II

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.

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

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

4 CONTENTS.

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

6 ‘‘Pharmaceutical Marketplace Reform Act of 1994’’.

7 (b) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex8 cept as otherwise specifically provided, whenever in this

9 Act an amendment is expressed in terms of an amendment

10 to or repeal of a section or other provision, the reference
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1 shall be considered to be made to that section or other

2 provision of the Social Security Act.

3 (c) TABLE OF CONTENTS.—The table of contents for

4 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.

5 SEC. 2. FINDINGS.

6 The Congress finds that—

7 (1) any medicare outpatient prescription drug

8 benefit should be structured to take advantage of
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1 market forces and should use the same principles as

2 other managed care pharmacy benefit programs;

3 (2) there is a lack of information in the health

4 care system about the price and quality of pharma5 ceutical products, resulting in a significant level of

6 market distortions and a lack of price competition;

7 (3) the availability of more information about

8 price and quality of medications would make the

9 pharmaceutical marketplace more competitive, and

10 minimize the need for more regulatory pharma11 ceutical cost containment mechanisms;

12 (4) in the absence of competing new pharma13 ceutical products in the market, there is a need for

14 the health care system to have information about the

15 price of new pharmaceutical products to assure that

16 the prices are reasonable;

17 (5) price concessions and discounting offered by

18 pharmaceutical manufacturers have not been offered

19 on equal terms to all purchasers, resulting in higher

20 prices for pharmaceutical products at the retail level,

21 and ultimately for consumers; and

22 (6) under health care reform, all Americans

23 should have access to high quality drug use review

24 and coordinated pharmaceutical care services.
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1 SEC. 3. PURPOSES.

2 The purposes of this Act are—

3 (1) to establish the medicare outpatient pre4 scription drug program as a pharmaceutical care

5 benefit using principles of managed care;

6 (2) to improve the quality and timeliness of in7 formation provided in the health care marketplace

8 about the relative price and value of currently mar9 keted and new pharmaceutical products;

10 (3) to assure that prices for new breakthrough

11 pharmaceutical products in the United States are

12 reasonable;

13 (4) to provide that all pharmaceutical buyers

14 have access to manufacturer price discounts and

15 concessions on equal terms and conditions; and

16 (5) to assure that drug use review and pharma17 ceutical care becomes an integral part of the delivery

18 of prescription drugs in health care programs.

19 TITLE I—MEDICARE PROGRAM

20 Subtitle A—Covered Outpatient

21 Prescription Drugs and Rebates

22 SEC. 101. COVERED OUTPATIENT PRESCRIPTION DRUGS.

23 (a) COVERED OUTPATIENT DRUGS AS MEDICAL AND

24 OTHER HEALTH SERVICES.—
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1 (1) IN GENERAL.—Section 1861(s)(2)(J) (42

2 U.S.C. 1395x(s)(2)(J)) is amended to read as fol3 lows:

4 ‘‘(J) covered outpatient drugs;’’.

5 (2) DEFINITION OF COVERED OUTPATIENT

6 DRUGS.—Section 1861(t) (42 U.S.C. 1395x(t)), as

7 amended by section 13553(b) of the Omnibus Budg8 et Reconciliation Act of 1993 (hereafter in this sub9 title referred to as ‘‘OBRA–1993’’), is amended—

10 (A) in the heading, by adding at the end

11 the following: ‘‘; Covered Outpatient Drugs’’;

12 (B) in paragraph (1), by striking ‘‘para13 graph (2)’’ and inserting ‘‘the succeeding para14 graphs of this subsection’’; and

15 (C) by inserting after paragraph (2) the

16 following new paragraph:

17 ‘‘(3) The term ‘covered outpatient drugs’ means—

18 ‘‘(A) drugs and biologicals (which cannot, as

19 determined in accordance with regulations, be self20 administered) furnished as incident to a physician’s

21 professional service, of kinds which are commonly

22 furnished in physicians’ offices and are commonly ei23 ther rendered without charge or included in the phy24 sician’s bill;
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1 ‘‘(B) prescription drugs used in immuno2 suppressive therapy furnished to an individual who

3 receives an organ transplant for which payment is

4 made under this title, but only in the case of drugs

5 furnished—

6 ‘‘(i) before 1995, within 12 months after

7 the date of the transplant procedure,

8 ‘‘(ii) during 1995, within 18 months after

9 the date of the transplant procedure,

10 ‘‘(iii) during 1996, within 24 months after

11 the date of the transplant procedure,

12 ‘‘(iv) during 1997, within 30 months after

13 the date of the transplant procedure, and

14 ‘‘(v) during any year after 1997, within 36

15 months after the date of the transplant proce16 dure;

17 ‘‘(C) erythropoietin—

18 ‘‘(i) for dialysis patients competent to use

19 such drug without medical or other supervision

20 with respect to the administration of such drug,

21 subject to methods and standards established

22 by the Secretary by regulation for the safe and

23 effective use of such drug; and

24 ‘‘(ii) administered in a renal dialysis facil25 ity.
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1 ‘‘(D) an oral drug (which is approved by the

2 Federal Food and Drug Administration) prescribed

3 for use as an anticancer chemotherapeutic agent for

4 a given indication, and containing an active ingredi5 ent (or ingredients), which is the same indication

6 and active ingredient (or ingredients) as a drug

7 which the carrier determines would be covered pur8 suant to subparagraph (A) or section 1861(s)(2)(B)

9 if the drug could not be self-administered; and

10 ‘‘(E) any other outpatient drug or biological de11 scribed in section 1927(k) for which payment may

12 be specially allowed.’’.

13 (3) CONFORMING AMENDMENTS.—(A) Section

14 1861(s)(2) (42 U.S.C. 1395x(s)(2)), as amended by

15 section 13553 of OBRA–1993, is amended—

16 (i) in subparagraph (A), by striking ‘‘(in17 cluding drugs and biologicals which cannot, as

18 determined in accordance with regulations, be

19 self-administered)’’,

20 (ii) by adding ‘‘and’’ at the end of sub21 paragraph (O),

22 (iii) by amending subparagraph (P) to

23 read as follows:

24 ‘‘(P) items related to the administration of

25 erythropoietin.’’, and
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1 (iv) by striking subparagraph (Q).

2 (B) Section 1881(b)(1)(C) (42 U.S.C.

3 1395rr(b)(1)(C)), as amended by section 13566(a)

4 of OBRA–1993, is amended by striking ‘‘section

5 1861(s)(2)(P)’’ and inserting ‘‘section

6 1861(t)(3)(C)(i)’’.

7 (b) ADDITION OF MEDICARE TO MASTER PLAN RE8 QUIREMENTS.—Section 8126(a)(4) of title 38, United

9 States Code, is amended—

10 (1) by striking ‘‘or’’ at the end of subparagraph

11 (B);

12 (2) by striking the period at the end of sub13 paragraph (C) and inserting ‘‘, or’’; and

14 (3) by adding at the end the following new sub15 paragraph:

16 ‘‘(D) the medicare program under title

17 XVIII of the Social Security Act.’’.

18 SEC. 102. REBATES FOR COVERED OUTPATIENT DRUGS.

19 (a) IN GENERAL.—Part B of title XVIII is amended

20 by adding at the end the following new section:

21 ‘‘REBATES FOR COVERED OUTPATIENT DRUGS

22 ‘‘SEC. 1849. (a) REQUIREMENT FOR REBATE

23 AGREEMENT.—In order for payment to be available under

24 this part for a covered outpatient drug of a manufacturer

25 dispensed on or after January 1, 1995, the manufacturer

26 must have entered into and have in effect a rebate agree-
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1 ment with the Secretary meeting the requirements of sub2 section (b).

3 ‘‘(b) TERMS, IMPLEMENTATION, AND ENFORCEMENT

4 OF REBATE AGREEMENT.—

5 ‘‘(1) PERIODIC REBATES.—

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

7 under this section shall require the manufac8 turer to pay to the Secretary for each calendar

9 quarter, not later than 30 days after the date

10 of receipt of the information described in para11 graph (2) for such quarter, a rebate in an

12 amount determined under subsection (c) for all

13 covered outpatient drugs of the manufacturer

14 described in subparagraph (B).

15 ‘‘(B) DRUGS INCLUDED IN QUARTERLY

16 REBATE CALCULATION.—Drugs subject to re17 bate with respect to a calendar quarter are cov18 ered outpatient drugs which are dispensed by a

19 pharmacy during such quarter to individuals

20 (other than individuals enrolled with an eligible

21 organization with a contract under section

22 1876) eligible for benefits under this part, as

23 reported by such pharmacies to the Secretary.

24 ‘‘(2) INFORMATION FURNISHED TO MANUFAC25 TURERS.—
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1 ‘‘(A) IN GENERAL.—The Secretary shall

2 report to each manufacturer, not later than 60

3 days after the end of each calendar quarter, in4 formation on the total number, for each covered

5 outpatient drug, of units of each dosage form,

6 strength, and package size dispensed under the

7 plan during the quarter, on the basis of the

8 data described in paragraph (1)(B) reported to

9 the Secretary.

10 ‘‘(B) AUDIT.—The Comptroller General

11 may audit the records of the Secretary to the

12 extent necessary to determine the accuracy of

13 reports by the Secretary pursuant to subpara14 graph (A). Adjustments to rebates shall be

15 made to the extent determined necessary by the

16 audit to reflect actual units of drugs dispensed.

17 ‘‘(3) PROVISION OF PRICE INFORMATION BY

18 MANUFACTURER.—

19 ‘‘(A) QUARTERLY PRICING INFORMA20 TION.—Each manufacturer with an agreement

21 in effect under this section shall report to the

22 Secretary, not later than 30 days after the last

23 day of each calendar quarter, on the average

24 manufacturer retail price for each dosage form
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1 and strength of each covered outpatient drug

2 for the quarter.

3 ‘‘(B) BASE QUARTER PRICES.—Each man4 ufacturer of a covered outpatient drug with an

5 agreement under this section shall report to the

6 Secretary, by not later than 30 days after the

7 effective date of such agreement (or, if later, 30

8 days after the end of the base quarter), the av9 erage manufacturer retail price, for such base

10 quarter, for each dosage form and strength of

11 each such covered outpatient drug.

12 ‘‘(C) VERIFICATION OF AVERAGE MANU13 FACTURER RETAIL PRICE.—The Secretary may

14 inspect the records of manufacturers, and sur15 vey wholesalers, pharmacies, and institutional

16 purchasers of drugs, as necessary to verify

17 prices reported under subparagraph (A).

18 ‘‘(D) PENALTIES.—

19 ‘‘(i) CIVIL MONEY PENALTIES.—The

20 Secretary may impose a civil money pen21 alty on a manufacturer with an agreement

22 under this section—

23 ‘‘(I) for failure to provide infor24 mation required under subparagraph
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1 (A) on a timely basis, in an amount

2 up to $10,000 per day of delay;

3 ‘‘(II) for refusal to provide infor4 mation about charges or prices re5 quested by the Secretary for purposes

6 of verification pursuant to subpara7 graph (C), in an amount up to

8 $100,000; and

9 ‘‘(III) for provision, pursuant to

10 subparagraph (A) or (B), of informa11 tion that the manufacturer knows or

12 should know is false, in an amount up

13 to $100,000 per item of information.

14 Such civil money penalties are in addition

15 to any other penalties prescribed by law.

16 The provisions of section 1128A (other

17 than subsections (a) (with respect to

18 amounts of penalties or additional assess19 ments) and (b)) shall apply to a civil

20 money penalty under this subparagraph in

21 the same manner as such provisions apply

22 to a penalty or proceeding under section

23 1128A(a).

24 ‘‘(ii) SUSPENSION OF AGREEMENT.—

25 If a manufacturer with an agreement
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1 under this section has not provided infor2 mation required under subparagraph (A)

3 or (B) within 90 days of the deadline im4 posed, the Secretary may suspend the

5 agreement with respect to covered out6 patient drugs dispensed after the end of

7 such 90-day period and until the date such

8 information is reported (but in no case

9 shall a suspension be for less than 30

10 days).

11 ‘‘(4) LENGTH OF AGREEMENT.—

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

13 shall be effective for an initial period of not less

14 than one year and shall be automatically re15 newed for a period of not less than one year un16 less terminated under subparagraph (B).

17 ‘‘(B) TERMINATION.—

18 ‘‘(i) BY THE SECRETARY.—The Sec19 retary may provide for termination of a re20 bate agreement for violation of the require21 ments of the agreement or other good

22 cause shown. Such termination shall not be

23 effective earlier than 60 days after the

24 date of notice of such termination. The

25 Secretary shall afford a manufacturer an
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1 opportunity for a hearing concerning such

2 termination, but such hearing shall not

3 delay the effective date of the termination.

4 ‘‘(ii) BY A MANUFACTURER.—A man5 ufacturer may terminate a rebate agree6 ment under this section for any reason.

7 Any such termination shall not be effective

8 until the calendar quarter beginning at

9 least 60 days after the date the manufac10 turer provides notice to the Secretary.

11 ‘‘(iii) EFFECTIVE DATE OF TERMI12 NATION.—Any termination under this sub13 paragraph shall not affect rebates due

14 under the agreement before the effective

15 date of its termination.

16 ‘‘(iv) NOTICE TO PHARMACIES.—In

17 the case of a termination under this sub18 paragraph, the Secretary shall notify phar19 macies and physician organizations not less

20 than 30 days before the effective date of

21 such termination.

22 ‘‘(c) AMOUNT OF REBATE.—

23 ‘‘(1) BASIC REBATE.—Each manufacturer shall

24 remit a basic rebate to the Secretary for each cal25 endar quarter in an amount, with respect to each
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1 dosage form and strength of a covered outpatient

2 drug (except as provided under paragraph (5)),

3 equal to the product of—

4 ‘‘(A) the total number of units subject to

5 rebate for such quarter, as described in sub6 section (b)(1)(B); and

7 ‘‘(B) the greater of—

8 ‘‘(i)(I) in the case of a single source

9 and innovator multiple source drugs (as

10 defined in section 1927(k)(7)), 17 percent

11 of the average manufacturer retail price

12 for the calendar quarter;

13 ‘‘(II) in the case of a noninnovator

14 multiple source drug (as defined in section

15 1927(k)(7)) that has an average manufac16 turer retail price which is greater than 50

17 percent of the average manufacturer retail

18 price of the corresponding innovator mul19 tiple source drug, 11 percent of the aver20 age manufacturer retail price for such

21 noninnovator multiple source drug for the

22 calendar quarter;

23 ‘‘(ii) the amount determined pursuant

24 to paragraph (2); or
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1 ‘‘(iii) the amount determined pursuant

2 to paragraph (3).

3 ‘‘(2) NEGOTIATED REBATE AMOUNT FOR NEW

4 DRUGS.—

5 ‘‘(A) IN GENERAL.—The Secretary may

6 negotiate with the manufacturer a per-unit re7 bate amount, in accordance with this para8 graph, for any covered outpatient drug (except

9 as provided under paragraph (5)) first mar10 keted after June 30, 1993, if one of the follow11 ing criteria apply:

12 ‘‘(i) The medicare program will be a

13 primary payer for the drug or biological in

14 the outpatient market or will incur signifi15 cant expenditures for the drug or biologi16 cal.

17 ‘‘(ii) The Drug Use Review Board (es18 tablished under section 1850(b)) deter19 mined that the drug (whether or not a new

20 chemical entity) is a significant clinical or

21 therapeutic advance over other drugs on

22 the market to treat a particular medical

23 condition.

24 ‘‘(iii) The manufacturer has provided

25 insufficient evidence to the Drug Use Re-
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1 view Board that the drug is cost-effective

2 at the current price charged by the manu3 facturer.

4 ‘‘(iv) The price of the drug is higher

5 in other industrialized nations as compared

6 with the price in the United States.

7 ‘‘(v) The Federal Government had a

8 substantial role in the research and devel9 opment of the drug.

10 ‘‘(B) AGREEMENT TO NEGOTIATE REBATE

11 FOR SUBSEQUENT NEW DRUGS.—Any manufac12 turer entering into an agreement with the Sec13 retary under this paragraph for any covered

14 outpatient drug shall agree to enter into good15 faith negotiations for the rebate amount under

16 this paragraph for any other covered outpatient

17 drug which is first marketed after such drug.

18 ‘‘(C) OPTION TO EXCLUDE OR LIMIT COV19 ERAGE.—If the Secretary is unable to negotiate

20 with the manufacturer an acceptable rebate

21 amount with respect to a covered outpatient

22 drug pursuant to this paragraph, the Secretary

23 may—

24 ‘‘(i) exclude such drug from coverage

25 under this part; or
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1 ‘‘(ii) limit the use of the drug based

2 on treatment or protocol guidelines (as rec3 ommended by the Drug Use Review

4 Board).

5 ‘‘(D) EFFECTIVE DATE OF EXCLUSION OR

6 LIMITATION FROM COVERAGE.—An exclusion or

7 limitation of a drug pursuant to subparagraph

8 (C) shall be effective on and after the earlier

9 of—

10 ‘‘(i) the date 6 months after the effec11 tive date of marketing approval of such

12 drug by the Food and Drug Administra13 tion (but in no event earlier than July 1,

14 1996), or

15 ‘‘(ii) the date the manufacturer termi16 nates negotiations with the Secretary con17 cerning the rebate amount.

18 ‘‘(3) HIGHER NEGOTIATED REBATES.—The

19 Secretary shall have the authority to negotiate with

20 a manufacturer a per-unit rebate amount on an an21 nual basis for any covered outpatient drug (except

22 as provided under paragraph (5)) that is greater

23 than the per unit rebate amount determined under

24 clause (I) or (II) of paragraph (1)(B)(i).
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1 ‘‘(4) ADDITIONAL REBATE.—Each manufac2 turer shall remit to the Secretary, for each calendar

3 quarter, an additional rebate for each dosage form

4 and strength of a covered outpatient drug (except as

5 provided under paragraph (5)), in an amount equal

6 to—

7 ‘‘(A) the total number of units subject to

8 rebate for such quarter, as described in sub9 section (b)(1)(B), multiplied by

10 ‘‘(B) the amount (if any) by which—

11 ‘‘(i) the average manufacturer retail

12 price for the covered drug of the manufac13 turer, exceeds

14 ‘‘(ii) the average manufacturer retail

15 price of the covered drug for the base

16 quarter, increased by the percentage by

17 which the Consumer Price Index for all

18 urban consumers (United States city aver19 age) for the month before the month in

20 which the calendar quarter begins exceeds

21 such index for the last month of the base

22 quarter.

23 ‘‘(5) NO REBATE REQUIRED FOR CERTAIN GE24 NERIC DRUGS.—Paragraphs (1) through (4) shall

25 not apply with respect to a covered outpatient drug
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1 that is a noninnovator multiple source drug which is

2 not described in paragraph (1)(B)(i)(II).

3 ‘‘(6) DEPOSIT OF REBATES.—The Secretary

4 shall deposit rebates under this section in the Fed5 eral Supplementary Medical Insurance Trust Fund

6 established under section 1841.

7 ‘‘(d) CONFIDENTIALITY OF INFORMATION.—Notwith8 standing any other provision of law, information disclosed

9 by a manufacturer under this section is confidential and

10 shall not be disclosed by the Secretary, except—

11 ‘‘(1) as the Secretary determines to be nec12 essary to carry out this section,

13 ‘‘(2) to permit the Comptroller General to re14 view the information provided, and

15 ‘‘(3) to permit the Director of the Congres16 sional Budget Office to review the information pro17 vided.

18 ‘‘(e) GENERIC DISPENSING INCENTIVES.—

19 ‘‘(1) ESTABLISHMENT OF DISPENSING POL20 ICY.—The Secretary shall establish a generic-only

21 dispensing policy for any drug described in subpara22 graph (A), subject to Federal upper limit for each

23 such drug described in subparagraph (B), which

24 shall ensure that expenditures for innovator multiple

25 source drugs (determined after taking into account
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1 any rebates with respect to such drugs under this

2 section) account for no more than 10 percent of the

3 total expenditures made under this part for multiple

4 source drugs (determined after taking into account

5 any rebates with respect to such drugs under this

6 section).

7 ‘‘(A) GENERIC-ONLY POLICY APPLICA8 BLE.—A drug described in this paragraph is

9 any covered outpatient drug which is a multiple

10 source drug (as defined in section 1927(k)(7))

11 for which there are three or more therapeuti12 cally and pharmaceutically equivalent brands of

13 the drug sold and marketed in the United

14 States.

15 ‘‘(B) FEDERAL UPPER LIMIT.—The Sec16 retary shall establish a Federal upper limit for

17 each drug described in subparagraph (A) by

18 using the prices of each of the therapeutically

19 and pharmaceutically equivalent brands of such

20 drug that is sold and marketed in the United

21 States.

22 ‘‘(2) DESCRIPTION OF GENERICS-ONLY POL23 ICY.—The Secretary shall exclude from payment

24 under section 1862(a)(17) any innovator version of
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1 a multiple source drug described in paragraph

2 (1)(A) unless—

3 ‘‘(A) a written prescription for the drug

4 contains, in the handwriting of the physician or

5 other person prescribing the drug, the phrase

6 ‘brand medically necessary’ indicating that the

7 particular brand of the innovator drug product

8 must be dispensed; and

9 ‘‘(B) at the option of the Secretary, a med10 ical justification is provided for the covered out11 patient drug described in subparagraph (A).

12 The Secretary may require prior authorization for

13 payment for any innovator version of a multiple

14 source drug described in paragraph (1)(A) unless

15 the net cost of the innovator multiple source drug to

16 the program under this part is less than or equal to

17 the Federal upper limit (as established by the Sec18 retary under paragraph (1)(B)).

19 ‘‘(3) PUBLICATION OF INFORMATION.—The

20 Secretary shall publish on no less than a semiannual

21 basis a prescription resource guide for physicians

22 and pharmacists for the outpatient prescription

23 drugs most commonly prescribed for medicare bene24 ficiaries. The guide would indicate when generics are

25 available for a particular brand name drug and indi-
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1 cate the net cost to the medicare program for the

2 furnishing of each drug in the therapeutic class of

3 such drug. Such information shall also be available

4 on any electronic claims prescription processing sys5 tem established by the Secretary.

6 ‘‘(f) PRIOR AUTHORIZATION PROGRAM.—The Sec7 retary may establish, as a condition of coverage or pay8 ment for a covered outpatient drug for which payment is

9 available under this part, a system which requires the ap10 proval of the drug before its dispensing for any medically

11 accepted indication (as defined in section 1927(k)(6)) but

12 the system providing for such approval must—

13 ‘‘(A) provide a response by telephone or

14 other telecommunication device within 24 hours

15 of a request for prior authorization; and

16 ‘‘(B) provide for the dispensing of at least

17 a 72-hour supply of a covered outpatient pre18 scription drug in an emergency situation (as de19 fined by the Secretary).

20 ‘‘(g) DEFINITIONS.—For purposes of this section:

21 ‘‘(1) AVERAGE MANUFACTURER RETAIL

22 PRICE.—The term ‘average manufacturer retail

23 price’ means, with respect to a covered outpatient

24 drug of a manufacturer for a calendar quarter, the

25 average price (inclusive of discounts for cash pay-
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1 ment, prompt payment, volume purchases, and re2 bates (other than rebates under this section), but ex3 clusive of nominal prices) paid to the manufacturer

4 for the drug in the United States for drugs distrib5 uted to the retail pharmacy class of trade.

6 ‘‘(2) BASE QUARTER.—The term ‘base quarter’

7 means, with respect to a covered outpatient drug of

8 a manufacturer, the calendar quarter beginning Oc9 tober 1, 1993, or, if later, the first full calendar

10 quarter during which the drug was marketed in the

11 United States.

12 ‘‘(3) MANUFACTURER.—The term ‘manufac13 turer’ means, with respect to a covered outpatient

14 drug, the entity holding legal title to or possession

15 of the National Drug Code number for such drug.

16 ‘‘(4) NOMINAL PRICE.—The term ‘nominal

17 price’ means any price which is less than 10 percent

18 of the average manufacturer’s retail price for the

19 covered outpatient drug of the manufacturer for the

20 calendar quarter.’’.

21 (b) EXCLUSIONS FROM COVERAGE.—Section

22 1862(a) (42 U.S.C. 1395y(a)) is amended—

23 (1) by striking ‘‘or’’ at the end of paragraph

24 (15),
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1 (2) by striking the period at the end of para2 graph (16) and inserting ‘‘; or’’, and

3 (3) by inserting after paragraph (16) the fol4 lowing new paragraph:

5 ‘‘(17) in the case of a covered outpatient drug

6 (as described in section 1861(t)) which—

7 ‘‘(A) is furnished during a year for which

8 the drug’s manufacturer does not have in effect

9 a rebate agreement with the Secretary that

10 meets the requirements of section 1849 for the

11 year,

12 ‘‘(B) is excluded from coverage during the

13 year by the Secretary pursuant to subpara14 graphs (C) and (D) of section 1849(c)(2) (re15 lating to negotiated rebate amounts for certain

16 new drugs), or

17 ‘‘(C) is not furnished in accordance with

18 treatment protocols developed by the Secretary

19 (based on recommendations from the Drug Use

20 Review Board)’’.

21 (c) CONFORMING AMENDMENTS TO MEDICAID PRO22 GRAM.—Section 1927(a) (42 U.S.C. 1396r–8(a)) is

23 amended—

24 (1) in the first sentence of paragraph (1), by

25 striking ‘‘and paragraph (6)’’ and inserting ‘‘, para-
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1 graph (6), and (for calendar quarters beginning on

2 or after January 1, 1995) paragraph (7)’’; and

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

4 paragraph:

5 ‘‘(7) REQUIREMENT RELATING TO REBATE

6 AGREEMENTS FOR COVERED OUTPATIENT DRUGS

7 UNDER MEDICARE PROGRAM.—A manufacturer

8 meets the requirements of this paragraph if the

9 manufacturer has in effect an agreement with the

10 Secretary under section 1849 for providing rebates

11 for covered outpatient drugs furnished to individuals

12 under title XVIII during the year.’’.

13 Subtitle B—Drug Use Review

14 SEC. 111. MEDICARE DRUG USE REVIEW.

15 Part B of title XVIII is further amended by adding

16 at the end the following new section:

17 ‘‘MEDICARE DRUG USE REVIEW

18 ‘‘SEC. 1850. (a) DRUG USE REVIEW.—

19 ‘‘(1) ESTABLISHMENT.—

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

21 subparagraph (C), the Secretary shall provide,

22 by not later than January 1, 1996, for a drug

23 use review program for covered outpatient

24 drugs which—

25 ‘‘(i) meets the requirements of para26 graph (2), and
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1 ‘‘(ii) assures that prescriptions for

2 covered outpatient drugs are appropriate,

3 medically necessary, and not likely to re4 sult in adverse medical results.

5 ‘‘(B) DRUG USE REVIEW ALLOWANCE.—

6 Not later than 180 days after the date of the

7 enactment of the Pharmaceutical Marketplace

8 Reform Act of 1994, the Secretary shall estab9 lish a methodology to provide payment to phar10 macists for prospective drug review and phar11 maceutical care activities required under sub12 paragraphs (A) through (H) of paragraph (2).

13 ‘‘(C) TREATMENT OF NURSING FACILI14 TIES.—The Secretary is not required to provide

15 for drug use review with respect to drugs dis16 pensed to residents of nursing facilities which

17 are in compliance with the requirements of sub18 sections (b)(4)(A)(iii) and (c)(1)(D) of section

19 1819.

20 ‘‘(2) REQUIREMENTS OF PROGRAM.—

21 ‘‘(A) PROSPECTIVE DRUG USE REVIEW.—

22 ‘‘(i) IN GENERAL.—The drug use re23 view program shall provide for a review of

24 drug therapy before each prescription for a

25 covered outpatient drug is filled or deliv-
28

•S 2239 IS

1 ered to an individual receiving a covered

2 outpatient drug. The review shall be de3 signed to identify potential drug therapy

4 problems due to therapeutic duplication,

5 drug-disease contraindications, drug inter6 actions (including serious interactions with

7 nonprescription or over-the-counter drugs),

8 incorrect drug dosage or duration of drug

9 treatment, drug-allergy interactions, and

10 clinical abuse or misuse.

11 ‘‘(ii) STANDARDS FOR COUNSELING

12 BY PHARMACISTS.—As part of the prospec13 tive drug use review program, the Sec14 retary (in consultation with the Drug Use

15 Review Board) shall establish standards

16 for counseling by pharmacists of individ17 uals receiving covered outpatient drugs.

18 Such standards shall include, at a mini19 mum, the following:

20 ‘‘(I) The pharmacist must offer

21 to discuss (in person, face-to-face

22 whenever practicable, or through ac23 cess to a telephone service which is

24 toll free for long-distance calls) with

25 each individual receiving covered out-
29

•S 2239 IS

1 patient drugs or caregiver of such in2 dividual who presents a prescription,

3 matters which in the exercise of the

4 pharmacist’s professional judgment

5 (consistent with any applicable State

6 law respecting the provision of such

7 information), the pharmacist deems

8 significant, which may include the fol9 lowing:

10 ‘‘(aa) The name and de11 scription of the medication.

12 ‘‘(bb) The dosage form, dos13 age, route of administration, and

14 duration of drug therapy.

15 ‘‘(cc) Special directions and

16 precautions for preparation, ad17 ministration, and use by the pa18 tient.

19 ‘‘(dd) Common severe side

20 or adverse effects or interactions

21 and therapeutic contraindications

22 that may be encountered, includ23 ing their avoidance, and the ac24 tion required if they occur.
30

•S 2239 IS

1 ‘‘(ee) Techniques for self2 monitoring drug therapy.

3 ‘‘(ff) Proper storage.

4 ‘‘(gg) Prescription refill in5 formation.

6 ‘‘(hh) Action to be taken in

7 the event of a missed dose.

8 ‘‘(II) A reasonable effort must be

9 made by the pharmacist to obtain,

10 record, and maintain at least the fol11 lowing information regarding individ12 uals receiving benefits under this title:

13 ‘‘(aa) Name, address, tele14 phone number, date of birth (or

15 age) and gender.

16 ‘‘(bb) Individual history

17 where significant, including dis18 ease state or states, known aller19 gies and drug reactions, and a

20 comprehensive list of medications

21 and relevant devices.

22 ‘‘(cc) Pharmacist comments

23 relevant to the individual’s drug

24 therapy.
31

•S 2239 IS

1 Nothing in this clause shall be construed

2 as requiring a pharmacist to provide con3 sultation when an individual receiving ben4 efits under this title or caregiver of such

5 individual refuses such consultation.

6 ‘‘(B) RETROSPECTIVE DRUG USE RE7 VIEW.—The program shall provide for the ongo8 ing periodic examination of claims data and

9 other records in order to identify patterns of

10 fraud, abuse, gross overuse, or inappropriate or

11 medically unnecessary care, among physicians,

12 pharmacists and individuals receiving benefits

13 under this title, or associated with specific

14 drugs or groups of drugs.

15 ‘‘(C) STANDARDS.—

16 ‘‘(i) IN GENERAL.—The program

17 shall, on an ongoing basis, assess data on

18 drug use against explicit standards deter19 mined by the Secretary upon the rec20 ommendations of the Drug Use Review

21 Board (using the sources described in

22 clause (ii) as the basis for determining the

23 standards for such assessment). Such as24 sessment shall include monitoring for

25 therapeutic appropriateness, overutilization
32

•S 2239 IS

1 and underutilization, appropriate use of ge2 neric products, therapeutic duplication,

3 drug-disease contraindications, drug-drug

4 interactions, incorrect drug dosage or du5 ration of drug treatment, and clinical

6 abuse or misuse, and introduce remedial

7 strategies in order to improve the quality

8 of care and to conserve program funds or

9 personal expenditures.

10 ‘‘(ii) SOURCES.—The sources de11 scribed in this clause are the American

12 Hospital Formulary Service Drug Informa13 tion, the United States Pharmacopeia14 Drug Information, the American Medical

15 Association Drug Evaluations, peer-re16 viewed medical literature as approved by

17 the Secretary, and other sources as deter18 mined by the Secretary in consultation

19 with the Drug Use Review Board.

20 ‘‘(D) EDUCATION AND INTERVENTION.—

21 The program shall provide for, either directly or

22 through contracts with accredited health care

23 educational institutions, medical societies or

24 pharmacists’ associations or societies, or other

25 organizations as specified by the Secretary, and
33

•S 2239 IS

1 using data provided by the Drug Use Review

2 Board on common drug therapy problems—

3 ‘‘(i) ongoing educational outreach pro4 grams to educate practitioners on common

5 drug therapy problems with the aim of im6 proving prescribing or dispensing practices;

7 and

8 ‘‘(ii) ongoing interventions for physi9 cians and pharmacists targeted toward

10 common drug therapy problems or individ11 uals identified in the course of retrospec12 tive drug use reviews performed under this

13 subsection, including, in appropriate in14 stances, at least the following:

15 ‘‘(I) Written, oral, or electronic

16 reminders containing patient-specific

17 or drug-specific (or both) information

18 and suggested changes in prescribing

19 or dispensing practices, communicated

20 in a manner designed to ensure the

21 privacy of patient-related information.

22 ‘‘(II) Use of face-to-face discus23 sions between health care profes24 sionals who are experts in rational

25 drug therapy and selected prescribers
34

•S 2239 IS

1 and pharmacists who have been tar2 geted for educational intervention, in3 cluding discussion of optimal prescrib4 ing, dispensing, or pharmacy care

5 practices, and follow up face-to-face

6 discussions.

7 ‘‘(III) Intensified review or mon8 itoring of selected prescribers or dis9 pensers.

10 ‘‘(E) HIGH RISK INDIVIDUALS.—The pro11 gram shall provide for case management of

12 drug therapy (under protocols established by

13 the Secretary) for individuals receiving covered

14 drugs who are identified as being at high risk

15 for potential medication-related problems.

16 ‘‘(F) INTERCHANGEABLE PHARMA17 CEUTICALS.—The program shall when appro18 priate provide for the interchange of therapeuti19 cally equivalent pharmaceutical products by a

20 pharmacist after approval of the prescribing

21 physician.

22 ‘‘(G) PATIENT INCENTIVE COMPLIANCE

23 PROGRAMS.—The program shall provide for the

24 management of patient incentive compliance

25 programs.
35

•S 2239 IS

1 ‘‘(H) OTHER SERVICES.—The program

2 shall contain such other services that the Sec3 retary finds to be standard of pharmacy prac4 tice consistent with the provision of pharma5 ceutical care.

6 ‘‘(b) DRUG USE REVIEW BOARD.—

7 ‘‘(1) ESTABLISHMENT.—The Secretary shall es8 tablish a Drug Use Review Board (hereafter in this

9 subsection referred to as the ‘DUR Board’) without

10 regard to the provisions of title 5, United States

11 Code, governing appointments in the competitive

12 service.

13 ‘‘(2) MEMBERSHIP.—

14 ‘‘(A) COMPOSITION.—The DUR Board

15 shall consist of 9 members of whom—

16 ‘‘(i) 4 are individuals who are practic17 ing physicians;

18 ‘‘(ii) 4 are individuals who are practic19 ing pharmacists; and

20 ‘‘(iii) 1 is an individual who receives

21 benefits under this title.

22 ‘‘(B) TERMS.—Members of the DUR

23 Board shall first be appointed by no later than

24 July 1, 1995, for a term of 3 years, except that

25 the Director may provide initially for such
36

•S 2239 IS

1 shorter terms as will ensure that (on a continu2 ing basis) the terms of no more than 4 mem3 bers expire in any 1 year.

4 ‘‘(3) CHAIR AND VICE CHAIR.—The DUR

5 Board shall select a Chair and Vice Chair from

6 among its members.

7 ‘‘(4) MEETINGS.—

8 ‘‘(A) IN GENERAL.—The DUR Board shall

9 meet at the call of the Chair.

10 ‘‘(B) INITIAL MEETING.—No later than 30

11 days after the date on which all members of the

12 DUR Board have been appointed, the DUR

13 Board shall hold its first meeting.

14 ‘‘(C) QUORUM.—A majority of the mem15 bers of the DUR Board shall constitute a

16 quorum, but a lesser number of members may

17 hold hearings.

18 ‘‘(5) DUTIES OF THE DUR BOARD.—The DUR

19 Board shall—

20 ‘‘(A) recommend policies and procedures to

21 the Secretary for the operation of the out22 patient prescription drug program for the pur23 pose of optimizing therapeutic outcomes in indi24 viduals who receive benefits under this part;
37

•S 2239 IS

1 ‘‘(B) suggest appropriate model criteria

2 and standards of prescribing and dispensing of

3 covered outpatient prescription drugs

4 (prioritized by medical relevance) through an

5 evaluation of the FDA approved labeling of the

6 covered outpatient drug, the medical literature,

7 other clinical data available from pharma8 ceutical manufacturers, and expert advice;

9 ‘‘(C) categorize covered outpatient drugs

10 by therapeutic class, and evaluate the relative

11 efficacy and cost-effectiveness of new and exist12 ing pharmaceuticals within established and new

13 therapeutic classes of drugs for the outpatient

14 drug program under this part;

15 ‘‘(D) make recommendations, based on the

16 clinical literature, of classes of pharmaceuticals

17 or specific pharmaceuticals that should be

18 added to or deleted from the list of excludable

19 drugs for the medicaid program under section

20 1927(d);

21 ‘‘(E) recommend to the Secretary those

22 covered outpatient drugs which, based on data

23 collected about the potential for the drug’s clini24 cal misuse, abuse, or economic impact on the

25 medicare program under this title should be
38

•S 2239 IS

1 subject to prescribing protocols or treatment

2 guidelines;

3 ‘‘(F) assist in the development of pharma4 ceutical care programs for recipients of out5 patient drugs under this part; and

6 ‘‘(G) suggest operational and evaluative

7 performance standards for the drug use review

8 program under this section and the State drug

9 use review programs under title XIX.

10 ‘‘(6) REPORTS.—

11 ‘‘(A) ANNUAL REPORTS.—Not later than

12 July 1, 1996, and annually thereafter on July

13 1, the DUR Board shall deliver an annual re14 port to Congress, the Secretary, the States, and

15 other interested parties which shall contain rec16 ommendations for appropriate administrative

17 and legislative action that will—

18 ‘‘(i) ensure the cost-effectiveness and

19 quality of care of drug therapy provided

20 under this title and title XIX; and

21 ‘‘(ii) improve the effectiveness of the

22 drug use review program under this title

23 and the State drug use review programs

24 under title XIX.
39

•S 2239 IS

1 ‘‘(7) SPECIAL REPORTS.—The DUR Board

2 shall deliver special reports on any of the matters

3 under paragraph (5) at the request of Congress.

4 ‘‘(8) CERTAIN PROVISIONS APPLICABLE.—Sec5 tion 1845(c)(1) shall apply to the DUR Board in the

6 same manner as it applies to the Physician Payment

7 Review Commission.

8 ‘‘(9) AUTHORIZATION OF APPROPRIATIONS.—

9 There are authorized to be appropriated such sums

10 as may be necessary to carry out the provisions of

11 this subsection.’’.

12 Subtitle C—Effective Date

13 SEC. 121. EFFECTIVE DATE.

14 Except as otherwise provided, the amendments made

15 by this title shall apply to items and services furnished

16 on or after January 1, 1995.

17 TITLE II—MEDICAID PROGRAM

18 SEC. 201. NO FEDERAL FINANCIAL PARTICIPATION WITH

19 RESPECT TO CERTAIN INNOVATOR MUL20 TIPLE SOURCE DRUGS.

21 (a) IN GENERAL.—Section 1903(i) (42 U.S.C.

22 1396b(i)) is amended—

23 (1) in paragraph (14), by striking the period at

24 the end and inserting a semicolon; and
40

•S 2239 IS

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

2 paragraphs:

3 ‘‘(15) with respect to an innovator multiple

4 source drug unless—

5 ‘‘(A) a written prescription for the drug

6 contains, in the handwriting of the physician or

7 other person prescribing the drug, the phrase

8 ‘brand medically necessary’ indicating that a

9 particular brand of the innovator drug product

10 must be dispensed; and

11 ‘‘(B) the physician or other person pre12 scribing the drug provides a medical justifica13 tion to the State agency for prescribing such

14 drug; or

15 ‘‘(16) with respect to expenditures made by the

16 State for the dispensing of innovator multiple source

17 drugs (determined after taking into account any re18 bates with respect to such drugs under section 1927)

19 that exceed an amount equal to—

20 ‘‘(A) for 1995, 15 percent, and

21 ‘‘(B) for 1996 and succeeding years, 10

22 percent,

23 of the expenditures made by the State for the dis24 pensing of all multiple source drugs (determined
41

•S 2239 IS

1 after taking into account any rebates with respect to

2 such drugs under section 1927).’’.

3 (b) EFFECTIVE DATE.—The amendments made by

4 subsection (a) shall be effective for calendar quarters be5 ginning on or after January 1, 1995.

6 SEC. 202. REBATE FOR CERTAIN COVERED OUTPATIENT

7 DRUGS.

8 (a) IN GENERAL.—Section 1927(c)(3)(B) (42 U.S.C.

9 1396r–8(c)(3)(B)) is amended to read as follows:

10 ‘‘(B) APPLICABLE PERCENTAGE.—

11 ‘‘(i) IN GENERAL.—Except as pro12 vided in clause (ii), for purposes of sub13 paragraph (A)(i), the ‘applicable percent14 age’ for rebate periods beginning—

15 ‘‘(I) before January 1, 1994, is

16 10 percent, and

17 ‘‘(II) after December 31, 1993, is

18 11 percent.

19 ‘‘(ii) SPECIAL RULE.—For purposes of

20 subparagraph (A)(i), if a covered out21 patient drug is a noninnovator multiple

22 source drug and the average manufacturer

23 price of such drug does not exceed 50 per24 cent of the average manufacturer price for

25 the corresponding innovator multiple
42

•S 2239 IS

1 source drug, the ‘applicable percentage’ for

2 rebate periods beginning—

3 ‘‘(I) after December 31, 1994,

4 and before January 1, 1996, is 9 per5 cent,

6 ‘‘(II) after December 31, 1995,

7 and before January 1, 1997, is 7 per8 cent, and

9 ‘‘(III) after December 31, 1996,

10 is 5 percent.’’.

11 (b) EFFECTIVE DATE.—The amendments made by

12 subsection (a) shall be effective for rebate periods begin13 ning after December 31, 1994.

14 SEC. 203. STATE REGULATION OF OUTPATIENT PRESCRIP15 TION DRUG BENEFITS COVERED BY HEALTH

16 CARE PLANS.

17 (a) IN GENERAL.—Title XIX (42 U.S.C. 1396 et

18 seq.) is amended—

19 (1) by redesignating section 1931 as section

20 1932; and

21 (2) by inserting after section 1930 the following

22 new section:

23 ‘‘STATE REGULATION OF OUTPATIENT PRESCRIPTION

24 DRUG BENEFITS COVERED BY HEALTH CARE PLANS

25 ‘‘SEC. 1931. No payment shall be made to a State

26 under section 1903 for any calendar quarter in which such
43

•S 2239 IS

1 State fails to have in effect regulations requiring each

2 health care plan offered in such State that covers out3 patient prescription drugs—

4 ‘‘(1) to establish a pharmacy and therapeutics

5 committee or drug use review board consisting of

6 physicians and pharmacists which shall make rec7 ommendations to the plan in order to assure that

8 outpatient prescription drugs used by individuals en9 rolled in the plan are medically appropriate and like10 ly to result in positive medical outcomes;

11 ‘‘(2) to establish a therapeutic formulary of out12 patient prescription drugs which are approved by the

13 pharmacy and therapeutics committee or drug use

14 review board for use by individuals enrolled in the

15 plan;

16 ‘‘(3) to establish a pharmaceutical care services

17 program which shall ensure that services provided by

18 a pharmacist licensed to practice in the State result

19 in positive medical and therapeutic outcomes and

20 which shall include—

21 ‘‘(A) drug use review including—

22 ‘‘(i) prospective review consisting of

23 counseling provided by pharmacists to indi24 viduals enrolled in the plan on the appro25 priate use of outpatient prescription drugs
44

•S 2239 IS

1 and identification and avoidance of poten2 tial adverse medication-related outcomes

3 before an outpatient prescription drug is

4 dispensed to an individual enrolled in the

5 plan;

6 ‘‘(ii) retrospective review consisting of

7 an organized process to collect and analyze

8 data concerning the drug use patterns of

9 individuals enrolled in the plan and pro10 vider prescribing and dispensing patterns

11 under the plan; and

12 ‘‘(iii) education of, and interventions

13 for, health care professionals to provide for

14 optimal use of outpatient prescription

15 drugs among individuals enrolled in the

16 plan;

17 ‘‘(B) management of drug therapy and

18 case management of patients that are identified

19 as at high risk for potential medication-related

20 problems;

21 ‘‘(C) preapproved or protocol-approved

22 interchange of pharmaceutical products;

23 ‘‘(D) management of patient compliance

24 incentive programs; and
45

•S 2239 IS

1 ‘‘(E) other services that are consistent with

2 standard pharmacy practice and consistent with

3 providing pharmaceutical care; and

4 ‘‘(4) to establish a system under which any

5 pharmacist who provides outpatient prescription

6 drugs to individuals enrolled in the plan is provided

7 payment for services required to comply with any re8 quirements imposed on such pharmacist by this sec9 tion.’’.

10 (b) EFFECTIVE DATE.—

11 (1) IN GENERAL.—Except as provided in para12 graph (2), the amendments made by subsection (a)

13 shall be effective for calendar quarters beginning on

14 or after January 1, 1996.

15 (2) DELAY IF STATE LEGISLATION RE16 QUIRED.—In the case of a State which the Secretary

17 determines requires State legislation (other than leg18 islation authorizing or appropriating funds) in order

19 to comply with the amendments made by subsection

20 (a), the State shall not be regarded as failing to

21 comply with such amendments solely on the basis of

22 its failure to meet the requirements of such amend23 ments before the first day of the first calendar quar24 ter beginning after the close of the first regular ses25 sion of the State legislature that begins after the
46

•S 2239 IS

1 date of the enactment of this Act. For purposes of

2 the preceding sentence, in the case of a State that

3 has a 2-year legislative session, each year of such

4 session shall be deemed to be a separate regular ses5 sion of the State legislature.

6 TITLE III—COMMISSIONS

7 SEC. 301. PHARMACEUTICAL MARKETPLACE INFORMATION

8 COMMISSION.

9 Part A of title XI (42 U.S.C. 1301 et seq.), as

10 amended by section 13581(a) of the Omnibus Budget Rec11 onciliation Act of 1993, is amended by adding at the end

12 the following new section:

13 ‘‘PHARMACEUTICAL MARKETPLACE INFORMATION

14 COMMISSION

15 ‘‘SEC. 1145. (a) IN GENERAL.—

16 ‘‘(1) ESTABLISHMENT.—The Secretary shall

17 provide for the appointment of the Pharmaceutical

18 Marketplace Information Commission (in this sec19 tion referred to as the ‘Commission’), without regard

20 to the provisions of title 5, United States Code, gov21 erning appointments in the competitive service.

22 ‘‘(2) MEMBERSHIP.—The Commission shall

23 consist of 9 individuals. The membership of the

24 Commission shall include recognized experts in the

25 fields of pharmacoeconomics, industrial cost account-
47

•S 2239 IS

1 ing, medicine, pharmacy, and science, a consumer, a

2 representative of a patient advocacy group.

3 ‘‘(3) TERMS.—Members of the Commission

4 shall first be appointed by no later than July 1,

5 1995, for a term of 3 years, except that the Director

6 may provide initially for such shorter terms as will

7 ensure that (on a continuing basis) the terms of no

8 more than 4 members expire in any 1 year.

9 ‘‘(4) CHAIR AND VICE CHAIR.—The Commis10 sion shall select a Chair and Vice Chair from among

11 its members.

12 ‘‘(5) MEETINGS.—

13 ‘‘(A) IN GENERAL.—The Commission shall

14 meet at the call of the Chair.

15 ‘‘(B) INITIAL MEETING.—No later than 30

16 days after the date on which all members of the

17 Commission have been appointed, the Commis18 sion shall hold its first meeting.

19 ‘‘(C) QUORUM.—A majority of the mem20 bers of the Commission shall constitute a

21 quorum, but a lesser number of members may

22 hold hearings.

23 ‘‘(b) DUTIES OF THE COMMISSION.—The Commis24 sion shall have the following duties:

25 ‘‘(1) DOMESTIC PHARMACEUTICAL PRICES.—
48

•S 2239 IS

1 ‘‘(A) PUBLICATION OF PRICING INFORMA2 TION.—The Commission shall annually publish

3 the weighted average price of each dosage form

4 and strength of each single source drug and in5 novator multiple source drug sold to all pur6 chasers of such drug in the United States and

7 the average manufacturer’s price for each such

8 drug distributed to the retail class of trade.

9 ‘‘(B) INFORMATION SOURCE ON PRICE

10 CONCESSIONS.—The Commission shall—

11 ‘‘(i) serve as a source of information

12 for purchasers on the policies and proce13 dures of drug manufacturers concerning

14 the terms under which manufacturers pro15 vide rebates, discounts and other price con16 cessions to pharmaceutical purchasers; and

17 ‘‘(ii) receive and investigate informa18 tion (provided by purchasers) relating to

19 instances in which manufacturers are not

20 offering and providing products on similar

21 terms and conditions to all purchasers.

22 ‘‘(2) INTERNATIONAL PHARMACEUTICAL

23 PRICES.—The Commission shall monitor, analyze,

24 and publish price information relating to currently

25 marketed and new pharmaceutical prices for drugs,
49

•S 2239 IS

1 biologicals, and vaccines in other industrialized na2 tions, including those nations described in section

3 802(b)(4)(A) of the Federal Food, Drug, and Cos4 metic Act. Such information shall include the aver5 age price in all classes of trade, and the average

6 price sold to the retail class of trade in each country.

7 The Commission shall also monitor mechanisms

8 used by other industrialized nations to contain phar9 maceutical expenditures.

10 ‘‘(3) PRICES OF CERTAIN PHARMACEUTICALS.—

11 ‘‘(A) IN GENERAL.—The Commission shall

12 review the price of drugs and biologicals and

13 provide information to purchasers to determine

14 whether the price of the drug or biological is

15 reasonable if such drug or biological product—

16 ‘‘(i)(I) is a new drug or biological

17 which is a significant clinical advance or

18 breakthrough over pharmaceutical products

19 currently available to treat a particular

20 condition, whether or not the product is a

21 new chemical or biological entity;

22 ‘‘(II) a new drug or biological which

23 has received a designation of 1–AA or 1–

24 P by the Food and Drug Administration;

25 ‘‘(III) is an orphan drug product;
50

•S 2239 IS

1 ‘‘(IV) is a currently marketed drug

2 for which there are no other therapeutic al3 ternatives on the market; or

4 ‘‘(V) the Federal Government had a

5 substantial role in the development of the

6 drug or biological, and such support was

7 essential to the approval of the drug by the

8 Food and Drug Administration; and

9 ‘‘(ii) a request is made to review the

10 price of such drug or biological by—

11 ‘‘(I) the Secretary;

12 ‘‘(II) a member of the Commis13 sion;

14 ‘‘(III) not less than 3 groups rep15 resenting consumers or patient advo16 cates, or

17 ‘‘(IV) not less than three health

18 plans providing such drug or biologi19 cal, where such plans present evidence

20 that the price is excessive.

21 ‘‘(B) GUIDELINES FOR DETERMINATION.—

22 The Commission shall use the following infor23 mation to determine whether the price of the

24 drug or biological is reasonable:
51

•S 2239 IS

1 ‘‘(i) DOMESTIC COMPARISON.—The

2 Commission shall compare the price of the

3 drug or biological with the price of drugs

4 or biologicals in the same therapeutic class

5 used to treat similar therapeutic conditions

6 in the United States.

7 ‘‘(ii) INTERNATIONAL COMPARISON.—

8 The Commission shall compare the price of

9 the drug or biological with the price of the

10 drug or biological in section 802(b)(4)(A)

11 of the Federal Food, Drug, and Cosmetic

12 Act.

13 ‘‘(iii) MANUFACTURER INFORMA14 TION.—The Commission shall consider the

15 following information provided by the man16 ufacturer of the drug or biological:

17 ‘‘(I) The manufacturer’s costs of

18 manufacturing, researching, and de19 veloping the product.

20 ‘‘(II) The anticipated revenue

21 from the sales of the product in the

22 United States and international mar23 kets.
52

•S 2239 IS

1 ‘‘(III) The manufacturer’s antici2 pated costs of marketing and advertis3 ing for the product.

4 ‘‘(IV) Anticipated revenue from

5 off-label uses of the product.

6 ‘‘(V) Extraordinary circum7 stances that justify the price charged

8 in the United States market.

9 ‘‘(VI) the expected period of pat10 ent life or market exclusivity for the

11 product.

12 ‘‘(VII) Profit expected by the

13 manufacturer as a result of the sales

14 of the product in the United States

15 and other industrialized nations.

16 ‘‘(VIII) Other relevant factors

17 that the manufacturer would like the

18 Commission to consider.

19 ‘‘(iv) INVESTIGATIONS PAID FOR BY

20 FEDERAL GOVERNMENT.—Funds expended

21 by the Federal Government either directly

22 or indirectly to support investigations that

23 were significant to the application made to

24 the Food and Drug Administration to ap25 prove the drug or biological.
53

•S 2239 IS

1 ‘‘(v) COST-EFFECTIVENESS.—The

2 cost-effectiveness of the pharmaceutical

3 relative to other medical treatment alter4 natives, including nonpharmaceutical treat5 ments, such as devices.

6 ‘‘(vi) QUALITY OF LIFE IMPROVE7 MENT.—The improvements in the quality

8 of life offered by the product, including the

9 ability to return to work and other appro10 priate measures of improvement in the

11 quality of life.

12 ‘‘(C) DETERMINATION.—

13 ‘‘(i) HEARING.—The Commission

14 shall hold a public hearing to collect infor15 mation and data from groups interested in

16 the price of the drug or biological before

17 making a report described in subparagraph

18 (B).

19 ‘‘(ii) REPORT.—The Commission shall

20 publish a report on the reasonableness of a

21 drug or biological as determined under this

22 paragraph, with all available information

23 and justification for its findings.
54

•S 2239 IS

1 ‘‘(iii) APPEAL.—The Commission shall

2 develop a process for an interested party to

3 appeal the report of the Commission.

4 ‘‘(iv) NO BINDING EFFECT.—No re5 port of the Commission issued under this

6 subparagraph shall have binding effect

7 upon any manufacturer or purchaser.

8 ‘‘(D) CONFIDENTIALITY OF PROPRIETARY

9 INFORMATION PROVIDED TO THE COMMIS10 SION.—Any proprietary information provided by

11 a manufacturer to the Commission under this

12 subsection shall be held confidential.

13 ‘‘(4) UTILIZATION OF GENERIC PHARMA14 CEUTICALS.—The Commission shall—

15 ‘‘(A) monitor the rate of dispensing generic

16 drugs in the United States;

17 ‘‘(B) publish (at least semiannually) and

18 make available to health care providers infor19 mation about the availability and relative costs

20 of generic drugs compared to the costs for the

21 equivalent innovator versions of these drugs;

22 and

23 ‘‘(C) monitor the pricing patterns of ge24 neric drugs, and the extent to which domestic

25 and international trade policies affect the ability
55

•S 2239 IS

1 of generic pharmaceutical manufacturers to ob2 tain materials for the purpose of manufacturing

3 and selling generic drugs in the United States.

4 ‘‘(5) PHARMACEUTICAL PATENT EXTEN5 SIONS.—Not less than 90 days before the expiration

6 of a pharmaceutical patent for which the holder of

7 the patent has sought an extension of that patent,

8 the Commission shall provide to the Congress and

9 the Office of Patents and Trademarks an analysis of

10 the feasibility and desirability of extending the pat11 ent as provided in the terms of the Drug Price Com12 petition and Patent Term Restoration Act of 1984.

13 ‘‘(6) PHARMACOECONOMIC AND COST-EFFEC14 TIVENESS ANALYSIS.—The Commission shall—

15 ‘‘(A) develop a standard methodology for

16 the purpose of conducting pharmacoeconomic

17 and cost-effectiveness analyses of pharma18 ceutical and biological products; and

19 ‘‘(B) collect and disseminate information

20 to purchasers about the relative cost-effective21 ness and cost-benefit of various pharmaceutical

22 products as compared to other pharmaceutical

23 products and other medical technologies, includ24 ing making evaluations of the new savings to
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1 the health care system as a result of new phar2 maceutical and biological products.

3 ‘‘(c) CERTAIN PROVISIONS APPLICABLE.—Section

4 1845(c)(1) shall apply to the Commission in the same

5 manner as it applies to the Physician Payment Review

6 Commission.

7 ‘‘(d) AUTHORIZATION OF APPROPRIATIONS.—There

8 are authorized to be appropriated such sums as may be

9 necessary to carry out the provisions of this section.’’.

10 SEC. 302. PRESCRIPTION DRUG PAYMENT REVIEW COMMIS11 SION.

12 Part A of title XI (42 U.S.C. 1301 et seq.), as

13 amended by section 301, is amended by adding at the end

14 the following new section:

15 ‘‘PRESCRIPTION DRUG PAYMENT REVIEW COMMISSION

16 ‘‘SEC. 1146. (a) ESTABLISHMENT.—The Director of

17 the Congressional Office of Technology Assessment (in

18 this section referred to as the ‘Director’ and the ‘Office’,

19 respectively) shall provide for the appointment of a Pre20 scription Drug Payment Review Commission (in this sec21 tion referred to as the ‘Commission’) without regard to

22 the provisions of title 5, United States Code, governing

23 appointments in the competitive service.

24 ‘‘(b) MEMBERSHIP.—

25 ‘‘(1) COMPOSITION.—The Commission shall

26 consist of 11 individuals with expertise in the provi-
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1 sion and financing of prescription drugs under feder2 ally funded health care programs.

3 ‘‘(2) TERMS.—Members of the Commission

4 shall first be appointed by no later than July 1,

5 1995 for a term of 3 years, except that the Director

6 may provide initially for such shorter terms as will

7 ensure that (on a continuing basis) the terms of no

8 more than 4 members expire in any 1 year.

9 ‘‘(3) CHAIR AND VICE CHAIR.—The Commis10 sion shall select a Chair and Vice Chair from among

11 its members.

12 ‘‘(c) MEETINGS.—

13 ‘‘(1) IN GENERAL.—The Commission shall meet

14 at the call of the Chair.

15 ‘‘(2) INITIAL MEETING.—No later than 30 days

16 after the date on which all members of the Commis17 sion have been appointed, the Commission shall hold

18 its first meeting.

19 ‘‘(3) QUORUM.—A majority of the members of

20 the Commission shall constitute a quorum, but a

21 lesser number of members may hold hearings.

22 ‘‘(d) DUTIES OF THE COMMISSION.—

23 ‘‘(1) IN GENERAL.—The Commission shall—

24 ‘‘(A) monitor the scope of coverage, reim25 bursement, expenditure levels, and financing of
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1 prescription drugs under Federal health care

2 programs;

3 ‘‘(B) monitor the prices for prescription

4 and nonprescription drugs (on the retail level

5 and manufacturer level) used in Federal health

6 care programs;

7 ‘‘(C) recommend modifications and

8 changes in cost containment measures and pay9 ment and reimbursement rates under Federal

10 health care programs;

11 ‘‘(D) monitor and analyze the extent to

12 which pharmaceuticals and pharmacy services

13 are available to specific populations, including

14 citizens in rural areas of the United States;

15 ‘‘(E) evaluate technologies available for ef16 ficient administration of Federal health care

17 programs and other third party prescription

18 drug programs; and

19 ‘‘(F) determine the annual cost of dispens20 ing a prescription for various classes of phar21 macies to assist in the development of

22 reimbursement and payment rates to providers.

23 ‘‘(2) REPORTS.—

24 ‘‘(A) ANNUAL REPORTS.—Not later than

25 July 1, 1996, and annually thereafter on July
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1 1, the Commission shall deliver an annual re2 port to Congress which shall contain the find3 ings and conclusions of the Commission, on

4 each of the matters under paragraph (1).

5 ‘‘(B) SPECIAL REPORTS.—The Commission

6 shall deliver special reports on any of the mat7 ters under paragraph (1) at the request of Con8 gress.

9 ‘‘(e) CERTAIN PROVISIONS APPLICABLE.—Section

10 1845(c)(1) shall apply to the Commission in the same

11 manner as it applies to the Physician Payment Review

12 Commission.

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

14 are authorized to be appropriated such sums as may be

15 necessary to carry out the provisions of this section.’’.

16 TITLE IV—ADDITIONS TO THE

17 MASTER AGREEMENT

18 SEC. 401. EQUAL ACCESS TO DISCOUNTS.

19 (a) IN GENERAL.—Section 8126(a) of title 38, Unit20 ed States Code, as amended by section 101(b), is amend21 ed—

22 (1) by striking ‘‘and’’ at the end of paragraph

23 (3);

24 (2) by redesignating paragraph (4) as para25 graph (5); and
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1 (3) by inserting after paragraph (3) the follow2 ing new paragraph:

3 ‘‘(4)(A) each manufacturer of single source and

4 innovator multiple source drugs (as described in sec5 tion 1927(k) of the Social Security Act) shall offer

6 such pharmaceuticals for sale to every purchaser on

7 equal terms and conditions including any rebates,

8 free merchandise, discounts, and other similar ad9 justments (excluding any terms offered to the De10 partment of Veterans Affairs, the Department of

11 Defense, entities that receive funding under the

12 Public Health Service, any other entity receiving dis13 counts under section 340(b) of the Public Health

14 Service Act, and any other Federal or State govern15 ment agency that directly procures pharmaceuticals);

16 ‘‘(B) each manufacturer of single source and in17 novator multiple source drugs may only offer re18 bates, free merchandise, discounts, and other similar

19 adjustments, if the manufacturer experiences savings

20 as a result of efficiencies in purchasing, such as vol21 ume buying (including programs to increase volume

22 buying through influencing physician prescribing

23 practices or by making an agreement to place drugs

24 on a formulary), prompt delivery, single-site delivery,

25 and prompt payment;
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1 ‘‘(C) each manufacturer of single source and in2 novator multiple source drugs shall make informa3 tion describing the terms and conditions described in

4 subparagraph (A) available to the public and the

5 Pharmaceutical Marketplace Information Commis6 sion (established under section 1145 of the Social

7 Security Act); and

8 ‘‘(D) each manufacturer that knowingly violates

9 the requirement under the preceding subparagraphs

10 shall be subject to a civil fine of not more than

11 $100,000 per violation; and’’.

12 SEC. 402. PROVISION OF INFORMATION TO THE PHARMA13 CEUTICAL MARKETPLACE INFORMATION

14 COMMISSION.

15 (a) IN GENERAL.—Section 8126(a) of title 38, Unit16 ed States Code, as amended by sections 101(b) and 401,

17 is amended—

18 (1) by striking ‘‘and’’ at the end of paragraph

19 (4);

20 (2) by redesignating paragraph (5) as para21 graph (6); and

22 (3) by inserting after paragraph (4) the follow23 ing new paragraph:

24 ‘‘(5)(A) each manufacturer of a single source

25 and innovator multiple source drug (as defined in
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1 section 1927(k) of the Social Security Act) shall re2 port to the Pharmaceutical Marketplace Information

3 Commission (established under section 1145 of the

4 Social Security Act) such information as the Com5 mission may require to compile the data necessary

6 to publish the domestic pricing information de7 scribed in section 1145(b)(1)(A) of the Social Secu8 rity Act and the international pricing information

9 described in section 1145(b)(2) of such Act no later

10 than 30 days after the end of each calendar quarter,

11 and

12 ‘‘(B) each manufacturer shall make available to

13 the Pharmaceutical Marketplace Information Com14 mission any additional information required by the

15 Commission; and’’.

16 SEC. 403. CONFORMING AMENDMENTS.

17 (a) ADDITIONAL REQUIREMENTS FOR PARTICIPA18 TION.—Section 8126(a)(6) of title 38, United States

19 Code, as redesignated in section 402(a)(2), is amended by

20 striking ‘‘, and (3)’’ and inserting ‘‘(3), (4), and (5)’’.

21 (b) AMENDMENTS TO EFFECTIVE DATE PROVI22 SIONS.—

23 (1) MEDICAID.—Section 1927(a) is amended—

24 (A) in paragraph (5)—
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1 (i) in subparagraph (D), by striking

2 ‘‘title VI of the Veterans Health Care Act

3 of 1992’’ and inserting ‘‘the Pharma4 ceutical Marketplace Reform Act of 1994’’;

5 and

6 (ii) in subparagraph (E), by striking

7 ‘‘immediately after the enactment of this

8 paragraph)’’ and inserting ‘‘immediately

9 after the enactment of the Pharmaceutical

10 Marketplace Reform Act of 1994)’’; and

11 (B) in paragraph (6)—

12 (i) in subparagraph (B), by striking

13 ‘‘title VI of the Veterans Health Care Act

14 of 1992’’ and inserting ‘‘the Pharma15 ceutical Marketplace Reform Act of 1994’’;

16 and

17 (ii) in subparagraph (C), by striking

18 ‘‘immediately after the enactment of this

19 paragraph)’’ and inserting ‘‘immediately

20 after the enactment of the Pharmaceutical

21 Marketplace Reform Act of 1994)’’.

22 (2) PUBLIC HEALTH SERVICE.—Section

23 340B(d) of the Public Health Service Act is amend24 ed by striking ‘‘the Veterans Health Care Act of
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1 1992’’ and inserting ‘‘the Pharmaceutical Market2 place Reform Act of 1994’’.

3 (3) VETERANS’ AFFAIRS.—Section 8126(g) of

4 title 38, United States Code, is amended—

5 (A) in paragraph (1), by inserting ‘‘, ex6 cept that such reference shall include any

7 amendments to the Social Security Act made by

8 the Pharmaceutical Marketplace Reform Act of

9 1994’’ before the period at the end; and

10 (B) in paragraph (2)—

11 (i) by striking ‘‘this section)’’ and in12 serting ‘‘the Pharmaceutical Marketplace

13 Reform Act of 1994)’’; and

14 (ii) by striking ‘‘date of the enactment

15 of this section’’ and inserting ‘‘date of the

16 enactment of the the Pharmaceutical Mar17 ketplace Reform Act of 1994’’.

18 SEC. 404. EFFECTIVE DATE.

19 Except as otherwise provided, the amendments made

20 by this title shall apply on and after December 31, 1994.

Æ

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