in 
        this subtitle referred to as ``OBRA-1993''), is amended--
                    (A) in the heading, by adding at the end the 
                following: ``; Covered Outpatient Drugs'';
                    (B) in paragraph (1), by striking ``paragraph (2)'' 
                and inserting ``the succeeding paragraphs of this 
                subsection''; and
                    (C) by inserting after paragraph (2) the following 
                new paragraph:
    ``(3) The term `covered outpatient drugs' means--
            ``(A) drugs and biologicals (which cannot, as determined in 
        accordance with regulations, be self-administered) furnished as 
        incident to a physician's professional service, of kinds which 
        are commonly furnished in physicians' offices and are commonly 
        either rendered without charge or included in the physician's 
        bill;
            ``(B) prescription drugs used in immunosuppressive therapy 
        furnished to an individual who receives an organ transplant for 
        which payment is made under this title, but only in the case of 
        drugs furnished--
                    ``(i) before 1995, within 12 months after the date 
                of the transplant procedure,
                    ``(ii) during 1995, within 18 months after the date 
                of the transplant procedure,
                    ``(iii) during 1996, within 24 months after the 
                date of the transplant procedure,
                    ``(iv) during 1997, within 30 months after the date 
                of the transplant procedure, and
                    ``(v) during any year after 1997, within 36 months 
                after the date of the transplant procedure;
            ``(C) erythropoietin--
                    ``(i) for dialysis patients competent to use such 
                drug without medical or other supervision with respect 
                to the administration of such drug, subject to methods 
                and standards established by the Secretary by 
                regulation for the safe and effective use of such drug; 
                and
                    ``(ii) administered in a renal dialysis facility.
            ``(D) an oral drug (which is approved by the Federal Food 
        and Drug Administration) prescribed for use as an anticancer 
        chemotherapeutic agent for a given indication, and containing 
        an active ingredient (or ingredients), which is the same 
        indication and active ingredient (or ingredients) as a drug 
        which the carrier determines would be covered pursuant to 
        subparagraph (A) or section 1861(s)(2)(B) if the drug could not 
        be self-administered; and
            ``(E) any other outpatient drug or biological described in 
        section 1927(k) for which payment may be specially allowed.''.
            (3) Conforming amendments.--(A) Section 1861(s)(2) (42 
        U.S.C. 1395x(s)(2)), as amended by section 13553 of OBRA-1993, 
        is amended--
                    (i) in subparagraph (A), by striking ``(including 
                drugs and biologicals which cannot, as determined in 
                accordance with regulations, be self-administered)'',
                    (ii) by adding ``and'' at the end of subparagraph 
                (O),
                    (iii) by amending subparagraph (P) to read as 
                follows:
            ``(P) items related to the administration of 
        erythropoietin.'', and
                    (iv) by striking subparagraph (Q).
            (B) Section 1881(b)(1)(C) (42 U.S.C. 1395rr(b)(1)(C)), as 
        amended by section 13566(a) of OBRA-1993, is amended by 
        striking ``section 1861(s)(2)(P)'' and inserting ``section 
        1861(t)(3)(C)(i)''.
    (b) Addition of Medicare to Master Plan Requirements.--Section 
8126(a)(4) of title 38, United States Code, is amended--
            (1) by striking ``or'' at the end of subparagraph (B);
            (2) by striking the period at the end of subparagraph (C) 
        and inserting ``, or''; and
            (3) by adding at the end the following new subparagraph:
                    ``(D) the medicare program under title XVIII of the 
                Social Security Act.''.

SEC. 102. REBATES FOR COVERED OUTPATIENT DRUGS.

    (a) In General.--Part B of title XVIII is amended by adding at the 
end the following new section:

                 ``rebates for covered outpatient drugs

    ``Sec. 1849. (a) Requirement for Rebate Agreement.--In order for 
payment to be available under this part for a covered outpatient drug 
of a manufacturer dispensed on or after January 1, 1995, the 
manufacturer must have entered into and have in effect a rebate 
agreement with the Secretary meeting the requirements of subsection 
(b).
    ``(b) Terms, Implementation, and Enforcement of Rebate Agreement.--
            ``(1) Periodic rebates.--
                    ``(A) In general.--A rebate agreement under this 
                section shall require the manufacturer to pay to the 
                Secretary for each calendar quarter, not later than 30 
                days after the date of receipt of the information 
                described in paragraph (2) for such quarter, a rebate 
                in an amount determined under subsection (c) for all 
                covered outpatient drugs of the manufacturer described 
                in subparagraph (B).
                    ``(B) Drugs included in quarterly rebate 
                calculation.--Drugs subject to rebate with respect to a 
                calendar quarter are covered outpatient drugs which are 
                dispensed by a pharmacy during such quarter to 
                individuals (other than individuals enrolled with an 
                eligible organization with a contract under section 
                1876) eligible for benefits under this part, as 
                reported by such pharmacies to the Secretary.
            ``(2) Information furnished to manufacturers.--
                    ``(A) In general.--The Secretary shall report to 
                each manufacturer, not later than 60 days after the end 
                of each calendar quarter, information on the total 
                number, for each covered outpatient drug, of units of 
                each dosage form, strength, and package size dispensed 
                under the plan during the quarter, on the basis of the 
                data described in paragraph (1)(B) reported to the 
                Secretary.
                    ``(B) Audit.--The Comptroller General may audit the 
                records of the Secretary to the extent necessary to 
                determine the accuracy of reports by the Secretary 
                pursuant to subparagraph (A). Adjustments to rebates 
                shall be made to the extent determined necessary by the 
                audit to reflect actual units of drugs dispensed.
            ``(3) Provision of price information by manufacturer.--
                    ``(A) Quarterly pricing information.--Each 
                manufacturer with an agreement in effect under this 
                section shall report to the Secretary, not later than 
                30 days after the last day of each calendar quarter, on 
                the average manufacturer retail price for each dosage 
                form and strength of each covered outpatient drug for 
                the quarter.
                    ``(B) Base quarter prices.--Each manufacturer of a 
                covered outpatient drug with an agreement under this 
                section shall report to the Secretary, by not later 
                than 30 days after the effective date of such agreement 
                (or, if later, 30 days after the end of the base 
                quarter), the average manufacturer retail price, for 
                such base quarter, for each dosage form and strength of 
                each such covered outpatient drug.
                    ``(C) Verification of average manufacturer retail 
                price.--The Secretary may inspect the records of 
                manufacturers, and survey wholesalers, pharmacies, and 
                institutional purchasers of drugs, as necessary to 
                verify prices reported under subparagraph (A).
                    ``(D) Penalties.--
                            ``(i) Civil money penalties.--The Secretary 
                        may impose a civil money penalty on a 
                        manufacturer with an agreement under this 
                        section--
                                    ``(I) for failure to provide 
                                information required under subparagraph 
                                (A) on a timely basis, in an amount up 
                                to $10,000 per day of delay;
                                    ``(II) for refusal to provide 
                                information about charges or prices 
                                requested by the Secretary for purposes 
                                of verification pursuant to 
                                subparagraph (C), in an amount up to 
                                $100,000; and
                                    ``(III) for provision, pursuant to 
                                subparagraph (A) or (B), of information 
                                that the manufacturer knows or should 
                                know is false, in an amount up to 
                                $100,000 per item of information.
                        Such civil money penalties are in addition to 
                        any other penalties prescribed by law. The 
                        provisions of section 1128A (other than 
                        subsections (a) (with respect to amounts of 
                        penalties or additional assessments) and (b)) 
                        shall apply to a civil money penalty under this 
                        subparagraph in the same manner as such 
                        provisions apply to a penalty or proceeding 
                        under section 1128A(a).
                            ``(ii) Suspension of agreement.--If a 
                        manufacturer with an agreement under this 
                        section has not provided information required 
                        under subparagraph (A) or (B) within 90 days of 
                        the deadline imposed, the Secretary may suspend 
                        the agreement with respect to covered 
                        outpatient drugs dispensed after the end of 
                        such 90-day period and until the date such 
                        information is reported (but in no case shall a 
                        suspension be for less than 30 days).
            ``(4) Length of agreement.--
                    ``(A) In general.--A rebate agreement shall be 
                effective for an initial period of not less than one 
                year and shall be automatically renewed for a period of 
                not less than one year unless terminated under 
                subparagraph (B).
                    ``(B) Termination.--
                            ``(i) By the secretary.--The Secretary may 
                        provide for termination of a rebate agreement 
                        for violation of the requirements of the 
                        agreement or other good cause shown. Such 
                        termination shall not be effective earlier than 
                        60 days after the date of notice of such 
                        termination. The Secretary shall afford a 
                        manufacturer an opportunity for a hearing 
                        concerning such termination, but such hearing 
                        shall not delay the effective date of the 
                        termination.
                            ``(ii) By a manufacturer.--A manufacturer 
                        may terminate a rebate agreement under this 
                        section for any reason. Any such termination 
                        shall not be effective until the calendar 
                        quarter beginning at least 60 days after the 
                        date the manufacturer provides notice to the 
                        Secretary.
                            ``(iii) Effective date of termination.--Any 
                        termination under this subparagraph shall not 
                        affect rebates due under the agreement before 
                        the effective date of its termination.
                            ``(iv) Notice to pharmacies.--In the case 
                        of a termination under this subparagraph, the 
                        Secretary shall notify pharmacies and physician 
                        organizations not less than 30 days before the 
                        effective date of such termination.
    ``(c) Amount of Rebate.--
            ``(1) Basic rebate.--Each manufacturer shall remit a basic 
        rebate to the Secretary for each calendar quarter in an amount, 
        with respect to each dosage form and strength of a covered 
        outpatient drug (except as provided under paragraph (5)), equal 
        to the product of--
                    ``(A) the total number of units subject to rebate 
                for such quarter, as described in subsection (b)(1)(B); 
                and
                    ``(B) the greater of--
                            ``(i)(I) in the case of a single source and 
                        innovator multiple source drugs (as defined in 
                        section 1927(k)(7)), 17 percent of the average 
                        manufacturer retail price for the calendar 
                        quarter;
                            ``(II) in the case of a noninnovator 
                        multiple source drug (as defined in section 
                        1927(k)(7)) that has an average manufacturer 
                        retail price which is greater than 50 percent 
                        of the average manufacturer retail price of the 
                        corresponding innovator multiple source drug, 
                        11 percent of the average manufacturer retail 
                        price for such noninnovator multiple source 
                        drug for the calendar quarter;
                            ``(ii) the amount determined pursuant to 
                        paragraph (2); or
                            ``(iii) the amount determined pursuant to 
                        paragraph (3).
            ``(2) Negotiated rebate amount for new drugs.--
                    ``(A) In general.--The Secretary may negotiate with 
                the manufacturer a per-unit rebate amount, in 
                accordance with this paragraph, for any covered 
                outpatient drug (except as provided under paragraph 
                (5)) first marketed after June 30, 1993, if one of the 
                following criteria apply:
                            ``(i) The medicare program will be a 
                        primary payer for the drug or biological in the 
                        outpatient market or will incur significant 
                        expenditures for the drug or biological.
                            ``(ii) The Drug Use Review Board 
                        (established under section 1850(b)) determined 
                        that the drug (whether or not a new chemical 
                        entity) is a significant clinical or 
                        therapeutic advance over other drugs on the 
                        market to treat a particular medical condition.
                            ``(iii) The manufacturer has provided 
                        insufficient evidence to the Drug Use Review 
                        Board that the drug is cost-effective at the 
                        current price charged by the manufacturer.
                            ``(iv) The price of the drug is higher in 
                        other industrialized nations as compared with 
                        the price in the United States.
                            ``(v) The Federal Government had a 
                        substantial role in the research and 
                        development of the drug.
                    ``(B) Agreement to negotiate rebate for subsequent 
                new drugs.--Any manufacturer entering into an agreement 
                with the Secretary under this paragraph for any covered 
                outpatient drug shall agree to enter into good-faith 
                negotiations for the rebate amount under this paragraph 
                for any other covered outpatient drug which is first 
                marketed after such drug.
                    ``(C) Option to exclude or limit coverage.--If the 
                Secretary is unable to negotiate with the manufacturer 
                an acceptable rebate amount with respect to a covered 
                outpatient drug pursuant to this paragraph, the 
                Secretary may--
                            ``(i) exclude such drug from coverage under 
                        this part; or
                            ``(ii) limit the use of the drug based on 
                        treatment or protocol guidelines (as 
                        recommended by the Drug Use Review Board).
                    ``(D) Effective date of exclusion or limitation 
                from coverage.--An exclusion or limitation of a drug 
                pursuant to subparagraph (C) shall be effective on and 
                after the earlier of--
                            ``(i) the date 6 months after the effective 
                        date of marketing approval of such drug by the 
                        Food and Drug Administration (but in no event 
                        earlier than July 1, 1996), or
                            ``(ii) the date the manufacturer terminates 
                        negotiations with the Secretary concerning the 
                        rebate amount.
            ``(3) Higher negotiated rebates.--The Secretary shall have 
        the authority to negotiate with a manufacturer a per-unit 
        rebate amount on an annual basis for any covered outpatient 
        drug (except as provided under paragraph (5)) that is greater 
        than the per unit rebate amount determined under clause (I) or 
        (II) of paragraph (1)(B)(i).
            ``(4) Additional rebate.--Each manufacturer shall remit to 
        the Secretary, for each calendar quarter, an additional rebate 
        for each dosage form and strength of a covered outpatient drug 
        (except as provided under paragraph (5)), in an amount equal 
        to--
                    ``(A) the total number of units subject to rebate 
                for such quarter, as described in subsection (b)(1)(B), 
                multiplied by
                    ``(B) the amount (if any) by which--
                            ``(i) the average manufacturer retail price 
                        for the covered drug of the manufacturer, 
                        exceeds
                            ``(ii) the average manufacturer retail 
                        price of the covered drug for the base quarter, 
                        increased by the percentage by which the 
                        Consumer Price Index for all urban consumers 
                        (United States city average) for the month 
                        before the month in which the calendar quarter 
                        begins exceeds such index for the last month of 
                        the base quarter.
            ``(5) No rebate required for certain generic drugs.--
        Paragraphs (1) through (4) shall not apply with respect to a 
        covered outpatient drug that is a noninnovator multiple source 
        drug which is not described in paragraph (1)(B)(i)(II).
            ``(6) Deposit of rebates.--The Secretary shall deposit 
        rebates under this section in the Federal Supplementary Medical 
        Insurance Trust Fund established under section 1841.
    ``(d) Confidentiality of Information.--Notwithstanding any other 
provision of law, information disclosed by a manufacturer under this 
section is confidential and shall not be disclosed by the Secretary, 
except--
            ``(1) as the Secretary determines to be necessary to carry 
        out this section,
            ``(2) to permit the Comptroller General to review the 
        information provided, and
            ``(3) to permit the Director of the Congressional Budget 
        Office to review the information provided.
    ``(e) Generic Dispensing Incentives.--
            ``(1) Establishment of dispensing policy.--The Secretary 
        shall establish a generic-only dispensing policy for any drug 
        described in subparagraph (A), subject to Federal upper limit 
        for each such drug described in subparagraph (B), which shall 
        ensure that expenditures for innovator multiple source drugs 
        (determined after taking into account any rebates with respect 
        to such drugs under this section) account for no more than 10 
        percent of the total expenditures made under this part for 
        multiple source drugs (determined after taking into account any 
        rebates with respect to such drugs under this section).
                    ``(A) Generic-only policy applicable.--A drug 
                described in this paragraph is any covered outpatient 
                drug which is a multiple source drug (as defined in 
                section 1927(k)(7)) for which there are three or more 
                therapeutically and pharmaceutically equivalent brands 
                of the drug sold and marketed in the United States.
                    ``(B) Federal upper limit.--The Secretary shall 
                establish a Federal upper limit for each drug described 
                in subparagraph (A) by using the prices of each of the 
                therapeutically and pharmaceutically equivalent brands 
                of such drug that is sold and marketed in the United 
                States.
            ``(2) Description of generics-only policy.--The Secretary 
        shall exclude from payment under section 1862(a)(17) any 
        innovator version of a multiple source drug described in 
        paragraph (1)(A) unless--
                    ``(A) a written prescription for the drug contains, 
                in the handwriting of the physician or other person 
                prescribing the drug, the phrase `brand medically 
                necessary' indicating that the particular brand of the 
                innovator drug product must be dispensed; and
                    ``(B) at the option of the Secretary, a medical 
                justification is provided for the covered outpatient 
                drug described in subparagraph (A).
        The Secretary may require prior authorization for payment for 
        any innovator version of a multiple source drug described in 
        paragraph (1)(A) unless the net cost of the innovator multiple 
        source drug to the program under this part is less than or 
        equal to the Federal upper limit (as established by the 
        Secretary under paragraph (1)(B)).
            ``(3) Publication of information.--The Secretary shall 
        publish on no less than a semiannual basis a prescription 
        resource guide for physicians and pharmacists for the 
        outpatient prescription drugs most commonly prescribed for 
        medicare beneficiaries. The guide would indicate when generics 
        are available for a particular brand name drug and indicate the 
        net cost to the medicare program for the furnishing of each 
        drug in the therapeutic class of such drug. Such information 
        shall also be available on any electronic claims prescription 
        processing system established by the Secretary.
    ``(f) Prior Authorization Program.--The Secretary may establish, as 
a condition of coverage or payment for a covered outpatient drug for 
which payment is available under this part, a system which requires the 
approval of the drug before its dispensing for any medically accepted 
indication (as defined in section 1927(k)(6)) but the system providing 
for such approval must--
                    ``(A) provide a response by telephone or other 
                telecommunication device within 24 hours of a request 
                for prior authorization; and
                    ``(B) provide for the dispensing of at least a 72-
                hour supply of a covered outpatient prescription drug 
                in an emergency situation (as defined by the 
                Secretary).
    ``(g) Definitions.--For purposes of this section:
            ``(1) Average manufacturer retail price.--The term `average 
        manufacturer retail price' means, with respect to a covered 
        outpatient drug of a manufacturer for a calendar quarter, the 
        average price (inclusive of discounts for cash payment, prompt 
        payment, volume purchases, and rebates (other than rebates 
        under this section), but exclusive of nominal prices) paid to 
        the manufacturer for the drug in the United States for drugs 
        distributed to the retail pharmacy class of trade.
            ``(2) Base quarter.--The term `base quarter' means, with 
        respect to a covered outpatient drug of a manufacturer, the 
        calendar quarter beginning October 1, 1993, or, if later, the 
        first full calendar quarter during which the drug was marketed 
        in the United States.
            ``(3) Manufacturer.--The term `manufacturer' means, with 
        respect to a covered outpatient drug, the entity holding legal 
        title to or possession of the National Drug Code number for 
        such drug.
            ``(4) Nominal price.--The term `nominal price' means any 
        price which is less than 10 percent of the average 
        manufacturer's retail price for the covered outpatient drug of 
        the manufacturer for the calendar quarter.''.
    (b) Exclusions From Coverage.--Section 1862(a) (42 U.S.C. 1395y(a)) 
is amended--
            (1) by striking ``or'' at the end of paragraph (15),
            (2) by striking the period at the end of paragraph (16) and 
        inserting ``; or'', and
            (3) by inserting after paragraph (16) the following new 
        paragraph:
            ``(17) in the case of a covered outpatient drug (as 
        described in section 1861(t)) which--
                    ``(A) is furnished during a year for which the 
                drug's manufacturer does not have in effect a rebate 
                agreement with the Secretary that meets the 
                requirements of section 1849 for the year,
                    ``(B) is excluded from coverage during the year by 
                the Secretary pursuant to subparagraphs (C) and (D) of 
                section 1849(c)(2) (relating to negotiated rebate 
                amounts for certain new drugs), or
                    ``(C) is not furnished in accordance with treatment 
                protocols developed by the Secretary (based on 
                recommendations from the Drug Use Review Board)''.
    (c) Conforming Amendments to Medicaid Program.--Section 1927(a) (42 
U.S.C. 1396r-8(a)) is amended--
            (1) in the first sentence of paragraph (1), by striking 
        ``and paragraph (6)'' and inserting ``, paragraph (6), and (for 
        calendar quarters beginning on or after January 1, 1995) 
        paragraph (7)''; and
            (2) by adding at the end the following new paragraph:
            ``(7) Requirement relating to rebate agreements for covered 
        outpatient drugs under medicare program.--A manufacturer meets 
        the requirements of this paragraph if the manufacturer has in 
        effect an agreement with the Secretary under section 1849 for 
        providing rebates for covered outpatient drugs furnished to 
        individuals under title XVIII during the year.''.

                      Subtitle B--Drug Use Review

SEC. 111. MEDICARE DRUG USE REVIEW.

    Part B of title XVIII is further amended by adding at the end the 
following new section:

                       ``medicare drug use review

    ``Sec. 1850. (a) Drug Use Review.--
            ``(1) Establishment.--
                    ``(A)  In general.--Except as provided in 
                subparagraph (C), the Secretary shall provide, by not 
                later than January 1, 1996, for a drug use review 
                program for covered outpatient drugs which--
                            ``(i) meets the requirements of paragraph 
                        (2), and
                            ``(ii) assures that prescriptions for 
                        covered outpatient drugs are appropriate, 
                        medically necessary, and not likely to result 
                        in adverse medical results.
                    ``(B) Drug use review allowance.--Not later than 
                180 days after the date of the enactment of the 
                Pharmaceutical Marketplace Reform Act of 1994, the 
                Secretary shall establish a methodology to provide 
                payment to pharmacists for prospective drug review and 
                pharmaceutical care activities required under 
                subparagraphs (A) through (H) of paragraph (2).
                    ``(C) Treatment of nursing facilities.--The 
                Secretary is not required to provide for drug use 
                review with respect to drugs dispensed to residents of 
                nursing facilities which are in compliance with the 
                requirements of subsections (b)(4)(A)(iii) and 
                (c)(1)(D) of section 1819.
            ``(2) Requirements of program.--
                    ``(A) Prospective drug use review.--
                            ``(i) In general.--The drug use review 
                        program shall provide for a review of drug 
                        therapy before each prescription for a covered 
                        outpatient drug is filled or delivered to an 
                        individual receiving a covered outpatient drug. 
                        The review shall be designed to identify 
                        potential drug therapy problems due to 
                        therapeutic duplication, drug-disease 
                        contraindications, drug interactions (including 
                        serious interactions with nonprescription or 
                        over-the-counter drugs), incorrect drug dosage 
                        or duration of drug treatment, drug-allergy 
                        interactions, and clinical abuse or misuse.
                            ``(ii) Standards for counseling by 
                        pharmacists.--As part of the prospective drug 
                        use review program, the Secretary (in 
                        consultation with the Drug Use Review Board) 
                        shall establish standards for counseling by 
                        pharmacists of individuals receiving covered 
                        outpatient drugs. Such standards shall include, 
                        at a minimum, the following:
                                    ``(I) The pharmacist must offer to 
                                discuss (in person, face-to-face 
                                whenever practicable, or through access 
                                to a telephone service which is toll 
                                free for long-distance calls) with each 
                                individual receiving covered outpatient 
                                drugs or caregiver of such individual 
                                who presents a prescription, matters 
                                which in the exercise of the 
                                pharmacist's professional judgment 
                                (consistent with any applicable State 
                                law respecting the provision of such 
                                information), the pharmacist deems 
                                significant, which may include the 
                                following:
                                            ``(aa) The name and 
                                        description of the medication.
                                            ``(bb) The dosage form, 
                                        dosage, route of 
                                        administration, and duration of 
                                        drug therapy.
                                            ``(cc) Special directions 
                                        and precautions for 
                                        preparation, administration, 
                                        and use by the patient.
                                            ``(dd) Common severe side 
                                        or adverse effects or 
                                        interactions and therapeutic 
                                        contraindications that may be 
                                        encountered, including their 
                                        avoidance, and the action 
                                        required if they occur.
                                            ``(ee) Techniques for self-
                                        monitoring drug therapy.
                                            ``(ff) Proper storage.
                                            ``(gg) Prescription refill 
                                        information.
                                            ``(hh) Action to be taken 
                                        in the event of a missed dose.
                                    ``(II) A reasonable effort must be 
                                made by the pharmacist to obtain, 
                                record, and maintain at least the 
                                following information regarding 
                                individuals receiving benefits under 
                                this title:
                                            ``(aa) Name, address, 
                                        telephone number, date of birth 
                                        (or age) and gender.
                                            ``(bb) Individual history 
                                        where significant, including 
                                        disease state or states, known 
                                        allergies and drug reactions, 
                                        and a comprehensive list of 
                                        medications and relevant 
                                        devices.
                                            ``(cc) Pharmacist comments 
                                        relevant to the individual's 
                                        drug therapy.
                        Nothing in this clause shall be construed as 
                        requiring a pharmacist to provide consultation 
                        when an individual receiving benefits under 
                        this title or caregiver of such individual 
                        refuses such consultation.
                    ``(B) Retrospective drug use review.--The program 
                shall provide for the ongoing periodic examination of 
                claims data and other records in order to identify 
                patterns of fraud, abuse, gross overuse, or 
                inappropriate or medically unnecessary care, among 
                physicians, pharmacists and individuals receiving 
                benefits under this title, or associated with specific 
                drugs or groups of drugs.
                    ``(C) Standards.--
                            ``(i) In general.--The program shall, on an 
                        ongoing basis, assess data on drug use against 
                        explicit standards determined by the Secretary 
                        upon the recommendations of the Drug Use Review 
                        Board (using the sources described in clause 
                        (ii) as the basis for determining the standards 
                        for such assessment). Such assessment shall 
                        include monitoring for therapeutic 
                        appropriateness, overutilization and 
                        underutilization, appropriate use of generic 
                        products, therapeutic duplication, drug-disease 
                        contraindications, drug-drug interactions, 
                        incorrect drug dosage or duration of drug 
                        treatment, and clinical abuse or misuse, and 
                        introduce remedial strategies in order to 
                        improve the quality of care and to conserve 
                        program funds or personal expenditures.
                            ``(ii) Sources.--The sources described in 
                        this clause are the American Hospital Formulary 
                        Service Drug Information, the United States 
                        Pharmacopeia-Drug Information, the American 
                        Medical Association Drug Evaluations, peer-
                        reviewed medical literature as approved by the 
                        Secretary, and other sources as determined by 
                        the Secretary in consultation with the Drug Use 
                        Review Board.
                    ``(D) Education and intervention.--The program 
                shall provide for, either directly or through contracts 
                with accredited health care educational institutions, 
                medical societies or pharmacists' associations or 
                societies, or other organizations as specified by the 
                Secretary, and using data provided by the Drug Use 
                Review Board on common drug therapy problems--
                            ``(i) ongoing educational outreach programs 
                        to educate practitioners on common drug therapy 
                        problems with the aim of improving prescribing 
                        or dispensing practices; and
                            ``(ii) ongoing interventions for physicians 
                        and pharmacists targeted toward common drug 
                        therapy problems or individuals identified in 
                        the course of retrospective drug use reviews 
                        performed under this subsection, including, in 
                        appropriate instances, at least the following:
                                    ``(I) Written, oral, or electronic 
                                reminders containing patient-specific 
                                or drug-specific (or both) information 
                                and suggested changes in prescribing or 
                                dispensing practices, communicated in a 
                                manner designed to ensure the privacy 
                                of patient-related information.
                                    ``(II) Use of face-to-face 
                                discussions between health care 
                                professionals who are experts in 
                                rational drug therapy and selected 
                                prescribers and pharmacists who have 
                                been targeted for educational 
                                intervention, including discussion of 
                                optimal prescribing, dispensing, or 
                                pharmacy care practices, and follow up 
                                face-to-face discussions.
                                    ``(III) Intensified review or 
                                monitoring of selected prescribers or 
                                dispensers.
                    ``(E) High risk individuals.--The program shall 
                provide for case management of drug therapy (under 
                protocols established by the Secretary) for individuals 
                receiving covered drugs who are identified as being at 
                high risk for potential medication-related problems.
                    ``(F) Interchangeable pharmaceuticals.--The program 
                shall when appropriate provide for the interchange of 
                therapeutically equivalent pharmaceutical products by a 
                pharmacist after approval of the prescribing physician.
                    ``(G) Patient incentive compliance programs.--The 
                program shall provide for the management of patient 
                incentive compliance programs.
                    ``(H) Other services.--The program shall contain 
                such other services that the Secretary finds to be 
                standard of pharmacy practice consistent with the 
                provision of pharmaceutical care.
    ``(b) Drug Use Review Board.--
            ``(1) Establishment.--The Secretary shall establish a Drug 
        Use Review Board (hereafter in this subsection referred to as 
        the `DUR Board') without regard to the provisions of title 5, 
        United States Code, governing appointments in the competitive 
        service.
            ``(2) Membership.--
                    ``(A) Composition.--The DUR Board shall consist of 
                9 members of whom--
                            ``(i) 4 are individuals who are practicing 
                        physicians;
                            ``(ii) 4 are individuals who are practicing 
                        pharmacists; and
                            ``(iii) 1 is an individual who receives 
                        benefits under this title.
                    ``(B) Terms.--Members of the DUR Board shall first 
                be appointed by no later than July 1, 1995, for a term 
                of 3 years, except that the Director may provide 
                initially for such shorter terms as will ensure that 
                (on a continuing basis) the terms of no more than 4 
                members expire in any 1 year.
            ``(3) Chair and vice chair.--The DUR Board shall select a 
        Chair and Vice Chair from among its members.
            ``(4) Meetings.--
                    ``(A) In general.--The DUR Board shall meet at the 
                call of the Chair.
                    ``(B)  Initial meeting.--No later than 30 days 
                after the date on which all members of the DUR Board 
                have been appointed, the DUR Board shall hold its first 
                meeting.
                    ``(C) Quorum.--A majority of the members of the DUR 
                Board shall constitute a quorum, but a lesser number of 
                members may hold hearings.
            ``(5) Duties of the dur board.--The DUR Board shall--
                    ``(A) recommend policies and procedures to the 
                Secretary for the operation of the outpatient 
                prescription drug program for the purpose of optimizing 
                therapeutic outcomes in individuals who receive 
                benefits under this part;
                    ``(B) suggest appropriate model criteria and 
                standards of prescribing and dispensing of covered 
                outpatient prescription drugs (prioritized by medical 
                relevance) through an evaluation of the FDA approved 
                labeling of the covered outpatient drug, the medical 
                literature, other clinical data available from 
                pharmaceutical manufacturers, and expert advice;
                    ``(C) categorize covered outpatient drugs by 
                therapeutic class, and evaluate the relative efficacy 
                and cost-effectiveness of new and existing 
                pharmaceuticals within established and new therapeutic 
                classes of drugs for the outpatient drug program under 
                this part;
                    ``(D) make recommendations, based on the clinical 
                literature, of classes of pharmaceuticals or specific 
                pharmaceuticals that should be added to or deleted from 
                the list of excludable drugs for the medicaid program 
                under section 1927(d);
                    ``(E) recommend to the Secretary those covered 
                outpatient drugs which, based on data collected about 
                the potential for the drug's clinical misuse, abuse, or 
                economic impact on the medicare program under this 
                title should be subject to prescribing protocols or 
                treatment guidelines;
                    ``(F) assist in the development of pharmaceutical 
                care programs for recipients of outpatient drugs under 
                this part; and
                    ``(G) suggest operational and evaluative 
                performance standards for the drug use review program 
                under this section and the State drug use review 
                programs under title XIX.
            ``(6) Reports.--
                    ``(A) Annual reports.--Not later than July 1, 1996, 
                and annually thereafter on July 1, the DUR Board shall 
                deliver an annual report to Congress, the Secretary, 
                the States, and other interested parties which shall 
                contain recommendations for appropriate administrative 
                and legislative action that will--
                            ``(i) ensure the cost-effectiveness and 
                        quality of care of drug therapy provided under 
                        this title and title XIX; and
                            ``(ii) improve the effectiveness of the 
                        drug use review program under this title and 
                        the State drug use review programs under title 
                        XIX.
            ``(7) Special reports.--The DUR Board shall deliver special 
        reports on any of the matters under paragraph (5) at the 
        request of Congress.
            ``(8) Certain provisions applicable.--Section 1845(c)(1) 
        shall apply to the DUR Board in the same manner as it applies 
        to the Physician Payment Review Commission.
            ``(9) Authorization of appropriations.--There are 
        authorized to be appropriated such sums as may be necessary to 
        carry out the provisions of this subsection.''.

                       Subtitle C--Effective Date

SEC. 121. EFFECTIVE DATE.

    Except as otherwise provided, the amendments made by this title 
shall apply to items and services furnished on or after January 1, 
1995.

                       TITLE II--MEDICAID PROGRAM

SEC. 201. NO FEDERAL FINANCIAL PARTICIPATION WITH RESPECT TO CERTAIN 
              INNOVATOR MULTIPLE SOURCE DRUGS.

    (a) In General.--Section 1903(i) (42 U.S.C. 1396b(i)) is amended--
            (1) in paragraph (14), by striking the period at the end 
        and inserting a semicolon; and
            (2) by adding at the end the following new paragraphs:
            ``(15) with respect to an innovator multiple source drug 
        unless--
                    ``(A) a written prescription for the drug contains, 
                in the handwriting of the physician or other person 
                prescribing the drug, the phrase `brand medically 
                necessary' indicating that a particular brand of the 
                innovator drug product must be dispensed; and
                    ``(B) the physician or other person prescribing the 
                drug provides a medical justification to the State 
                agency for prescribing such drug; or
            ``(16) with respect to expenditures made by the State for 
        the dispensing of innovator multiple source drugs (determined 
        after taking into account any rebates with respect to such 
        drugs under section 1927) that exceed an amount equal to--
                    ``(A) for 1995, 15 percent, and
                    ``(B) for 1996 and succeeding years, 10 percent,
        of the expenditures made by the State for the dispensing of all 
        multiple source drugs (determined after taking into account any 
        rebates with respect to such drugs under section 1927).''.
    (b) Effective Date.--The amendments made by subsection (a) shall be 
effective for calendar quarters beginning on or after January 1, 1995.

SEC. 202. REBATE FOR CERTAIN COVERED OUTPATIENT DRUGS.

    (a) In General.--Section 1927(c)(3)(B) (42 U.S.C. 1396r-8(c)(3)(B)) 
is amended to read as follows:
                    ``(B) Applicable percentage.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), for purposes of subparagraph 
                        (A)(i), the `applicable percentage' for rebate 
                        periods beginning--
                                    ``(I) before January 1, 1994, is 10 
                                percent, and
                                    ``(II) after December 31, 1993, is 
                                11 percent.
                            ``(ii) Special rule.--For purposes of 
                        subparagraph (A)(i), if a covered outpatient 
                        drug is a noninnovator multiple source drug and 
                        the average manufacturer price of such drug 
                        does not exceed 50 percent of the average 
                        manufacturer price for the corresponding 
                        innovator multiple source drug, the `applicable 
                        percentage' for rebate periods beginning--
                                    ``(I) after December 31, 1994, and 
                                before January 1, 1996, is 9 percent,
                                    ``(II) after December 31, 1995, and 
                                before January 1, 1997, is 7 percent, 
                                and
                                    ``(III) after December 31, 1996, is 
                                5 percent.''.
    (b) Effective Date.--The amendments made by subsection (a) shall be 
effective for rebate periods beginning after December 31, 1994.

SEC. 203. STATE REGULATION OF OUTPATIENT PRESCRIPTION DRUG BENEFITS 
              COVERED BY HEALTH CARE PLANS.

    (a) In General.--Title XIX (42 U.S.C. 1396 et seq.) is amended--
            (1) by redesignating section 1931 as section 1932; and
            (2) by inserting after section 1930 the following new 
        section:

``state regulation of outpatient prescription drug benefits covered by 
                           health care plans

    ``Sec. 1931. No payment shall be made to a State under section 1903 
for any calendar quarter in which such State fails to have in effect 
regulations requiring each health care plan offered in such State that 
covers outpatient prescription drugs--
            ``(1) to establish a pharmacy and therapeutics committee or 
        drug use review board consisting of physicians and pharmacists 
        which shall make recommendations to the plan in order to assure 
        that outpatient prescription drugs used by individuals enrolled 
        in the plan are medically appropriate and likely to result in 
        positive medical outcomes;
            ``(2) to establish a therapeutic formulary of outpatient 
        prescription drugs which are approved by the pharmacy and 
        therapeutics committee or drug use review board for use by 
        individuals enrolled in the plan;
            ``(3) to establish a pharmaceutical care services program 
        which shall ensure that services provided by a pharmacist 
        licensed to practice in the State result in positive medical 
        and therapeutic outcomes and which shall include--
                    ``(A) drug use review including--
                            ``(i) prospective review consisting of 
                        counseling provided by pharmacists to 
                        individuals enrolled in the plan on the 
                        appropriate use of outpatient prescription 
                        drugs and identification and avoidance of 
                        potential adverse medication-related outcomes 
                        before an outpatient prescription drug is 
                        dispensed to an individual enrolled in the 
                        plan;
                            ``(ii) retrospective review consisting of 
                        an organized process to collect and analyze 
                        data concerning the drug use patterns of 
                        individuals enrolled in the plan and provider 
                        prescribing and dispensing patterns under the 
                        plan; and
                            ``(iii) education of, and interventions 
                        for, health care professionals to provide for 
                        optimal use of outpatient prescription drugs 
                        among individuals enrolled in the plan;
                    ``(B) management of drug therapy and case 
                management of patients that are identified as at high 
                risk for potential medication-related problems;
                    ``(C) preapproved or protocol-approved interchange 
                of pharmaceutical products;
                    ``(D) management of patient compliance incentive 
                programs; and
                    ``(E) other services that are consistent with 
                standard pharmacy practice and consistent with 
                providing pharmaceutical care; and
            ``(4) to establish a system under which any pharmacist who 
        provides outpatient prescription drugs to individuals enrolled 
        in the plan is provided payment for services required to comply 
        with any requirements imposed on such pharmacist by this 
        section.''.
    (b) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by subsection (a) shall be effective for 
        calendar quarters beginning on or after January 1, 1996.
            (2) Delay if state legislation required.--In the case of a 
        State which the Secretary determines requires State legislation 
        (other than legislation authorizing or appropriating funds) in 
        order to comply with the amendments made by subsection (a), the 
        State shall not be regarded as failing to comply with such 
        amendments solely on the basis of its failure to meet the 
        requirements of such amendments before the first day of the 
        first calendar quarter beginning after the close of the first 
        regular session of the State legislature that begins after the 
        date of the enactment of this Act. For purposes of the 
        preceding sentence, in the case of a State that has a 2-year 
        legislative session, each year of such session shall be deemed 
        to be a separate regular session of the State legislature.

                         TITLE III--COMMISSIONS

SEC. 301. PHARMACEUTICAL MARKETPLACE INFORMATION COMMISSION.

    Part A of title XI (42 U.S.C. 1301 et seq.), as amended by section 
13581(a) of the Omnibus Budget Reconciliation Act of 1993, is amended 
by adding at the end the following new section:

          ``pharmaceutical marketplace information commission

    ``Sec. 1145. (a) In General.--
            ``(1) Establishment.--The Secretary shall provide for the 
        appointment of the Pharmaceutical Marketplace Information 
        Commission (in this section referred to as the `Commission'), 
        without regard to the provisions of title 5, United States 
        Code, governing appointments in the competitive service.
            ``(2) Membership.--The Commission shall consist of 9 
        individuals. The membership of the Commission shall include 
        recognized experts in the fields of pharmacoeconomics, 
        industrial cost accounting, medicine, pharmacy, and science, a 
        consumer, a representative of a patient advocacy group.
            ``(3) Terms.--Members of the Commission shall first be 
        appointed by no later than July 1, 1995, for a term of 3 years, 
        except that the Director may provide initially for such shorter 
        terms as will ensure that (on a continuing basis) the terms of 
        no more than 4 members expire in any 1 year.
            ``(4) Chair and vice chair.--The Commission shall select a 
        Chair and Vice Chair from among its members.
            ``(5) Meetings.--
                    ``(A) In general.--The Commission shall meet at the 
                call of the Chair.
                    ``(B)  Initial meeting.--No later than 30 days 
                after the date on which all members of the Commission 
                have been appointed, the Commission shall hold its 
                first meeting.
                    ``(C) Quorum.--A majority of the members of the 
                Commission shall constitute a quorum, but a lesser 
                number of members may hold hearings.
    ``(b) Duties of the Commission.--The Commission shall have the 
following duties:
            ``(1) Domestic pharmaceutical prices.--
                    ``(A) Publication of pricing information.--The 
                Commission shall annually publish the weighted average 
                price of each dosage form and strength of each single 
                source drug and innovator multiple source drug sold to 
                all purchasers of such drug in the United States and 
                the average manufacturer's price for each such drug 
                distributed to the retail class of trade.
                    ``(B) Information source on price concessions.--The 
                Commission shall--
                            ``(i) serve as a source of information for 
                        purchasers on the policies and procedures of 
                        drug manufacturers concerning the terms under 
                        which manufacturers provide rebates, discounts 
                        and other price concessions to pharmaceutical 
                        purchasers; and
                            ``(ii) receive and investigate information 
                        (provided by purchasers) relating to instances 
                        in which manufacturers are not offering and 
                        providing products on similar terms and 
                        conditions to all purchasers.
            ``(2) International pharmaceutical prices.--The Commission 
        shall monitor, analyze, and publish price information relating 
        to currently marketed and new pharmaceutical prices for drugs, 
        biologicals, and vaccines in other industrialized nations, 
        including those nations described in section 802(b)(4)(A) of 
        the Federal Food, Drug, and Cosmetic Act. Such information 
        shall include the average price in all classes of trade, and 
        the average price sold to the retail class of trade in each 
        country. The Commission shall also monitor mechanisms used by 
        other industrialized nations to contain pharmaceutical 
        expenditures.
            ``(3) Prices of certain pharmaceuticals.--
                    ``(A) In general.--The Commission shall review the 
                price of drugs and biologicals and provide information 
                to purchasers to determine whether the price of the 
                drug or biological is reasonable if such drug or 
                biological product--
                            ``(i)(I) is a new drug or biological which 
                        is a significant clinical advance or 
                        breakthrough over pharmaceutical products 
                        currently available to treat a particular 
                        condition, whether or not the product is a new 
                        chemical or biological entity;
                            ``(II) a new drug or biological which has 
                        received a designation of 1-AA or 1-P by the 
                        Food and Drug Administration;
                            ``(III) is an orphan drug product;
                            ``(IV) is a currently marketed drug for 
                        which there are no other therapeutic 
                        alternatives on the market; or
                            ``(V) the Federal Government had a 
                        substantial role in the development of the drug 
                        or biological, and such support was essential 
                        to the approval of the drug by the Food and 
                        Drug Administration; and
                            ``(ii) a request is made to review the 
                        price of such drug or biological by--
                                    ``(I) the Secretary;
                                    ``(II) a member of the Commission;
                                    ``(III) not less than 3 groups 
                                representing consumers or patient 
                                advocates, or
                                    ``(IV) not less than three health 
                                plans providing such drug or 
                                biological, where such plans present 
                                evidence that the price is excessive.
                    ``(B) Guidelines for determination.--The Commission 
                shall use the following information to determine 
                whether the price of the drug or biological is 
                reasonable:
                            ``(i) Domestic comparison.--The Commission 
                        shall compare the price of the drug or 
                        biological with the price of drugs or 
                        biologicals in the same therapeutic class used 
                        to treat similar therapeutic conditions in the 
                        United States.
                            ``(ii) International comparison.--The 
                        Commission shall compare the price of the drug 
                        or biological with the price of the drug or 
                        biological in section 802(b)(4)(A) of the 
                        Federal Food, Drug, and Cosmetic Act.
                            ``(iii) Manufacturer information.--The 
                        Commission shall consider the following 
                        information provided by the manufacturer of the 
                        drug or biological:
                                    ``(I) The manufacturer's costs of 
                                manufacturing, researching, and 
                                developing the product.
                                    ``(II) The anticipated revenue from 
                                the sales of the product in the United 
                                States and international markets.
                                    ``(III) The manufacturer's 
                                anticipated costs of marketing and 
                                advertising for the product.
                                    ``(IV) Anticipated revenue from 
                                off-label uses of the product.
                                    ``(V) Extraordinary circumstances 
                                that justify the price charged in the 
                                United States market.
                                    ``(VI) the expected period of 
                                patent life or market exclusivity for 
                                the product.
                                    ``(VII) Profit expected by the 
                                manufacturer as a result of the sales 
                                of the product in the United States and 
                                other industrialized nations.
                                    ``(VIII) Other relevant factors 
                                that the manufacturer would like the 
                                Commission to consider.
                            ``(iv) Investigations paid for by federal 
                        government.--Funds expended by the Federal 
                        Government either directly or indirectly to 
                        support investigations that were significant to 
                        the application made to the Food and Drug 
                        Administration to approve the drug or 
                        biological.
                            ``(v) Cost-effectiveness.--The cost-
                        effectiveness of the pharmaceutical relative to 
                        other medical treatment alternatives, including 
                        nonpharmaceutical treatments, such as devices.
                            ``(vi) Quality of life improvement.--The 
                        improvements in the quality of life offered by 
                        the product, including the ability to return to 
                        work and other appropriate measures of 
                        improvement in the quality of life.
                    ``(C) Determination.--
                            ``(i) Hearing.--The Commission shall hold a 
                        public hearing to collect information and data 
                        from groups interested in the price of the drug 
                        or biological before making a report described 
                        in subparagraph (B).
                            ``(ii) Report.--The Commission shall 
                        publish a report on the reasonableness of a 
                        drug or biological as determined under this 
                        paragraph, with all available information and 
                        justification for its findings.
                            ``(iii) Appeal.--The Commission shall 
                        develop a process for an interested party to 
                        appeal the report of the Commission.
                            ``(iv) No binding effect.--No report of the 
                        Commission issued under this subparagraph shall 
                        have binding effect upon any manufacturer or 
                        purchaser.
                    ``(D) Confidentiality of proprietary information 
                provided to the commission.--Any proprietary 
                information provided by a manufacturer to the 
                Commission under this subsection shall be held 
                confidential.
            ``(4) Utilization of generic pharmaceuticals.--The 
        Commission shall--
                    ``(A) monitor the rate of dispensing generic drugs 
                in the United States;
                    ``(B) publish (at least semiannually) and make 
                available to health care providers information about 
                the availability and relative costs of generic drugs 
                compared to the costs for the equivalent innovator 
                versions of these drugs; and
                    ``(C) monitor the pricing patterns of generic 
                drugs, and the extent to which domestic and 
                international trade policies affect the ability of 
                generic pharmaceutical manufacturers to obtain 
                materials for the purpose of manufacturing and selling 
                generic drugs in the United States.
            ``(5) Pharmaceutical patent extensions.--Not less than 90 
        days before the expiration of a pharmaceutical patent for which 
        the holder of the patent has sought an extension of that 
        patent, the Commission shall provide to the Congress and the 
        Office of Patents and Trademarks an analysis of the feasibility 
        and desirability of extending the patent as provided in the 
        terms of the Drug Price Competition and Patent Term Restoration 
        Act of 1984.
            ``(6) Pharmacoeconomic and cost-effectiveness analysis.--
        The Commission shall--
                    ``(A) develop a standard methodology for the 
                purpose of conducting pharmacoeconomic and cost-
                effectiveness analyses of pharmaceutical and biological 
                products; and
                    ``(B) collect and disseminate information to 
                purchasers about the relative cost-effectiveness and 
                cost-benefit of various pharmaceutical products as 
                compared to other pharmaceutical products and other 
                medical technologies, including making evaluations of 
                the new savings to the health care system as a result 
                of new pharmaceutical and biological products.
    ``(c) Certain Provisions Applicable.--Section 1845(c)(1) shall 
apply to the Commission in the same manner as it applies to the 
Physician Payment Review Commission.
    ``(d) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary to carry out the provisions 
of this section.''.

SEC. 302. PRESCRIPTION DRUG PAYMENT REVIEW COMMISSION.

    Part A of title XI (42 U.S.C. 1301 et seq.), as amended by section 
301, is amended by adding at the end the following new section:

             ``prescription drug payment review commission

    ``Sec. 1146. (a) Establishment.--The Director of the Congressional 
Office of Technology Assessment (in this section referred to as the 
`Director' and the `Office', respectively) shall provide for the 
appointment of a Prescription Drug Payment Review Commission (in this 
section referred to as the `Commission') without regard to the 
provisions of title 5, United States Code, governing appointments in 
the competitive service.
    ``(b) Membership.--
            ``(1) Composition.--The Commission shall consist of 11 
        individuals with expertise in the provision and financing of 
        prescription drugs under federally funded health care programs.
            ``(2) Terms.--Members of the Commission shall first be 
        appointed by no later than July 1, 1995 for a term of 3 years, 
        except that the Director may provide initially for such shorter 
        terms as will ensure that (on a continuing basis) the terms of 
        no more than 4 members expire in any 1 year.
            ``(3) Chair and vice chair.--The Commission shall select a 
        Chair and Vice Chair from among its members.
    ``(c) Meetings.--
            ``(1) In general.--The Commission shall meet at the call of 
        the Chair.
            ``(2)  Initial meeting.--No later than 30 days after the 
        date on which all members of the Commission have been 
        appointed, the Commission shall hold its first meeting.
            ``(3) Quorum.--A majority of the members of the Commission 
        shall constitute a quorum, but a lesser number of members may 
        hold hearings.
    ``(d) Duties of the Commission.--
            ``(1) In general.--The Commission shall--
                    ``(A) monitor the scope of coverage, reimbursement, 
                expenditure levels, and financing of prescription drugs 
                under Federal health care programs;
                    ``(B) monitor the prices for prescription and 
                nonprescription drugs (on the retail level and 
                manufacturer level) used in Federal health care 
                programs;
                    ``(C) recommend modifications and changes in cost 
                containment measures and payment and reimbursement 
                rates under Federal health care programs;
                    ``(D) monitor and analyze the extent to which 
                pharmaceuticals and pharmacy services are available to 
                specific populations, including citizens in rural areas 
                of the United States;
                    ``(E) evaluate technologies available for efficient 
                administration of Federal health care programs and 
                other third party prescription drug programs; and
                    ``(F) determine the annual cost of dispensing a 
                prescription for various classes of pharmacies to 
                assist in the development of reimbursement and payment 
                rates to providers.
            ``(2) Reports.--
                    ``(A) Annual reports.--Not later than July 1, 1996, 
                and annually thereafter on July 1, the Commission shall 
                deliver an annual report to Congress which shall 
                contain the findings and conclusions of the Commission, 
                on each of the matters under paragraph (1).
                    ``(B) Special reports.--The Commission shall 
                deliver special reports on any of the matters under 
                paragraph (1) at the request of Congress.
    ``(e) Certain Provisions Applicable.--Section 1845(c)(1) shall 
apply to the Commission in the same manner as it applies to the 
Physician Payment Review Commission.
    ``(f) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary to carry out the provisions 
of this section.''.

              TITLE IV--ADDITIONS TO THE MASTER AGREEMENT

SEC. 401. EQUAL ACCESS TO DISCOUNTS.

    (a) In General.--Section 8126(a) of title 38, United States Code, 
as amended by section 101(b), is amended--
            (1) by striking ``and'' at the end of paragraph (3);
            (2) by redesignating paragraph (4) as paragraph (5); and
            (3) by inserting after paragraph (3) the following new 
        paragraph:
            ``(4)(A) each manufacturer of single source and innovator 
        multiple source drugs (as described in section 1927(k) of the 
        Social Security Act) shall offer such pharmaceuticals for sale 
        to every purchaser on equal terms and conditions including any 
        rebates, free merchandise, discounts, and other similar 
        adjustments (excluding any terms offered to the Department of 
        Veterans Affairs, the Department of Defense, entities that 
        receive funding under the Public Health Service, any other 
        entity receiving discounts under section 340(b) of the Public 
        Health Service Act, and any other Federal or State government 
        agency that directly procures pharmaceuticals);
            ``(B) each manufacturer of single source and innovator 
        multiple source drugs may only offer rebates, free merchandise, 
        discounts, and other similar adjustments, if the manufacturer 
        experiences savings as a result of efficiencies in purchasing, 
        such as volume buying (including programs to increase volume 
        buying through influencing physician prescribing practices or 
        by making an agreement to place drugs on a formulary), prompt 
        delivery, single-site delivery, and prompt payment;
            ``(C) each manufacturer of single source and innovator 
        multiple source drugs shall make information describing the 
        terms and conditions described in subparagraph (A) available to 
        the public and the Pharmaceutical Marketplace Information 
        Commission (established under section 1145 of the Social 
        Security Act); and
            ``(D) each manufacturer that knowingly violates the 
        requirement under the preceding subparagraphs shall be subject 
        to a civil fine of not more than $100,000 per violation; and''.

SEC. 402. PROVISION OF INFORMATION TO THE PHARMACEUTICAL MARKETPLACE 
              INFORMATION COMMISSION.

    (a) In General.--Section 8126(a) of title 38, United States Code, 
as amended by sections 101(b) and 401, is amended--
            (1) by striking ``and'' at the end of paragraph (4);
            (2) by redesignating paragraph (5) as paragraph (6); and
            (3) by inserting after paragraph (4) the following new 
        paragraph:
            ``(5)(A) each manufacturer of a single source and innovator 
        multiple source drug (as defined in section 1927(k) of the 
        Social Security Act) shall report to the Pharmaceutical 
        Marketplace Information Commission (established under section 
        1145 of the Social Security Act) such information as the 
        Commission may require to compile the data necessary to publish 
        the domestic pricing information described in section 
        1145(b)(1)(A) of the Social Security Act and the international 
        pricing information described in section 1145(b)(2) of such Act 
        no later than 30 days after the end of each calendar quarter, 
        and
            ``(B) each manufacturer shall make available to the 
        Pharmaceutical Marketplace Information Commission any 
        additional information required by the Commission; and''.

SEC. 403. CONFORMING AMENDMENTS.

    (a) Additional Requirements for Participation.--Section 8126(a)(6) 
of title 38, United States Code, as redesignated in section 402(a)(2), 
is amended by striking ``, and (3)'' and inserting ``(3), (4), and 
(5)''.
    (b) Amendments to Effective Date Provisions.--
            (1) Medicaid.--Section 1927(a) is amended--
                    (A) in paragraph (5)--
                            (i) in subparagraph (D), by striking 
                        ``title VI of the Veterans Health Care Act of 
                        1992'' and inserting ``the Pharmaceutical 
                        Marketplace Reform Act of 1994''; and
                            (ii) in subparagraph (E), by striking 
                        ``immediately after the enactment of this 
                        paragraph)'' and inserting ``immediately after 
                        the enactment of the Pharmaceutical Marketplace 
                        Reform Act of 1994)''; and
                    (B) in paragraph (6)--
                            (i) in subparagraph (B), by striking 
                        ``title VI of the Veterans Health Care Act of 
                        1992'' and inserting ``the Pharmaceutical 
                        Marketplace Reform Act of 1994''; and
                            (ii) in subparagraph (C), by striking 
                        ``immediately after the enactment of this 
                        paragraph)'' and inserting ``immediately after 
                        the enactment of the Pharmaceutical Marketplace 
                        Reform Act of 1994)''.
            (2) Public health service.--Section 340B(d) of the Public 
        Health Service Act is amended by striking ``the Veterans Health 
        Care Act of 1992'' and inserting ``the Pharmaceutical 
        Marketplace Reform Act of 1994''.
            (3) Veterans' affairs.--Section 8126(g) of title 38, United 
        States Code, is amended--
                    (A) in paragraph (1), by inserting ``, except that 
                such reference shall include any amendments to the 
                Social Security Act made by the Pharmaceutical 
                Marketplace Reform Act of 1994'' before the period at 
                the end; and
                    (B) in paragraph (2)--
                            (i) by striking ``this section)'' and 
                        inserting ``the Pharmaceutical Marketplace 
                        Reform Act of 1994)''; and
                            (ii) by striking ``date of the enactment of 
                        this section'' and inserting ``date of the 
                        enactment of the the Pharmaceutical Marketplace 
                        Reform Act of 1994''.

SEC. 404. EFFECTIVE DATE.

    Except as otherwise provided, the amendments made by this title 
shall apply on and after December 31, 1994.

                                 <all>

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```