I 

109TH CONGRESS 

2D SESSION H. R. 4697 

To amend title XVIII of the Social Security Act to replace the Medicare 

prescription drug benefit adopted by the Medicare Prescription Drug, 

Improvement, and Modernization Act of 2003 with a revised and simplified prescription benefit program for all Medicare beneficiaries. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 1, 2006 

Mr. SANDERS (for himself, Mr. KUCINICH, Mr. DEFAZIO, Mr. OWENS, Ms. 

LEE, Mr. HINCHEY, Mr. PAYNE, Mr. GRIJALVA, Mr. OLVER, Mr. STARK, 

Ms. WOOLSEY, Mr. NADLER, Mr. MCGOVERN, Ms. KAPTUR, Mr. CONYERS, Ms. CORRINE BROWN of Florida, Mrs. EMERSON, and Mr. 

TIERNEY) introduced the following bill; which was referred to the Committee on Energy and Commerce, and in addition to the Committee on 

Ways and Means, for a period to be subsequently determined by the 

Speaker, in each case for consideration of such provisions as fall within 

the jurisdiction of the committee concerned 

A BILL 

To amend title XVIII of the Social Security Act to replace 

the Medicare prescription drug benefit adopted by the 

Medicare Prescription Drug, Improvement, and Modernization Act of 2003 with a revised and simplified 

prescription benefit program for all Medicare beneficiaries. 

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

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

3 ‘‘Medicare Drugs for Seniors (MEDS) Act of 2006’’. 

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

5 this Act is as follows: 

Sec. 1. Short title; table of contents 

Sec. 2. Findings 

Sec. 3. Repeal and transition 

Sec. 4. Prescription medicine benefit program 

‘‘PART D—PRESCRIPTION MEDICINE BENEFIT FOR THE AGED AND

DISABLED

‘‘Sec. 1860. Establishment of prescription medicine benefit program for 

the aged and disabled 

‘‘Sec. 1860A. Scope of benefits 

‘‘Sec. 1860B. Payment of benefits; benefit limits 

‘‘Sec. 1860C. Eligibility and enrollment 

‘‘Sec. 1860D. Premiums 

‘‘Sec. 1860E. Special eligibility, enrollment, and copayment rules for lowincome individuals 

‘‘Sec. 1860F. Prescription Medicine Insurance Account 

‘‘Sec. 1860G. Administration of benefits 

‘‘Sec. 1860H. Employer Incentive Program for employment-based retiree 

medicine coverage 

‘‘Sec. 1860I. Promotion of pharmaceutical research on break-through 

medicines while providing program cost containment 

‘‘Sec. 1860J. Appropriations to cover Government contributions 

‘‘Sec. 1860K. Prescription medicine defined 

Sec. 5. Substantial reductions in the price of prescription drugs for medicare 

beneficiaries 

Sec. 6. Importation of certain prescription drugs 

‘‘Sec. 804. Commercial and personal importation of prescription drugs 

‘‘Sec. 805. Disposition of certain drugs denied admission 

‘‘Sec. 503B. Internet sales of prescription drugs 

Sec. 7. Reasonable price agreement for federally funded research 

Sec. 8. GAO ongoing studies and reports on program; miscellaneous reports 

Sec. 9. Medigap transition provisions 

6 SEC. 2. FINDINGS. 

7 Congress makes the following findings: 

8 (1) The first month of implementation of the 

9 Medicare prescription drug benefit enacted by the 

10 amendments made by title I of the Medicare Pre-
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1 scription Drug, Improvement, and Modernization 

2 Act of 2003 (Public Law 108–173) revealed inherent 

3 problems with the structure of the benefit and dem4 onstrated that the benefit is complicated and con5 fusing to individuals eligible for the benefit. 

6 (2) During such first month, hundreds of thou7 sands of low-income Medicare beneficiaries had dif8 ficulty obtaining their covered prescription drugs; 

9 many were turned away from the pharmacies with10 out their covered prescription drugs and many oth11 ers were overcharged for their covered prescription 

12 drugs. 

13 (3) Since implementation of such prescription 

14 drug benefit 26 states needed to intervene to ensure 

15 that their low-income Medicare beneficiaries ob16 tained their covered prescription drugs and many 

17 States have been forced to declare public health 

18 emergencies. 

19 (4) The amendments made by title I of the 

20 Medicare Prescription Drug, Improvement, and 

21 Modernization Act of 2003 do not ensure the long22 term financial viability of the Medicare prescription 

23 drug benefit enacted by such title through cost-con24 tainment measures, and contains a provision that ex25 plicitly prohibits Medicare from negotiating for lower 
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1 prescription drug prices, which is a practice of the 

2 Department of Veterans Affairs (VA). 

3 (5) All Medicare beneficiaries should have ac4 cess to a voluntary, reliable, affordable, and defined 

5 outpatient medicine benefit that is part of the Medi6 care program and that assists with the high cost of 

7 prescription medicines and protects such bene8 ficiaries from excessive out-of-pocket costs. 

9 (6) Americans unjustly pay up to 5 times more 

10 to fill their prescriptions than consumers in other 

11 countries. 

12 (7) The United States is the largest market for 

13 pharmaceuticals in the world, yet American con14 sumers pay the highest prices for brand pharma15 ceuticals in the world. 

16 (8) A prescription drug is neither safe nor ef17 fective to an individual who cannot afford it. 

18 (9) Allowing and structuring the importation of 

19 prescription drugs to ensure access to safe and af20 fordable drugs approved by the Food and Drug Ad21 ministration will provide a level of safety to Amer22 ican consumers that they do not currently enjoy. 

23 (10) American seniors will spend 

24 $1,800,000,000,000 on pharmaceuticals over the 

25 next 10 years. 
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1 (11) Allowing open pharmaceutical markets 

2 could save American consumers at least 

3 $38,000,000,000 each year. 

4 SEC. 3. REPEAL AND TRANSITION. 

5 (a) REPEAL OF MEDICARE PART D BENEFIT AND

6 TRANSITION TO NEW MEDICARE PRESCRIPTION MEDI7 CINE BENEFIT PROGRAM.—The amendments made by 

8 title I of the Medicare Prescription Drug, Improvement, 

9 and Modernization Act of 2003 (Public Law 108–173) are 

10 repealed as of December 31, 2006, and the provisions of 

11 law amended by such title shall read as if such title had 

12 not been enacted. 

13 (b) TRANSITION.—The Secretary of Health and 

14 Human Services shall provide for an appropriate transi15 tion from administering the Social Security Act in accord16 ance with the amendments made by title I of the Medicare 

17 Prescription Drug, Improvement, and Modernization Act 

18 of 2003 (Public Law 108–173) to administering such Act 

19 in accordance with the amendments made by section 4 of 

20 this Act. 

21 SEC. 4. PRESCRIPTION MEDICINE BENEFIT PROGRAM. 

22 (a) IN GENERAL.—Title XVIII of the Social Security 

23 Act (42 U.S.C. 1395 et seq.) is amended— 

24 (1) by redesignating part D as part E; and 
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1 (2) by inserting after part C the following new 

2 part: 

3 ‘‘PART D—PRESCRIPTION MEDICINE BENEFIT FOR THE

4 AGED AND DISABLED

5 ‘‘ESTABLISHMENT OF PRESCRIPTION MEDICINE BENEFIT

6 PROGRAM FOR THE AGED AND DISABLED

7 ‘‘SEC. 1860. There is established a voluntary insur8 ance program to provide prescription medicine benefits, 

9 including pharmacy services, in accordance with the provi10 sions of this part for individuals who are aged or disabled 

11 or have end-stage renal disease and who elect to enroll 

12 under such program, to be financed from premium pay13 ments by enrollees together with contributions from funds 

14 appropriated by the Federal Government. 

15 ‘‘SCOPE OF BENEFITS

16 ‘‘SEC. 1860A. (a) IN GENERAL.—The benefits pro17 vided to an individual enrolled in the insurance program 

18 under this part shall consist of— 

19 ‘‘(1) payments made, in accordance with the 

20 provisions of this part, for covered prescription 

21 medicines (as specified in subsection (b)) dispensed 

22 by any pharmacy participating in the program under 

23 this part (and, in circumstances designated by the 

24 Secretary, by a nonparticipating pharmacy), includ25 ing any specifically named medicine prescribed for 

26 the individual by a qualified health care professional 
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1 regardless of whether the medicine is included in any 

2 formulary established under this part if such medi3 cine is certified as medically necessary by such 

4 health care professional (except that the Secretary 

5 shall encourage to the maximum extent possible the 

6 substitution and use of lower-cost generics), up to 

7 the benefit limits specified in section 1860B; and 

8 ‘‘(2) charging by pharmacies of the negotiated 

9 price— 

10 ‘‘(A) for all covered prescription medicines, 

11 without regard to such benefit limit; and 

12 ‘‘(B) established with respect to any drugs 

13 or classes of drugs described in subparagraphs 

14 (A), (B), (D), (E), or (F) of section 1927(d)(2) 

15 that are available to individuals receiving bene16 fits under this title. 

17 ‘‘(b) COVERED PRESCRIPTION MEDICINES.— 

18 ‘‘(1) IN GENERAL.—Covered prescription medi19 cines, for purposes of this part, include all prescrip20 tion medicines (as defined in section 1860K(1)), in21 cluding smoking cessation agents, except as other22 wise provided in this subsection. 

23 ‘‘(2) EXCLUSIONS FROM COVERAGE.—Covered 

24 prescription medicines shall not include drugs or 

25 classes of drugs described in subparagraphs (A) 
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1 through (D) and (F) through (H) of section 

2 1927(d)(2) unless— 

3 ‘‘(A) specifically provided otherwise by the 

4 Secretary with respect to a drug in any of such 

5 classes; or 

6 ‘‘(B) a drug in any of such classes is cer7 tified to be medically necessary by a health care 

8 professional. 

9 ‘‘(3) EXCLUSION OF PRESCRIPTION MEDICINES

10 TO THE EXTENT COVERED UNDER PART A OR B.— 

11 A medicine prescribed for an individual that would 

12 otherwise be a covered prescription medicine under 

13 this part shall not be so considered to the extent 

14 that payment for such medicine is available under 

15 part A or B, including all injectable drugs and 

16 biologicals for which payment was made or should 

17 have been made by a carrier under section 

18 1861(s)(2) (A) or (B) as of the date of enactment 

19 of the Medicare Drugs for Seniors (MEDS) Act of 

20 2006. Medicines otherwise covered under part A or 

21 B shall be covered under this part to the extent that 

22 benefits under part A or B are exhausted. 

23 ‘‘(4) STUDY ON INCLUSION OF HOME INFUSION

24 THERAPY SERVICES.—Not later than one year after 

25 the date of the enactment of the Medicare Drugs for 
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1 Seniors (MEDS) Act of 2006, the Secretary shall 

2 submit to Congress a legislative proposal for the de3 livery of home infusion therapy services under this 

4 title and for a system of payment for such a benefit 

5 that coordinates items and services furnished under 

6 part B and under this part. 

7 ‘‘PAYMENT OF BENEFITS; BENEFIT LIMITS

8 ‘‘SEC. 1860B. (a) PAYMENT OF BENEFITS.— 

9 ‘‘(1) IN GENERAL.—There shall be paid from 

10 the Prescription Medicine Insurance Account within 

11 the Supplementary Medical Insurance Trust Fund, 

12 in the case of each individual who is enrolled in the 

13 insurance program under this part and who pur14 chases covered prescription medicines in a calendar 

15 year— 

16 ‘‘(A) with respect to costs incurred for cov17 ered prescription medicine furnished during a 

18 year, before the individual has incurred out-of19 pocket expenses under this subsection equal to 

20 the catastrophic out-of-pocket limit specified in 

21 subsection (b), an amount equal to the applica22 ble percentage (specified in paragraph (2)) of 

23 the negotiated price for each such covered pre24 scription medicine or such higher percentage as 

25 is proposed under section 1860G(b)(7); and 
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1 ‘‘(B) with respect to costs incurred for cov2 ered prescription medicine furnished during a 

3 year, after the individual has incurred out-of4 pocket expenses under this subsection equal to 

5 the catastrophic out-of-pocket limit specified in 

6 subsection (b), an amount equal to 100 percent 

7 of the negotiated price for each such covered 

8 prescription medicine. 

9 ‘‘(2) APPLICABLE PERCENTAGE.—The applica10 ble percentage specified in this paragraph is 80 per11 cent or such higher percentage as is proposed under 

12 section 1860G(b)(7), if the Secretary finds that such 

13 higher percentage will not increase aggregate costs 

14 to the Prescription Medicine Insurance Account. 

15 ‘‘(b) CATASTROPHIC LIMIT ON OUT-OF-POCKET EX16 PENSES.— 

17 ‘‘(1) IN GENERAL.—The catastrophic limit on 

18 out-of-pocket expenses specified in this subsection— 

19 ‘‘(A) for each of calendar years 2007 and 

20 2008, $2,000; and 

21 ‘‘(B) subject to paragraph (2), for calendar 

22 year 2009 and each subsequent calendar year is 

23 equal to the limit for the preceding year under 

24 this paragraph adjusted by the sustainable 
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1 growth rate percentage (determined under sec2 tion 1860I(b)) for the year involved. 

3 ‘‘(2) ROUNDING.—Any amount determined 

4 under paragraph (1)(B) that is not a multiple of 

5 $10 shall be rounded to the nearest multiple of $10. 

6 ‘‘ELIGIBILITY AND ENROLLMENT

7 ‘‘SEC. 1860C. (a) ELIGIBILITY.—Every individual 

8 who, during or after 2007, is entitled to hospital insurance 

9 benefits under part A or enrolled in the medical insurance 

10 program under part B is eligible to enroll, in accordance 

11 with the provisions of this section, in the insurance pro12 gram under this part, during an enrollment period under 

13 this section, in such manner and form specified by the Sec14 retary in regulations. 

15 ‘‘(b) ENROLLMENT.— 

16 ‘‘(1) IN GENERAL.—Each individual who satis17 fies subsection (a) shall be enrolled (or eligible to en18 roll) in the program under this part in accordance 

19 with the provisions of section 1837, as if that section 

20 applied to this part, except as otherwise explicitly 

21 provided in this part. 

22 ‘‘(2) SINGLE ENROLLMENT PERIOD.—Except as 

23 provided in section 1837(i) (as such section applies 

24 to this part), 1860E, or 1860H(e), or as otherwise 

25 explicitly provided, no individual shall be entitled to 

26 enroll in the program under this part at any time 
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1 after the initial enrollment period without penalty, 

2 and in the case of all other late enrollments, the Sec3 retary shall develop a late enrollment penalty for the 

4 individual that fully recovers the additional actuarial 

5 risk involved providing coverage for the individual. 

6 ‘‘(3) SPECIAL ENROLLMENT PERIOD FOR

7 2007.— 

8 ‘‘(A) IN GENERAL.—An individual who 

9 first satisfies subsection (a) in 2007 may on or 

10 after the date on which they first become eligi11 ble and at any time on or before December 31, 

12 2007— 

13 ‘‘(i) enroll in the program under this 

14 part; and 

15 ‘‘(ii) enroll or reenroll in such pro16 gram after having previously declined or 

17 terminated enrollment in such program. 

18 ‘‘(B) EFFECTIVE DATE OF COVERAGE.— 

19 An individual who enrolls under the program 

20 under this part pursuant to subparagraph (A) 

21 shall be entitled to benefits under this part be22 ginning on the first day of the month following 

23 the month in which such enrollment occurs. 

24 ‘‘(c) PERIOD OF COVERAGE.— 
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1 ‘‘(1) IN GENERAL.—Except as otherwise pro2 vided in this part, an individual’s coverage under the 

3 program under this part shall be effective for the pe4 riod provided in section 1838, as if that section ap5 plied to the program under this part. 

6 ‘‘(2) PART D COVERAGE TERMINATED BY TER7 MINATION OF COVERAGE UNDER PARTS A AND B.— 

8 In addition to the causes of termination specified in 

9 section 1838, an individual’s coverage under this 

10 part shall be terminated if the individual retains cov11 erage under neither the program under part A nor 

12 the program under part B, effective on the effective 

13 date of termination of coverage under part A or (if 

14 later) under part B. 

15 ‘‘PREMIUMS

16 ‘‘SEC. 1860D. (a) ANNUAL ESTABLISHMENT OF

17 MONTHLY PREMIUM RATES.— 

18 ‘‘(1) IN GENERAL.—The Secretary shall, during 

19 September of 2006 and of each succeeding year, de20 termine and promulgate a monthly premium rate for 

21 the succeeding year in accordance with the provi22 sions of this subsection. 

23 ‘‘(2) INITIAL PREMIUMS.—For months in 2007, 

24 the monthly premium rate under this subsection 

25 shall be— 
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1 ‘‘(A) $25, in the case of premiums paid by 

2 an individual enrolled in the program under this 

3 part; and 

4 ‘‘(B) $32, in the case of premiums paid for 

5 such an individual by a former employer (as de6 fined in section 1860H(f)(2)). 

7 ‘‘(3) SUBSEQUENT YEARS.— 

8 ‘‘(A) IN GENERAL.—For months in a year 

9 after 2007, the monthly premium under this 

10 subsection shall be (subject to subparagraph 

11 (B)) the monthly premium (computed under 

12 this subsection without regard to subparagraph 

13 (B)) for the previous year increased by the an14 nual percentage increase in average per capita 

15 aggregate expenditures for covered outpatient 

16 medicines in the United States for medicare 

17 beneficiaries, as estimated and published by the 

18 Secretary in September before the year and for 

19 the year involved. 

20 ‘‘(B) ROUNDING.—The monthly premium 

21 determined under subparagraph (A) shall be 

22 rounded to the nearest multiple of 10 cents if 

23 it is not a multiple of 10 cents. 

24 ‘‘(C) PUBLICATION OF ASSUMPTIONS.— 

25 The Secretary shall publish, together with the 
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1 promulgation of the monthly premium rates 

2 under this paragraph, a statement setting forth 

3 the actuarial assumptions and bases employed 

4 in arriving at the monthly premium under sub5 paragraph (A). 

6 ‘‘(b) PAYMENT OF PREMIUMS.— 

7 ‘‘(1) PAYMENTS BY DEDUCTION FROM SOCIAL

8 SECURITY, RAILROAD RETIREMENT BENEFITS, OR

9 BENEFITS ADMINISTERED BY OPM.— 

10 ‘‘(A) DEDUCTION FROM BENEFITS.—In 

11 the case of an individual who is entitled to or 

12 receiving benefits as described in subsection (a), 

13 (b), or (d) of section 1840, premiums payable 

14 under this part shall be collected by deduction 

15 from such benefits at the same time and in the 

16 same manner as premiums payable under part 

17 B are collected pursuant to section 1840. 

18 ‘‘(B) TRANSFERS TO PRESCRIPTION MEDI19 CINE INSURANCE ACCOUNT.—The Secretary of 

20 the Treasury shall, from time to time, but not 

21 less often than quarterly, transfer premiums 

22 collected pursuant to subparagraph (A) to the 

23 Prescription Medicine Insurance Account from 

24 the appropriate funds and accounts described in 

25 subsections (a)(2), (b)(2), and (d)(2) of section 
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1 1840, on the basis of the certifications de2 scribed in such subsections. The amounts of 

3 such transfers shall be appropriately adjusted 

4 to the extent that prior transfers were too great 

5 or too small. 

6 ‘‘(2) DIRECT PAYMENTS TO SECRETARY.— 

7 ‘‘(A) ADDITIONAL PAYMENT BY EN8 ROLLEE.—An individual to whom paragraph 

9 (1) applies (other than an individual receiving 

10 benefits as described in section 1840(d)) and 

11 who estimates that the amount that will be 

12 available for deduction under such paragraph 

13 for any premium payment period will be less 

14 than the amount of the monthly premiums for 

15 such period may (under regulations) pay to the 

16 Secretary the estimated balance, or such great17 er portion of the monthly premium as the indi18 vidual chooses. 

19 ‘‘(B) PAYMENTS BY OTHER ENROLLEES.— 

20 An individual enrolled in the insurance program 

21 under this part with respect to whom none of 

22 the preceding provisions of this subsection ap23 plies (or to whom section 1840(c) applies) shall 

24 pay premiums to the Secretary at such times 
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1 and in such manner as the Secretary shall by 

2 regulations prescribe. 

3 ‘‘(C) DEPOSIT OF PREMIUMS.—Amounts 

4 paid to the Secretary under this paragraph 

5 shall be deposited in the Treasury to the credit 

6 of the Prescription Medicine Insurance Account 

7 in the Supplementary Medical Insurance Trust 

8 Fund. 

9 ‘‘(c) CERTAIN LOW-INCOME INDIVIDUALS.—For 

10 rules concerning premiums for certain low-income individ11 uals, see section 1860E. 

12 ‘‘SPECIAL ELIGIBILITY, ENROLLMENT, AND COPAYMENT

13 RULES FOR LOW-INCOME INDIVIDUALS

14 ‘‘SEC. 1860E. (a) STATE AGREEMENTS FOR COV15 ERAGE.— 

16 ‘‘(1) IN GENERAL.—The Secretary shall, at the 

17 request of a State, enter into an agreement with the 

18 State under which all individuals described in para19 graph (2) are enrolled in the program under this 

20 part, without regard to whether any such individual 

21 has previously declined the opportunity to enroll in 

22 such program. 

23 ‘‘(2) ELIGIBILITY GROUPS.—The individuals de24 scribed in this paragraph, for purposes of paragraph 

25 (1), are individuals who satisfy section 1860C(a) 

26 and who are— 
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1 ‘‘(A)(i) eligible individuals within the 

2 meaning of section 1843; and 

3 ‘‘(ii) in a coverage group or groups per4 mitted under section 1843 (as selected by the 

5 State and specified in the agreement); or 

6 ‘‘(B) qualified medicare medicine bene7 ficiaries (as defined in subsection (e)(1)). 

8 ‘‘(3) COVERAGE PERIOD.—The period of cov9 erage under this part of an individual enrolled under 

10 an agreement under this subsection shall be as fol11 lows: 

12 ‘‘(A) INDIVIDUALS ELIGIBLE (AT STATE

13 OPTION) FOR PART B BUY-IN.—In the case of 

14 an individual described in subsection (a)(2)(A), 

15 the coverage period shall be the same period 

16 that applies (or would apply) pursuant to sec17 tion 1843(d). 

18 ‘‘(B) QUALIFIED MEDICARE MEDICINE

19 BENEFICIARIES.—In the case of an individual 

20 described in subsection (a)(2)(B)— 

21 ‘‘(i) the coverage period shall begin on 

22 the latest of— 

23 ‘‘(I) January 1, 2007; 

24 ‘‘(II) the first day of the third 

25 month following the month in which 
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1 the State agreement is entered into; 

2 or 

3 ‘‘(III) the first day of the first 

4 month following the month in which 

5 the individual satisfies section 

6 1860C(a); and 

7 ‘‘(ii) the coverage period shall end on 

8 the last day of the month in which the in9 dividual is determined by the State to have 

10 become ineligible for medicare medicine 

11 cost-sharing. 

12 ‘‘(4) ALTERNATIVE ENROLLMENT METHODS.— 

13 In the process of enrolling low-income individuals 

14 under this part, the Secretary shall use the system 

15 provided under section 154 of the Social Security 

16 Act Amendments of 1994 for newly eligible medicare 

17 beneficiaries and shall apply a similar system for 

18 other medicare beneficiaries. Such system shall use 

19 existing Federal government databases to identify 

20 eligibility. Such system shall not require that bene21 ficiaries apply for, or enroll through, State medicaid 

22 systems in order to obtain low-income assistance de23 scribed in this section. 
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1 ‘‘(b) SPECIAL PART D ENROLLMENT OPPORTUNITY

2 FOR INDIVIDUALS LOSING MEDICAID ELIGIBILITY.—In 

3 the case of an individual who— 

4 ‘‘(1) satisfies section 1860C(a); and 

5 ‘‘(2) loses eligibility for benefits under the State 

6 plan under title XIX after having been enrolled 

7 under such plan or having been determined eligible 

8 for such benefits; 

9 the Secretary shall provide an opportunity for enrollment 

10 under the program under this part during the period that 

11 begins on the date that such individual loses such eligi12 bility and ends on the date specified by the Secretary. 

13 ‘‘(c) STATE OPTION TO BUY-IN DUALLY ELIGIBLE

14 INDIVIDUALS.— 

15 ‘‘(1) COVERAGE OF PREMIUMS AS MEDICAL AS16 SISTANCE.—For purposes of applying the second 

17 sentence of section 1905(a), any reference to pre18 miums under part B shall be considered to include 

19 a reference to premiums under this part. 

20 ‘‘(2) STATE COMMITMENT TO CONTINUE PAR21 TICIPATION IN PART D AFTER BENEFIT LIMIT

22 REACHED.—As a condition of additional funding to 

23 a State under subsection (d), the State, in its State 

24 plan under title XIX, shall provide that in the case 

25 of any individual whose eligibility for medical assist-
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1 ance under title XIX is not limited to medicare cost2 sharing and for whom the State elects to pay pre3 miums under this part pursuant to this section, the 

4 State will purchase all prescription medicines for 

5 such individual in accordance with the provisions of 

6 this part without regard to whether the benefit limit 

7 for such individual under section 1860B(b) has been 

8 reached. 

9 ‘‘(3) MEDICARE COST-SHARING REQUIRED FOR

10 QUALIFIED MEDICARE BENEFICIARIES.—In applying 

11 title XIX, the term ‘medicare cost-sharing’ (as de12 fined in section 1905(p)(3)) is deemed to include— 

13 ‘‘(A) premiums under section 1860D; and 

14 ‘‘(B) the difference between the amount 

15 that is paid under section 1860B and the 

16 amount that would be paid under such section 

17 if any reference to ‘80 percent’ in subsection 

18 (a)(2) of such section were deemed a reference 

19 to ‘100 percent’ (or, if the Secretary approves 

20 a higher percentage under such section, if such 

21 percentage were deemed to be 100 percent). 

22 ‘‘(d) PAYMENT TO STATES FOR COVERAGE OF CER23 TAIN MEDICARE COST-SHARING.— 
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1 ‘‘(1) IN GENERAL.—The Secretary shall provide 

2 for payment under this subsection to each State that 

3 provides for— 

4 ‘‘(A) medicare cost-sharing described in 

5 section 1905(p)(3)(A)(ii) for individuals who 

6 would be qualified medicare beneficiaries de7 scribed in section 1905(p)(1) but for the fact 

8 that their income exceeds the income level es9 tablished by the State under section 1905(p)(2) 

10 and is at least 120 percent, but less than 135 

11 percent, of the official poverty line (referred to 

12 in such section) for a family of the size involved 

13 and who are not otherwise eligible for medical 

14 assistance under the State plan; and 

15 ‘‘(B) medicare medicine cost-sharing (as 

16 defined in subsection (e)(2)) for qualified medi17 care medicine beneficiaries described in sub18 section (e)(1). 

19 ‘‘(2) AMOUNT OF PAYMENT.—The amount of 

20 payment under paragraph (1) shall equal 100 per21 cent of the cost-sharing described in such paragraph, 

22 except that, in the case of an individual whose eligi23 bility for medical assistance under title XIX is not 

24 limited to medicare cost-sharing or medicare medi25 cine cost-sharing, the amount of payment under 
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1 paragraph (1)(B) shall be equal to the Federal med2 ical assistance percentage described in section 

3 1905(b)) of amounts as expended for such cost-shar4 ing. 

5 ‘‘(3) METHOD OF PAYMENT; RELATION TO

6 OTHER PAYMENTS.—Amounts shall be paid to 

7 States under this subsection in a manner similar to 

8 that provided under section 1903(d). Payments 

9 under this subsection shall be made in lieu of any 

10 payments that otherwise may be made for medical 

11 assistance provided under section 

12 1902(a)(10)(E)(iv). 

13 ‘‘(4) TREATMENT OF TERRITORIES.— 

14 ‘‘(A) IN GENERAL.—Subject to subpara15 graph (B), this subsection shall not apply to 

16 States other than the 50 States and the Dis17 trict of Columbia. 

18 ‘‘(B) PAYMENTS.—In the case of a State 

19 (other than the 50 States and the District of 

20 Columbia) that develops and implements a plan 

21 of assistance for pharmaceuticals provided to 

22 low-income medicare beneficiaries, the Secretary 

23 shall provide for payment to the State in an 

24 amount that is reasonable in relation to the 
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1 payment levels provided to other States under 

2 paragraph (2). 

3 ‘‘(e) DEFINITIONS; SPECIAL RULES.—For purposes 

4 of this section: 

5 ‘‘(1) QUALIFIED MEDICARE MEDICINE BENE6 FICIARY.—The term ‘qualified medicare medicine 

7 beneficiary’ means an individual— 

8 ‘‘(A) who is entitled to hospital insurance 

9 benefits under part A (including an individual 

10 entitled to such benefits pursuant to an enroll11 ment under section 1818, but not including an 

12 individual entitled to such benefits only pursu13 ant to an enrollment under section 1818A); 

14 ‘‘(B) whose income (as determined under 

15 section 1612 for purposes of the supplemental 

16 security income program, except as provided in 

17 section 1905(p)(2)(D)) is above 100 percent 

18 but below 150 percent of the official poverty 

19 line (as defined by the Office of Management 

20 and Budget, and revised annually in accordance 

21 with section 673(2) of the Omnibus Budget 

22 Reconciliation Act of 1981) applicable to a fam23 ily of the size involved; and 

24 ‘‘(C) whose resources (as determined under 

25 section 1613 for purposes of the supplemental 
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1 security income program) do not exceed twice 

2 the maximum amount of resources that an indi3 vidual may have and obtain benefits under that 

4 program. 

5 ‘‘(2) MEDICARE MEDICINE COST-SHARING.— 

6 The term ‘medicare medicine cost-sharing’ means 

7 the following costs incurred with respect to a quali8 fied medicare medicine beneficiary, without regard to 

9 whether the costs incurred were for items and serv10 ices for which medical assistance is otherwise avail11 able under a State plan under title XIX: 

12 ‘‘(A) In the case of a qualified medicare 

13 medicine beneficiary whose income (as deter14 mined under paragraph (1)) is less than 135 

15 percent of the official poverty line— 

16 ‘‘(i) premiums under section 1860D; 

17 and 

18 ‘‘(ii) the difference between the 

19 amount that is paid under section 1860B 

20 and the amount that would be paid under 

21 such section if any reference to ‘50 per22 cent’ therein were deemed a reference to 

23 ‘100 percent’ (or, if the Secretary approves 

24 a higher percentage under such section, if 
26 

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1 such percentage were deemed to be 100 

2 percent). 

3 ‘‘(B) In the case of a qualified medicare 

4 medicine beneficiary whose income (as deter5 mined under paragraph (1)) is at least 135 per6 cent but less than 150 percent of the official 

7 poverty line, a percentage of premiums under 

8 section 1860D, determined on a linear sliding 

9 scale ranging from 100 percent for individuals 

10 with incomes at 135 percent of such line to 0 

11 percent for individuals with incomes at 150 per12 cent of such line. 

13 ‘‘(3) STATE.—The term ‘State’ has the mean14 ing given such term under section 1101(a) for pur15 poses of title XIX. 

16 ‘‘(4) TREATMENT OF DRUGS PURCHASED.—The 

17 provisions of section 1927 shall not apply to pre18 scription drugs purchased under this part pursuant 

19 to an agreement with the Secretary under this sec20 tion (including any drugs so purchased after the 

21 limit under section 1860B(b) has been exceeded). 

22 ‘‘PRESCRIPTION MEDICINE INSURANCE ACCOUNT

23 ‘‘SEC. 1860F. (a) ESTABLISHMENT.—There is cre24 ated within the Federal Supplemental Medical Insurance 

25 Trust Fund established by section 1841 an account to be 
27 

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1 known as the ‘Prescription Medicine Insurance Account’ 

2 (in this section referred to as the ‘Account’). 

3 ‘‘(b) AMOUNTS IN ACCOUNT.— 

4 ‘‘(1) IN GENERAL.—The Account shall consist 

5 of— 

6 ‘‘(A) such amounts as may be deposited in, 

7 or appropriated to, such fund as provided in 

8 this part; and 

9 ‘‘(B) such gifts and bequests as may be 

10 made as provided in section 201(i)(1). 

11 ‘‘(2) SEPARATION OF FUNDS.—Funds provided 

12 under this part to the Account shall be kept sepa13 rate from all other funds within the Federal Supple14 mental Medical Insurance Trust Fund. 

15 ‘‘(c) PAYMENTS FROM ACCOUNT.—The Managing 

16 Trustee shall pay from time to time from the Account such 

17 amounts as the Secretary certifies are necessary to make 

18 the payments provided for by this part, and the payments 

19 with respect to administrative expenses in accordance with 

20 section 201(g). 

21 ‘‘ADMINISTRATION OF BENEFITS

22 ‘‘SEC. 1860G. (a) THROUGH CMS.—The Secretary 

23 shall provide for administration of the benefits under this 

24 part through the Centers for Medicare & Medicaid Serv25 ices in accordance with the provisions of this section. The 

26 Administrator of such Centers may enter into contracts 
28 

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1 with carriers to administer this part in the same manner 

2 as the Administrator enters into such contracts to admin3 ister part B. Any such contract shall be separate from any 

4 contract under section 1842. 

5 ‘‘(b) ADMINISTRATION FUNCTIONS.—In carrying out 

6 this part, the Administrator (or a carrier under a contract 

7 with the Administrator) shall (or in the case of the func8 tion described in paragraph (9), may) perform the fol9 lowing functions: 

10 ‘‘(1) PARTICIPATION AGREEMENTS, PRICES, 

11 AND FEES.— 

12 ‘‘(A) NEGOTIATED PRICES.—Establish, 

13 through negotiations with medicine manufactur14 ers and wholesalers and pharmacies, a schedule 

15 of prices for covered prescription medicines. 

16 ‘‘(B) AGREEMENTS WITH PHARMACIES.— 

17 Enter into participation agreements under sub18 section (c) with pharmacies, that include terms 

19 that— 

20 ‘‘(i) secure the participation of suffi21 cient numbers of pharmacies to ensure 

22 convenient access (including adequate 

23 emergency access); 

24 ‘‘(ii) permit the participation of any 

25 pharmacy in the service area that meets 
29 

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1 the participation requirements described in 

2 subsection (c); and 

3 ‘‘(iii) allow for reasonable dispensing 

4 and consultation fees for pharmacies. 

5 ‘‘(C) LISTS OF PRICES AND PARTICIPATING

6 PHARMACIES.—Ensure that the negotiated 

7 prices established under subparagraph (A) and 

8 the list of pharmacies with agreements under 

9 subsection (c) are regularly updated and readily 

10 available to health care professionals authorized 

11 to prescribe medicines, participating phar12 macies, and enrolled individuals. 

13 ‘‘(2) TRACKING OF COVERED ENROLLED INDI14 VIDUALS.—Maintain accurate, updated records of all 

15 enrolled individuals (other than individuals enrolled 

16 in a plan under part C). 

17 ‘‘(3) PAYMENT AND COORDINATION OF BENE18 FITS.— 

19 ‘‘(A) PAYMENT.— 

20 ‘‘(i) Administer claims for payment of 

21 benefits under this part and encourage, to 

22 the maximum extent possible, use of elec23 tronic means for the submissions of claims. 

24 ‘‘(ii) Determine amounts of benefit 

25 payments to be made. 
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1 ‘‘(iii) Receive, disburse, and account 

2 for funds used in making such payments, 

3 including through the activities specified in 

4 the provisions of this paragraph. 

5 ‘‘(B) COORDINATION.—Coordinate with 

6 other private benefit providers, pharmacies, and 

7 other relevant entities as necessary to ensure 

8 appropriate coordination of benefits with re9 spect to enrolled individuals, including coordina10 tion of access to and payment for covered pre11 scription medicines according to an individual’s 

12 in-service area plan provisions, when such indi13 vidual is traveling outside the home service 

14 area, and under such other circumstances as 

15 the Secretary may specify. 

16 ‘‘(C) EXPLANATION OF BENEFITS.—Fur17 nish to enrolled individuals an explanation of 

18 benefits in accordance with section 1806(a), 

19 and a notice of the balance of benefits remain20 ing for the current year, whenever prescription 

21 medicine benefits are provided under this part 

22 (except that such notice need not be provided 

23 more often than monthly). 

24 ‘‘(4) RULES RELATING TO PROVISION OF BENE25 FITS.— 
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1 ‘‘(A) IN GENERAL.—In providing benefits 

2 under this part, the Secretary (directly or 

3 through contracts) shall employ mechanisms to 

4 provide benefits economically, including the use 

5 of— 

6 ‘‘(i) formularies (consistent with sub7 paragraph (B)); 

8 ‘‘(ii) automatic generic medicine sub9 stitution (unless the physician specifies 

10 otherwise, in which case a 30-day prescrip11 tion may be dispensed pending a consulta12 tion with the physician on whether a ge13 neric substitute can be dispensed in the fu14 ture); 

15 ‘‘(iii) tiered copayments (which may 

16 include copayments at a rate lower than 20 

17 percent) to encourage the use of the lowest 

18 cost, on-formulary product in cases where 

19 there is no restrictive prescription (de20 scribed in subparagraph (D)(i)); and 

21 ‘‘(iv) therapeutic interchange. 

22 ‘‘(B) REQUIREMENTS WITH RESPECT TO

23 FORMULARIES.—If a formulary is used to con24 tain costs under this part— 
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1 ‘‘(i) use an advisory committee (or a 

2 therapeutics committee) comprised of li3 censed practicing physicians, pharmacists, 

4 and other health care practitioners to de5 velop and manage the formulary; 

6 ‘‘(ii) include in the formulary at least 

7 one medicine from each therapeutic class 

8 and, if available, a generic equivalent 

9 thereof; and 

10 ‘‘(iii) disclose to current and prospec11 tive enrollees and to participating providers 

12 and pharmacies, the nature of the for13 mulary restrictions, including information 

14 regarding the medicines included in the 

15 formulary and any difference in cost-shar16 ing amounts. 

17 ‘‘(C) CONSTRUCTION.—Nothing in this 

18 subsection shall be construed to prevent the 

19 Secretary (directly or through contracts) from 

20 using incentives (including a lower beneficiary 

21 coinsurance) to encourage enrollees to select ge22 neric or other cost-effective medicines, so long 

23 as— 

24 ‘‘(i) such incentives are designed not 

25 to result in any increase in the aggregate 
33 

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1 expenditures under the Federal Medicare 

2 Prescription Medicine Trust Fund; 

3 ‘‘(ii) the average coinsurance charged 

4 to all beneficiaries by the Secretary (di5 rectly or through contractors) shall seek to 

6 approximate (but in no case exceed) 20 

7 percent for on-formulary medicines; 

8 ‘‘(iii) a beneficiary’s coinsurance shall 

9 be no greater than 20 percent if the pre10 scription is a restrictive prescription; and 

11 ‘‘(iv) the reimbursement for a pre12 scribed nonformulary medicine without a 

13 restrictive prescription in no case shall be 

14 more than the lowest reimbursement for a 

15 formulary medicine in the therapeutic class 

16 of the prescribed medicine. 

17 ‘‘(D) RESTRICTIVE PRESCRIPTION.—For 

18 purposes of this section: 

19 ‘‘(i) WRITTEN PRESCRIPTIONS.—In 

20 the case of a written prescription for a 

21 medicine, it is a restrictive prescription 

22 only if the prescription indicates, in the 

23 writing of the physician or other qualified 

24 person prescribing the medicine and with 

25 an appropriate phrase (such as ‘brand 
34 

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1 medically necessary’) recognized by the 

2 Secretary, that a particular medicine prod3 uct must be dispensed based upon a belief 

4 by the physician or person prescribing the 

5 medicine that the particular medicine will 

6 provide even marginally superior thera7 peutic benefits to the individual for whom 

8 the medicine is prescribed or would have 

9 marginally fewer adverse reactions with re10 spect to such individual. 

11 ‘‘(ii) TELEPHONE PRESCRIPTIONS.— 

12 In the case of a prescription issued by tele13 phone for a medicine, it is a restrictive 

14 prescription only if the prescription cannot 

15 be longer than 30 days and the physician 

16 or other qualified person prescribing the 

17 medicine (through use of such an appro18 priate phrase) states that a particular 

19 medicine product must be dispensed, and 

20 the physician or other qualified person sub21 mits to the pharmacy involved, within 30 

22 days after the date of the telephone pre23 scription, a written confirmation from the 

24 physician or other qualified person pre25 scribing the medicine and which indicates 
35 

•HR 4697 IH 

1 with such appropriate phrase that the par2 ticular medicine product was required to 

3 have been dispensed based upon a belief by 

4 the physician or person prescribing the 

5 medicine that the particular medicine will 

6 provide even marginally superior thera7 peutic benefits to the individual for whom 

8 the medicine is prescribed or would have 

9 marginally fewer adverse reactions with re10 spect to such individual. Such written con11 firmation is required to refill the prescrip12 tion. 

13 ‘‘(iii) REVIEW OF RESTRICTIVE PRE14 SCRIPTIONS.—The advisory committee (es15 tablished under subparagraph (B)(i)) may 

16 decide to review a restrictive prescription 

17 and, if so, it may approve or disapprove 

18 such restrictive prescription. It may not 

19 disapprove such restrictive prescription un20 less it finds that there is no literature ap21 proved by the Food and Drug Administra22 tion that supports a determination that the 

23 particular medicine provides even margin24 ally superior therapeutic benefits to the in25 dividual for whom the medicine is pre-
36 

•HR 4697 IH 

1 scribed or would have marginally fewer ad2 verse reactions with respect to such indi3 vidual. If it disapproves, upon request of 

4 the prescribing physician or the enrollee, 

5 the committee must provide for a review by 

6 an independent contractor of such decision 

7 within 48 hours of the time of submission 

8 of the prescription, to determine whether 

9 the prescription is an eligible benefit under 

10 this part. The Secretary shall ensure that 

11 independent contractors so used are com12 pletely independent of the contractor or its 

13 advisory committee. 

14 ‘‘(5) COST AND UTILIZATION MANAGEMENT; 

15 QUALITY ASSURANCE.—Have in place effective cost 

16 and utilization management, drug utilization review, 

17 quality assurance measures, and systems to reduce 

18 medical errors, including at least the following, to19 gether with such additional measures as the Admin20 istrator may specify: 

21 ‘‘(A) DRUG UTILIZATION REVIEW.—A drug 

22 utilization review program conforming to the 

23 standards provided in section 1927(g)(2) (with 

24 such modifications as the Administrator finds 

25 appropriate). 
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1 ‘‘(B) FRAUD AND ABUSE CONTROL.—Ac2 tivities to control fraud, abuse, and waste, in3 cluding prevention of diversion of pharma4 ceuticals to the illegal market. 

5 ‘‘(C) MEDICATION THERAPY MANAGE6 MENT.— 

7 ‘‘(i) IN GENERAL.—A program of 

8 medicine therapy management and medica9 tion administration that is designed to as10 sure that covered outpatient medicines are 

11 appropriately used to achieve therapeutic 

12 goals and reduce the risk of adverse 

13 events, including adverse drug interactions. 

14 ‘‘(ii) ELEMENTS.—Such program may 

15 include— 

16 ‘‘(I) enhanced beneficiary under17 standing of such appropriate use 

18 through beneficiary education, coun19 seling, and other appropriate means; 

20 and 

21 ‘‘(II) increased beneficiary adher22 ence with prescription medication 

23 regimens through medication refill re24 minders, special packaging, and other 

25 appropriate means. 
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1 ‘‘(iii) DEVELOPMENT OF PROGRAM IN

2 COOPERATION WITH LICENSED PHAR3 MACISTS.—The program shall be developed 

4 in cooperation with licensed pharmacists 

5 and physicians. 

6 ‘‘(iv) CONSIDERATIONS IN PHARMACY

7 FEES.—There shall be taken into account, 

8 in establishing fees for pharmacists and 

9 others providing services under the medica10 tion therapy management program, the re11 sources and time used in implementing the 

12 program. 

13 ‘‘(6) EDUCATION AND INFORMATION ACTIVI14 TIES.—Have in place mechanisms for disseminating 

15 educational and informational materials to enrolled 

16 individuals and health care providers designed to en17 courage effective and cost-effective use of prescrip18 tion medicine benefits and to ensure that enrolled in19 dividuals understand their rights and obligations 

20 under the program. 

21 ‘‘(7) BENEFICIARY PROTECTIONS.— 

22 ‘‘(A) CONFIDENTIALITY OF HEALTH IN23 FORMATION.—Have in effect systems to safe24 guard the confidentiality of health care infor25 mation on enrolled individuals, which comply 
39 

•HR 4697 IH 

1 with section 1106 and with section 552a of title 

2 5, United States Code, and meet such addi3 tional standards as the Administrator may pre4 scribe. 

5 ‘‘(B) GRIEVANCE AND APPEAL PROCE6 DURES.—Have in place such procedures as the 

7 Administrator may specify for hearing and re8 solving grievances and appeals, including expe9 dited appeals, brought by enrolled individuals 

10 against the Administrator or a pharmacy con11 cerning benefits under this part, which shall in12 clude procedures equivalent to those specified in 

13 subsections (f) and (g) of section 1852. 

14 ‘‘(8) RECORDS, REPORTS, AND AUDITS.— 

15 ‘‘(A) RECORDS AND AUDITS.—Maintain 

16 adequate records, and afford the Administrator 

17 access to such records (including for audit pur18 poses). 

19 ‘‘(B) REPORTS.—Make such reports and 

20 submissions of financial and utilization data as 

21 the Administrator may require taking into ac22 count standard commercial practices. 

23 ‘‘(9) PROPOSAL FOR ALTERNATIVE COINSUR24 ANCE AMOUNT.— 
40 

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1 ‘‘(A) SUBMISSION.—The Administrator 

2 may provide for increased Government cost3 sharing for generic prescription medicines, pre4 scription medicines on a formulary, or prescrip5 tion medicines obtained through mail order 

6 pharmacies. 

7 ‘‘(B) CONTENTS.—The proposal submitted 

8 under subparagraph (A) shall contain evidence 

9 that such increased cost-sharing would not re10 sult in an increase in aggregate costs to the Ac11 count, including an analysis of differences in 

12 projected drug utilization patterns by bene13 ficiaries whose cost-sharing would be reduced 

14 under the proposal and those making the cost15 sharing payments that would otherwise apply. 

16 ‘‘(10) OTHER REQUIREMENTS.—Meet such 

17 other requirements as the Secretary may specify. 

18 The Administrator shall negotiate a schedule of prices 

19 under paragraph (1)(A), except that nothing in this sen20 tence shall prevent a carrier under a contract with the Ad21 ministrator from negotiating a lower schedule of prices for 

22 covered prescription medicines. 

23 ‘‘(c) PHARMACY PARTICIPATION AGREEMENTS.— 

24 ‘‘(1) IN GENERAL.—A pharmacy that meets the 

25 requirements of this subsection shall be eligible to 
41 

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1 enter an agreement with the Administrator to fur2 nish covered prescription medicines and pharmacists’ 

3 services to enrolled individuals. 

4 ‘‘(2) TERMS OF AGREEMENT.—An agreement 

5 under this subsection shall include the following 

6 terms and requirements: 

7 ‘‘(A) LICENSING.—The pharmacy and 

8 pharmacists shall meet (and throughout the 

9 contract period will continue to meet) all appli10 cable State and local licensing requirements. 

11 ‘‘(B) LIMITATION ON CHARGES.—Phar12 macies participating under this part shall not 

13 charge an enrolled individual more than the ne14 gotiated price for an individual medicine as es15 tablished under subsection (b)(1), regardless of 

16 whether such individual has attained the benefit 

17 limit under section 1860B(b), and shall not 

18 charge an enrolled individual more than the in19 dividual’s share of the negotiated price as deter20 mined under the provisions of this part. 

21 ‘‘(C) PERFORMANCE STANDARDS.—The 

22 pharmacy and the pharmacist shall comply with 

23 performance standards relating to— 

24 ‘‘(i) measures for quality assurance, 

25 reduction of medical errors, and participa-
42 

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1 tion in the drug utilization review program 

2 described in subsection (b)(3)(A); 

3 ‘‘(ii) systems to ensure compliance 

4 with the confidentiality standards applica5 ble under subsection (b)(5)(A); and 

6 ‘‘(iii) other requirements as the Sec7 retary may impose to ensure integrity, effi8 ciency, and the quality of the program. 

9 ‘‘(D) DISCLOSURE OF PRICE OF GENERIC

10 MEDICINE.—A pharmacy participating under 

11 this part shall inform an enrollee of the dif12 ference in price between generic and non-ge13 neric equivalents. 

14 ‘‘(d) SPECIAL ATTENTION TO RURAL AND HARD-TO15 SERVE AREAS.— 

16 ‘‘(1) IN GENERAL.—The Secretary shall ensure 

17 that all beneficiaries have access to the full range of 

18 pharmaceuticals under this part, and shall give spe19 cial attention to access, pharmacist counseling, and 

20 delivery in rural and hard-to-serve areas (as the Sec21 retary may define by regulation). 

22 ‘‘(2) SPECIAL ATTENTION DEFINED.—For pur23 poses of paragraph (1), the term ‘special attention’ 

24 may include bonus payments to retail pharmacists in 

25 rural areas and any other actions the Secretary de-
43 

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1 termines are necessary to ensure full access to rural 

2 and hard-to-serve beneficiaries. 

3 ‘‘(3) GAO REPORT.—Not later than two years 

4 after the implementation of this part the Comp5 troller General of the United States shall submit to 

6 Congress a report on the access of medicare bene7 ficiaries to pharmaceuticals and pharmacists’ serv8 ices in rural and hard-to-serve areas under this part 

9 together with any recommendations of the Comp10 troller General regarding any additional steps the 

11 Secretary may need to take to ensure the access of 

12 medicare beneficiaries to pharmaceuticals and phar13 macists’ services in such areas under this part. 

14 ‘‘(e) INCENTIVES FOR COST AND UTILIZATION MAN15 AGEMENT AND QUALITY IMPROVEMENT.—The Secretary 

16 is authorized to include in a contract awarded under sub17 section (b) with a carrier such incentives for cost and utili18 zation management and quality improvement as the Sec19 retary may deem appropriate, including— 

20 ‘‘(1) bonus and penalty incentives to encourage 

21 administrative efficiency; 

22 ‘‘(2) incentives under which carriers share in 

23 any benefit savings achieved; 

24 ‘‘(3) risk-sharing arrangements related to ini25 tiatives to encourage savings in benefit payments; 
44 

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1 ‘‘(4) financial incentives under which savings 

2 derived from the substitution of generic medicines in 

3 lieu of non-generic medicines are made available to 

4 carriers, pharmacies, and the Prescription Medicine 

5 Insurance Account; and 

6 ‘‘(5) any other incentive that the Secretary 

7 deems appropriate and likely to be effective in man8 aging costs or utilization. 

9 ‘‘EMPLOYER INCENTIVE PROGRAM FOR EMPLOYMENT10 BASED RETIREE MEDICINE COVERAGE

11 ‘‘SEC. 1860H. (a) PROGRAM AUTHORITY.—The Sec12 retary shall develop and implement a program under this 

13 section called the ‘Employer Incentive Program’ that en14 courages employers and other sponsors of employment15 based health care coverage to provide adequate prescrip16 tion medicine benefits to retired individuals and to main17 tain such existing benefit programs, by subsidizing, in 

18 part, the sponsor’s cost of providing coverage under quali19 fying plans. 

20 ‘‘(b) SPONSOR REQUIREMENTS.—In order to be eligi21 ble to receive an incentive payment under this section with 

22 respect to coverage of an individual under a qualified re23 tiree prescription medicine plan (as defined in subsection 

24 (f)(3)), a sponsor shall meet the following requirements: 

25 ‘‘(1) ASSURANCES.—The sponsor shall— 
45 

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1 ‘‘(A) annually attest, and provide such as2 surances as the Secretary may require, that the 

3 coverage offered by the sponsor is a qualified 

4 retiree prescription medicine plan, and will re5 main such a plan for the duration of the spon6 sor’s participation in the program under this 

7 section; and 

8 ‘‘(B) guarantee that it will give notice to 

9 the Secretary and covered retirees— 

10 ‘‘(i) at least 120 days before termi11 nating its plan; and 

12 ‘‘(ii) immediately upon determining 

13 that the actuarial value of the prescription 

14 medicine benefit under the plan falls below 

15 the actuarial value of the insurance benefit 

16 under this part. 

17 ‘‘(2) OTHER REQUIREMENTS.—The sponsor 

18 shall provide such information, and comply with 

19 such requirements, including information require20 ments to ensure the integrity of the program, as the 

21 Secretary may find necessary to administer the pro22 gram under this section. 

23 ‘‘(c) INCENTIVE PAYMENT.— 

24 ‘‘(1) IN GENERAL.—A sponsor that meets the 

25 requirements of subsection (b) with respect to a 
46 

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1 quarter in a calendar year shall have payment made 

2 by the Secretary on a quarterly basis (to the sponsor 

3 or, at the sponsor’s direction, to the appropriate em4 ployment-based health plan) of an incentive pay5 ment, in the amount determined as described in 

6 paragraph (2), for each retired individual (or 

7 spouse) who— 

8 ‘‘(A) was covered under the sponsor’s 

9 qualified retiree prescription medicine plan dur10 ing such quarter; and 

11 ‘‘(B) was eligible for but was not enrolled 

12 in the insurance program under this part. 

13 ‘‘(2) AMOUNT OF INCENTIVE.—The payment 

14 under this section with respect to each individual de15 scribed in paragraph (1) for a month shall be equal 

to 2 16 ⁄3 of the monthly premium amount payable from 

17 the Prescription Medicine Insurance Account for an 

18 enrolled individual, as set for the calendar year pur19 suant to section 1860D(a)(2). 

20 ‘‘(3) PAYMENT DATE.—The incentive under 

21 this section with respect to a calendar quarter shall 

22 be payable as of the end of the next succeeding cal23 endar quarter. 

24 ‘‘(d) CIVIL MONEY PENALTIES.—A sponsor, health 

25 plan, or other entity that the Secretary determines has, 
47 

•HR 4697 IH 

1 directly or through its agent, provided information in con2 nection with a request for an incentive payment under this 

3 section that the entity knew or should have known to be 

4 false shall be subject to a civil monetary penalty in an 

5 amount equal to $2,000 for each false representation plus 

6 an amount not to exceed three times the total incentive 

7 amounts under subsection (c) that were paid (or would 

8 have been payable) on the basis of such information. 

9 ‘‘(e) PART D ENROLLMENT FOR CERTAIN INDIVID10 UALS COVERED BY EMPLOYMENT-BASED RETIREE

11 HEALTH COVERAGE PLANS.— 

12 ‘‘(1) ELIGIBLE INDIVIDUALS.—An individual 

13 shall be given the opportunity to enroll in the pro14 gram under this part during the period specified in 

15 paragraph (2) if— 

16 ‘‘(A) the individual declined enrollment in 

17 the program under this part at the time the in18 dividual first satisfied section 1860C(a); 

19 ‘‘(B) at that time, the individual was cov20 ered under a qualified retiree prescription medi21 cine plan for which an incentive payment was 

22 paid under this section; and 

23 ‘‘(C)(i) the sponsor subsequently ceased to 

24 offer such plan; or 
48 

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1 ‘‘(ii) the value of prescription medicine cov2 erage under such plan is reduced below the 

3 value of the coverage provided at the time the 

4 individual first became eligible to participate in 

5 the program under this part. 

6 ‘‘(2) SPECIAL ENROLLMENT PERIOD.—An indi7 vidual described in paragraph (1) shall be eligible to 

8 enroll in the program under this part during the six9 month period beginning on the first day of the 

10 month in which— 

11 ‘‘(A) the individual receives a notice that 

12 coverage under such plan has terminated (in 

13 the circumstance described in paragraph 

14 (1)(C)(i)) or notice that a claim has been de15 nied because of such a termination; or 

16 ‘‘(B) the individual received notice of the 

17 change in benefits (in the circumstance de18 scribed in paragraph (1)(C)(ii)). 

19 ‘‘(f) DEFINITIONS.—In this section: 

20 ‘‘(1) EMPLOYMENT-BASED RETIREE HEALTH

21 COVERAGE.—The term ‘employment-based retiree 

22 health coverage’ means health insurance or other 

23 coverage of health care costs for retired individuals 

24 (or for such individuals and their spouses and de-
49 

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1 pendents) based on their status as former employees 

2 or labor union members. 

3 ‘‘(2) EMPLOYER.—The term ‘employer’ has the 

4 meaning given to such term by section 3(5) of the 

5 Employee Retirement Income Security Act of 1974 

6 (except that such term shall include only employers 

7 of two or more employees). 

8 ‘‘(3) QUALIFIED RETIREE PRESCRIPTION MEDI9 CINE PLAN.—The term ‘qualified retiree prescription 

10 medicine plan’ means health insurance coverage in11 cluded in employment-based retiree health coverage 

12 that— 

13 ‘‘(A) provides coverage of the cost of pre14 scription medicines whose actuarial value to 

15 each retired beneficiary equals or exceeds the 

16 actuarial value of the benefits provided to an in17 dividual enrolled in the program under this 

18 part; and 

19 ‘‘(B) does not deny, limit, or condition the 

20 coverage or provision of prescription medicine 

21 benefits for retired individuals based on age or 

22 any health status-related factor described in 

23 section 2702(a)(1) of the Public Health Service 

24 Act. 
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1 ‘‘(4) SPONSOR.—The term ‘sponsor’ has the 

2 meaning given the term ‘plan sponsor’ by section 

3 3(16)(B) of the Employee Retirement Income Secu4 rity Act of 1974. 

5 ‘‘PROMOTION OF PHARMACEUTICAL RESEARCH ON

6 BREAK-THROUGH MEDICINES WHILE PROVIDING

7 PROGRAM COST CONTAINMENT

8 ‘‘SEC. 1860I. (a) MONITORING EXPENDITURES.— 

9 The Secretary shall monitor expenditures under this part. 

10 On October 1, 2007, the Secretary shall estimate total ex11 penditures under this part for 2007. 

12 ‘‘(b) ESTABLISHMENT OF SUSTAINABLE GROWTH

13 RATE.— 

14 ‘‘(1) IN GENERAL.—The Secretary shall estab15 lish a sustainable growth rate prescription medicine 

16 target system for expenditures under this part for 

17 each year after 2007. 

18 ‘‘(2) INITIAL COMPUTATION.—Such target shall 

19 equal the amount of total expenditures estimated for 

20 2007 adjusted by the Secretary’s estimate of a sus21 tainable growth rate (in this section referred to as 

22 an ‘SGR’) percentage between 2007 and 2008. Such 

23 SGR shall be estimated based on the following: 

24 ‘‘(A) Reasonable changes in the cost of 

25 production or price of covered pharmaceuticals, 

26 but in no event more than the rate of increase 
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1 in the consumer price index for all urban con2 sumers for the period involved. 

3 ‘‘(B) Population enrolled in this part, both 

4 in numbers and in average age and severity of 

5 chronic and acute illnesses. 

6 ‘‘(C) Appropriate changes in utilization of 

7 pharmaceuticals, as determined by the Drug 

8 Review Board (established under subsection 

9 (c)(3)) and based on best estimates of utiliza10 tion change if there were no direct-to-consumer 

11 advertising or promotions to providers. 

12 ‘‘(D) Productivity index of manufacturers 

13 and distributors. 

14 ‘‘(E) Percentage of products with patent 

15 and market exclusivity protection versus prod16 ucts without patent protection and changes in 

17 the availability of generic substitutes. 

18 ‘‘(F) Such other factors as the Secretary 

19 may determine are appropriate. 

20 In no event may the sustainable growth rate exceed 

21 120 percent of the estimated per capita growth in 

22 total spending under this title. 

23 ‘‘(3) COMPUTATION FOR SUBSEQUENT

24 YEARS.—In October of 2008 and each year there25 after, for purposes of setting the SGRs for the suc-
52 

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1 ceeding year, the Secretary shall adjust each current 

2 year’s estimated expenditures by the estimated SGR 

3 for the succeeding year, further adjusted for correc4 tions in earlier estimates and the receipt of addi5 tional data on previous years spending as follows: 

6 ‘‘(A) ERROR ESTIMATES.—An adjustment 

7 (up or down) for errors in the estimate of total 

8 expenditures under this part for the previous 

9 year. 

10 ‘‘(B) COSTS.—An adjustment (up or 

11 down) for corrections in the cost of production 

12 of prescriptions covered under this part between 

13 the current calendar year and the previous year. 

14 ‘‘(C) TARGET.—An adjustment for any 

15 amount (over or under) that expenditures in the 

16 current year under this part are estimated to 

17 differ from the target amount set for the year. 

18 If expenditures in the current year are esti19 mated to be— 

20 ‘‘(i) less than the target amount, fu21 ture target amounts will be adjusted down22 ward; or 

23 ‘‘(ii) more than the target amount, 

24 the Secretary shall notify all pharma25 ceutical manufacturers with sales of phar-
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1 maceutical prescription medicine products 

2 to medicare beneficiaries under this part, 

3 of a rebate requirement (except as pro4 vided in this subparagraph) to be deposited 

5 in the Federal Medicare Prescription Medi6 cine Trust Fund. 

7 ‘‘(D) REBATE DETERMINATION.—The 

8 amount of the rebate described in subparagraph 

9 (C)(ii) may vary among manufacturers and 

10 shall be based on the manufacturer’s estimated 

11 contribution to the expenditure above the target 

12 amount, taking into consideration such factors 

13 as— 

14 ‘‘(i) above average increases in the 

15 cost of the manufacturer’s product; 

16 ‘‘(ii) increases in utilization due to 

17 promotion activities of the manufacturer, 

18 wholesaler, or retailer; 

19 ‘‘(iii) launch prices of new drugs at 

20 the same or higher prices as similar drugs 

21 already in the marketplace (so-called ‘me 

22 too’ or ‘copy-cat’ drugs); 

23 ‘‘(iv) the role of the manufacturer in 

24 delaying the entry of generic products into 

25 the market; and 
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1 ‘‘(v) such other actions by the manu2 facturer that the Secretary may determine 

3 has contributed to the failure to meet the 

4 SGR target. 

5 The rebates shall be established under such 

6 subparagraph so that the total amount of the 

7 rebates is estimated to ensure that the amount 

8 the target for the current year is estimated to 

9 be exceeded is recovered in lower spending in 

10 the subsequent year; except that, no rebate 

11 shall be made in any manufacturer’s product 

12 which the Food and Drug Administration has 

13 determined is a breakthrough medicine (as de14 termined under subsection (c)) or an orphan 

15 medicine. 

16 ‘‘(c) BREAKTHROUGH MEDICINES.— 

17 ‘‘(1) DETERMINATION.—For purposes of this 

18 section, a medicine is a ‘breakthrough medicine’ if 

19 the Drug Review Board (established under para20 graph (3)) determines— 

21 ‘‘(A) it is a new product that will make a 

22 significant and major improvement by reducing 

23 physical or mental illness, reducing mortality, 

24 or reducing disability; and 
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1 ‘‘(B) that no other product is available to 

2 beneficiaries that achieves similar results for 

3 the same condition at a lower cost. 

4 ‘‘(2) CONDITION.—An exemption from rebates 

5 under subsection (b)(3) for a breakthrough medicine 

6 shall continue as long as the medicine is certified as 

7 a breakthrough medicine but shall be limited to 

8 seven calendar years from 2007 or seven calendar 

9 years from the date of the initial determination 

10 under paragraph (1), whichever is later. 

11 ‘‘(3) DRUG REVIEW BOARD.—The Drug Review 

12 Board under this paragraph shall consist of the 

13 Commissioner of Food and Drugs, the Directors of 

14 the National Institutes of Health, the Director of 

15 the National Science Foundation, and 10 experts in 

16 pharmaceuticals, medical research, and clinical care, 

17 selected by the Commissioner of Food and Drugs 

18 from the faculty of academic medical centers, except 

19 that no person who has (or who has an immediate 

20 family member that has) any conflict of interest with 

21 any pharmaceutical manufacturer shall serve on the 

22 Board. 

23 ‘‘(d) NO REVIEW.—The Secretary’s determination of 

24 the rebate amounts under this section, and the Drug Re-
56 

•HR 4697 IH 

1 view Board’s determination of what is a breakthrough 

2 drug, are not subject to administrative or judicial review. 

3 ‘‘APPROPRIATIONS TO COVER GOVERNMENT

4 CONTRIBUTIONS

5 ‘‘SEC. 1860J. (a) IN GENERAL.—There are author6 ized to be appropriated from time to time, out of any mon7 eys in the Treasury not otherwise appropriated, to the 

8 Prescription Medicine Insurance Account, a Government 

9 contribution equal to— 

10 ‘‘(1) the aggregate premiums payable for a 

11 month pursuant to section 1860D(a)(2) by individ12 uals enrolled in the program under this part; plus 

13 ‘‘(2) one-half the aggregate premiums payable 

14 for a month pursuant to such section for such indi15 viduals by former employers; plus 

16 ‘‘(3) the benefits payable by reason of the appli17 cation of paragraph (2) of section 1860B(a) (relat18 ing to catastrophic benefits). 

19 ‘‘(b) APPROPRIATIONS TO COVER INCENTIVES FOR

20 EMPLOYMENT-BASED RETIREE MEDICINE COVERAGE.— 

21 There are authorized to be appropriated to the Prescrip22 tion Medicine Insurance Account from time to time, out 

23 of any moneys in the Treasury not otherwise appropriated 

24 such sums as may be necessary for payment of incentive 

25 payments under section 1860H(c). 
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1 ‘‘PRESCRIPTION MEDICINE DEFINED

2 ‘‘SEC. 1860K. 

3 As used in this part, the term ‘prescription medicine’ 

4 means— 

5 ‘‘(1) a drug that may be dispensed only upon 

6 a prescription, and that is described in subpara7 graph (A)(i), (A)(ii), or (B) of section 1927(k)(2); 

8 and 

9 ‘‘(2) insulin certified under section 506 of the 

10 Federal Food, Drug, and Cosmetic Act, and needles, 

11 syringes, and disposable pumps for the administra12 tion of such insulin.’’. 

13 (b) CONFORMING AMENDMENTS.— 

14 (1) AMENDMENTS TO FEDERAL SUPPLE15 MENTARY HEALTH INSURANCE TRUST FUND.—Sec16 tion 1841 of the Social Security Act (42 U.S.C. 

17 1395t) is amended— 

18 (A) in the last sentence of subsection (a)— 

19 (i) by striking ‘‘and’’ after ‘‘section 

20 201(i)(1)’’; and 

21 (ii) by inserting before the period the 

22 following: ‘‘, and such amounts as may be 

23 deposited in, or appropriated to, the Pre24 scription Medicine Insurance Account es25 tablished by section 1860F’’; 
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1 (B) in subsection (g), by inserting after 

2 ‘‘by this part,’’ the following: ‘‘the payments 

3 provided for under part D (in which case the 

4 payments shall come from the Prescription 

5 Medicine Insurance Account in the Supple6 mentary Medical Insurance Trust Fund),’’; 

7 (C) in the first sentence of subsection (h), 

8 by inserting before the period the following: 

9 ‘‘and section 1860D(b)(4) (in which case the 

10 payments shall come from the Prescription 

11 Medicine Insurance Account in the Supple12 mentary Medical Insurance Trust Fund)’’; and 

13 (D) in the first sentence of subsection 

14 (i)— 

15 (i) by striking ‘‘and’’ after ‘‘section 

16 1840(b)(1)’’; and 

17 (ii) by inserting before the period the 

18 following: ‘‘, section 1860D(b)(2) (in which 

19 case the payments shall come from the 

20 Prescription Medicine Insurance Account 

21 in the Supplementary Medical Insurance 

22 Trust Fund)’’. 

23 (2) PRESCRIPTION MEDICINE OPTION UNDER

24 MA PLANS.— 
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1 (A) ELIGIBILITY, ELECTION, AND ENROLL2 MENT.—Section 1851 of the Social Security Act 

3 (42 U.S.C. 1395w–21) is amended— 

4 (i) in subsection (a)(1)(A), by striking 

5 ‘‘parts A and B’’ and inserting ‘‘parts A, 

6 B, and D’’; and 

7 (ii) in subsection (i)(1), by striking 

8 ‘‘parts A and B’’ and inserting ‘‘parts A, 

9 B, and D’’. 

10 (B) VOLUNTARY BENEFICIARY ENROLL11 MENT FOR MEDICINE COVERAGE.—Section 

12 1852(a)(1)(A) of such Act (42 U.S.C. 1395w– 

13 22(a)(1)(A)) is amended by inserting ‘‘(and 

14 under part D to individuals also enrolled under 

15 that part)’’ after ‘‘parts A and B’’. 

16 (C) ACCESS TO SERVICES.—Section 

17 1852(d)(1) of such Act (42 U.S.C. 1395w– 

18 22(d)(1)) is amended— 

19 (i) in subparagraph (D), by striking 

20 ‘‘and’’ at the end; 

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

22 the period at the end and inserting ‘‘; 

23 and’’; and 

24 (iii) by adding at the end the fol25 lowing new subparagraph: 
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1 ‘‘(F) the plan for prescription medicine 

2 benefits under part D guarantees coverage of 

3 any specifically named covered prescription 

4 medicine for an enrollee, when prescribed by a 

5 physician in accordance with the provisions of 

6 such part, regardless of whether such medicine 

7 would otherwise be covered under an applicable 

8 formulary or discount arrangement.’’. 

9 (D) PAYMENTS TO ORGANIZATIONS.—Sec10 tion 1853(a)(1)(A) of such Act (42 U.S.C. 

11 1395w–23(a)(1)(A)) is amended— 

12 (i) by inserting ‘‘determined sepa13 rately for benefits under parts A and B 

14 and under part D (for individuals enrolled 

15 under that part)’’ after ‘‘as calculated 

16 under subsection (c)’’; 

17 (ii) by striking ‘‘that area, adjusted 

18 for such risk factors’’ and inserting ‘‘that 

19 area. In the case of payment for benefits 

20 under parts A and B, such payment shall 

21 be adjusted for such risk factors as’’; and 

22 (iii) by inserting before the last sen23 tence the following: ‘‘In the case of the 

24 payments for benefits under part D, such 

25 payment shall initially be adjusted for the 
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1 risk factors of each enrollee as the Sec2 retary determines to be feasible and appro3 priate. By 2010, the adjustments would be 

4 for the same risk factors applicable for 

5 benefits under parts A and B.’’. 

6 (E) CALCULATION OF ANNUAL MA CAPITA7 TION RATES.—Section 1853(c) of such Act (42 

8 U.S.C. 1395w–23(c)) is amended— 

9 (i) in paragraph (1), in the matter 

10 preceding subparagraph (A), by inserting 

11 ‘‘for benefits under parts A and B’’ after 

12 ‘‘capitation rate’’; 

13 (ii) in paragraph (6)(A), by striking 

14 ‘‘rate of growth in expenditures under this 

15 title’’ and inserting ‘‘rate of growth in ex16 penditures for benefits available under 

17 parts A and B’’; and 

18 (iii) by adding at the end the fol19 lowing new paragraph: 

20 ‘‘(8) PAYMENT FOR PRESCRIPTION MEDI21 CINES.—The Secretary shall determine a capitation 

22 rate for prescription medicines— 

23 ‘‘(A) dispensed in 2007, which is based on 

24 the projected national per capita costs for pre25 scription medicine benefits under part D and 
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1 associated claims processing costs for bene2 ficiaries under the original medicare fee-for3 service program; and 

4 ‘‘(B) dispensed in each subsequent year, 

5 which shall be equal to the rate for the previous 

6 year updated by the Secretary’s estimate of the 

7 projected per capita rate of growth in expendi8 tures under this title for an individual enrolled 

9 under part D.’’. 

10 (F) LIMITATION ON ENROLLEE LIABIL11 ITY.—Section 1854(e) of such Act (42 U.S.C. 

12 1395w–24(e)) is amended by adding at the end 

13 the following new paragraph: 

14 ‘‘(5) SPECIAL RULE FOR PROVISION OF PART D

15 BENEFITS.—In no event may a Medicare Advantage 

16 organization include as part of a plan for prescrip17 tion medicine benefits under part D a requirement 

18 that an enrollee pay a deductible, or a coinsurance 

19 percentage that exceeds 20 percent.’’. 

20 (G) REQUIREMENT FOR ADDITIONAL BEN21 EFITS.—Section 1854(f)(1) of such Act (42 

22 U.S.C. 1395w–24(f)(1)) is amended by adding 

23 at the end the following new sentence: ‘‘Such 

24 determination shall be made separately for ben-
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1 efits under parts A and B and for prescription 

2 medicine benefits under part D.’’. 

3 (3) EXCLUSIONS FROM COVERAGE.— 

4 (A) APPLICATION TO PART D.—Section 

5 1862(a) of the Social Security Act (42 U.S.C. 

6 1395y(a)) is amended in the matter preceding 

7 paragraph (1) by striking ‘‘part A or part B’’ 

8 and inserting ‘‘part A, B, or D’’. 

9 (B) PRESCRIPTION MEDICINES NOT EX10 CLUDED FROM COVERAGE IF APPROPRIATELY

11 PRESCRIBED.—Section 1862(a)(1) of such Act 

12 (42 U.S.C. 1395y(a)(1)) is amended— 

13 (i) in subparagraph (H), by striking 

14 ‘‘and’’ at the end; 

15 (ii) in subparagraph (I), by striking 

16 the semicolon at the end and inserting ‘‘, 

17 and’’; and 

18 (iii) by adding at the end the fol19 lowing new subparagraph: 

20 ‘‘(J) in the case of prescription medicines 

21 covered under part D, which are not prescribed 

22 in accordance with such part;’’. 

23 (c) EFFECTIVE DATE.—The amendments made by 

24 this section shall take effect on January 1, 2007, and the 

25 Secretary of Health and Human Services shall administer 
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1 the Social Security Act in accordance with such amend2 ments on and after such date. 

3 SEC. 5. SUBSTANTIAL REDUCTIONS IN THE PRICE OF PRE4 SCRIPTION DRUGS FOR MEDICARE BENE5 FICIARIES. 

6 (a) PARTICIPATING MANUFACTURERS.— 

7 (1) IN GENERAL.—Each participating manufac8 turer of a covered outpatient drug shall make avail9 able for purchase by each pharmacy such covered 

10 outpatient drug in the amount described in para11 graph (2) at the price described in paragraph (3). 

12 (2) DESCRIPTION OF AMOUNT OF DRUGS.—The 

13 amount of a covered outpatient drug that a partici14 pating manufacturer shall make available for pur15 chase by a pharmacy is an amount equal to the ag16 gregate amount of the covered outpatient drug sold 

17 or distributed by the pharmacy to medicare bene18 ficiaries. 

19 (3) DESCRIPTION OF PRICE.—The price at 

20 which a participating manufacturer shall make a 

21 covered outpatient drug available for purchase by a 

22 pharmacy is the price equal to the lowest of the fol23 lowing: 
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1 (A) The lowest price paid for the covered 

2 outpatient drug by any agency or department of 

3 the United States. 

4 (B) The manufacturer’s best price for the 

5 covered outpatient drug, as defined in section 

6 1927(c)(1)(C) of the Social Security Act (42 

7 U.S.C. 1396r–8(c)(1)(C)). 

8 (C) The lowest price at which the drug is 

9 available (as determined by the Secretary) 

10 through importation consistent with the provi11 sions of section 804 of the Federal Food, Drug, 

12 and Cosmetic Act. 

13 (b) SPECIAL PROVISION WITH RESPECT TO HOSPICE

14 PROGRAMS.—For purposes of determining the amount of 

15 a covered outpatient drug that a participating manufac16 turer shall make available for purchase by a pharmacy 

17 under subsection (a), there shall be included in the cal18 culation of such amount the amount of the covered out19 patient drug sold or distributed by a pharmacy to a hos20 pice program. In calculating such amount, only amounts 

21 of the covered outpatient drug furnished to a medicare 

22 beneficiary enrolled in the hospice program shall be in23 cluded. 
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1 (c) ADMINISTRATION.—The Secretary shall issue 

2 such regulations as may be necessary to implement this 

3 section. 

4 (d) REPORTS TO CONGRESS REGARDING EFFECTIVE5 NESS OF SECTION.— 

6 (1) IN GENERAL.—Not later than two years 

7 after the date of the enactment of this Act, and an8 nually thereafter, the Secretary shall report to Con9 gress regarding the effectiveness of this section in— 

10 (A) protecting medicare beneficiaries from 

11 discriminatory pricing by drug manufacturers; 

12 and 

13 (B) making prescription drugs available to 

14 medicare beneficiaries at substantially reduced 

15 prices. 

16 (2) CONSULTATION.—In preparing such re17 ports, the Secretary shall consult with public health 

18 experts, affected industries, organizations rep19 resenting consumers and older Americans, and other 

20 interested persons. 

21 (3) RECOMMENDATIONS.—The Secretary shall 

22 include in such reports any recommendations they 

23 consider appropriate for changes in this section to 

24 further reduce the cost of covered outpatient drugs 

25 to medicare beneficiaries. 
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1 (f) DEFINITIONS.—For purposes of this section: 

2 (1) PARTICIPATING MANUFACTURER.—The 

3 term ‘‘participating manufacturer’’ means any man4 ufacturer of drugs or biologicals that, on or after the 

5 date of the enactment of this Act, enters into a con6 tract or agreement with the United States for the 

7 sale or distribution of covered outpatient drugs to 

8 the United States. 

9 (2) COVERED OUTPATIENT DRUG.—The term 

10 ‘‘covered outpatient drug’’ has the meaning given 

11 that term in section 1927(k)(2) of the Social Secu12 rity Act (42 U.S.C. 1396r–8(k)(2)). 

13 (3) MEDICARE BENEFICIARY.—The term 

14 ‘‘medicare beneficiary’’ means an individual entitled 

15 to benefits under part A of title XVIII of the Social 

16 Security Act or enrolled under part B of such title, 

17 or both. 

18 (4) HOSPICE PROGRAM.—The term ‘‘hospice 

19 program’’ has the meaning given that term under 

20 section 1861(dd)(2) of the Social Security Act (42 

21 U.S.C. 1395x(dd)(2)). 

22 (5) SECRETARY.—The term ‘‘Secretary’’ means 

23 the Secretary of Health and Human Services. 

24 (f) EFFECTIVE DATE.—This section shall take effect 

25 on January 1, 2007, and the Secretary shall implement 
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1 this section in a manner consistent with the obligations 

2 of the United States. 

3 SEC. 6. IMPORTATION OF CERTAIN PRESCRIPTION DRUGS. 

4 (a) REPEAL OF CERTAIN SECTION REGARDING IM5 PORTATION OF PRESCRIPTION DRUGS.—Chapter VIII of 

6 the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 381 

7 et seq.) is amended by striking section 804. 

8 (b) IMPORTATION OF PRESCRIPTION DRUGS; WAIVER

9 OF CERTAIN IMPORT RESTRICTIONS.— 

10 (1) IN GENERAL.—Chapter VIII of the Federal 

11 Food, Drug, and Cosmetic Act (21 U.S.C. 381 et 

12 seq.), as amended by section 3, is further amended 

13 by inserting after section 803 the following: 

14 ‘‘SEC. 804. COMMERCIAL AND PERSONAL IMPORTATION OF 

15 PRESCRIPTION DRUGS. 

16 ‘‘(a) IMPORTATION OF PRESCRIPTION DRUGS.— 

17 ‘‘(1) IN GENERAL.—In the case of qualifying 

18 drugs imported or offered for import into the United 

19 States from registered exporters or by registered im20 porters— 

21 ‘‘(A) the limitation on importation that is 

22 established in section 801(d)(1) is waived; and 

23 ‘‘(B) the standards referred to in section 

24 801(a) regarding admission of the drugs are 

25 subject to subsection (g) of this section (includ-
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1 ing with respect to qualifying drugs to which 

2 section 801(d)(1) does not apply). 

3 ‘‘(2) IMPORTERS.—A qualifying drug may not 

4 be imported under paragraph (1) unless— 

5 ‘‘(A) the drug is imported by a pharmacy, 

6 group of pharmacies, or a wholesaler that is a 

7 registered importer; or 

8 ‘‘(B) the drug is imported by an individual 

9 for personal use or for the use of a family mem10 ber of the individual (not for resale) from a reg11 istered exporter. 

12 ‘‘(3) RULE OF CONSTRUCTION.—This section 

13 shall apply only with respect to a drug that is im14 ported or offered for import into the United 

15 States— 

16 ‘‘(A) by a registered importer; or 

17 ‘‘(B) from a registered exporter to an indi18 vidual. 

19 ‘‘(4) DEFINITIONS.— 

20 ‘‘(A) REGISTERED EXPORTER; REG21 ISTERED IMPORTER.—For purposes of this sec22 tion: 

23 ‘‘(i) The term ‘registered exporter’ 

24 means an exporter for which a registration 
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1 under subsection (b) has been approved 

2 and is in effect. 

3 ‘‘(ii) The term ‘registered importer’ 

4 means a pharmacy, group of pharmacies, 

5 or a wholesaler for which a registration 

6 under subsection (b) has been approved 

7 and is in effect. 

8 ‘‘(iii) The term ‘registration condition’ 

9 means a condition that must exist for a 

10 registration under subsection (b) to be ap11 proved. 

12 ‘‘(B) QUALIFYING DRUG.—For purposes of 

13 this section, the term ‘qualifying drug’ means a 

14 drug for which there is a corresponding U.S. 

15 label drug. 

16 ‘‘(C) U.S. LABEL DRUG.—For purposes of 

17 this section, the term ‘U.S. label drug’ means 

18 a prescription drug that— 

19 ‘‘(i) with respect to a qualifying drug, 

20 has the same active ingredient or ingredi21 ents, route of administration, dosage form, 

22 and strength as the qualifying drug; 

23 ‘‘(ii) with respect to the qualifying 

24 drug, is manufactured by or for the person 

25 that manufactures the qualifying drug; 
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1 ‘‘(iii) is approved under section 

2 505(c); and 

3 ‘‘(iv) is not— 

4 ‘‘(I) a controlled substance, as 

5 defined in section 102 of the Con6 trolled Substances Act (21 U.S.C. 

7 802); 

8 ‘‘(II) a biological product, as de9 fined in section 351 of the Public 

10 Health Service Act (42 U.S.C. 262), 

11 including— 

12 ‘‘(aa) a therapeutic DNA 

13 plasmid product; 

14 ‘‘(bb) a therapeutic synthetic 

15 peptide product; 

16 ‘‘(cc) a monoclonal antibody 

17 product for in vivo use; and 

18 ‘‘(dd) a therapeutic recom19 binant DNA-derived product; 

20 ‘‘(III) an infused drug, including 

21 a peritoneal dialysis solution; 

22 ‘‘(IV) an injected drug; 

23 ‘‘(V) a drug that is inhaled dur24 ing surgery; or 
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1 ‘‘(VI) a drug that is the listed 

2 drug referred to in 2 or more abbre3 viated new drug applications under 

4 which the drug is commercially mar5 keted. 

6 ‘‘(D) OTHER DEFINITIONS.—For purposes 

7 of this section: 

8 ‘‘(i)(I) The term ‘exporter’ means a 

9 person that is in the business of exporting 

10 a drug to individuals in the United States 

11 from Canada or from a permitted country 

12 designated by the Secretary under sub13 clause (II), or that, pursuant to submitting 

14 a registration under subsection (b), seeks 

15 to be in such business. 

16 ‘‘(II) The Secretary shall designate a 

17 permitted country under subparagraph (E) 

18 (other than Canada) as a country from 

19 which an exporter may export a drug to in20 dividuals in the United States if the Sec21 retary determines that— 

22 ‘‘(aa) the country has statutory 

23 or regulatory standards that are 

24 equivalent to the standards in the 
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1 United States and Canada with re2 spect to— 

3 ‘‘(AA) the training of phar4 macists; 

5 ‘‘(BB) the practice of phar6 macy; and 

7 ‘‘(CC) the protection of the 

8 privacy of personal medical infor9 mation; and 

10 ‘‘(bb) the importation of drugs to 

11 individuals in the United States from 

12 the country will not adversely affect 

13 public health. 

14 ‘‘(ii) The term ‘importer’ means a 

15 pharmacy, a group of pharmacies, or a 

16 wholesaler that is in the business of im17 porting a drug into the United States or 

18 that, pursuant to submitting a registration 

19 under subsection (b), seeks to be in such 

20 business. 

21 ‘‘(iii) The term ‘pharmacist’ means a 

22 person licensed by a State to practice 

23 pharmacy, including the dispensing and 

24 selling of prescription drugs. 
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1 ‘‘(iv) The term ‘pharmacy’ means a 

2 person that— 

3 ‘‘(I) is licensed by a State to en4 gage in the business of selling pre5 scription drugs at retail; and 

6 ‘‘(II) employs 1 or more phar7 macists. 

8 ‘‘(v) The term ‘prescription drug’ means a drug 

9 that is described in section 503(b)(1). 

10 ‘‘(vi) The term ‘wholesaler’— 

11 ‘‘(I) means a person licensed as a whole12 saler or distributor of prescription drugs in the 

13 United States under section 503(e)(2)(A); and 

14 ‘‘(II) does not include a person authorized 

15 to import drugs under section 801(d)(1). 

16 ‘‘(E) PERMITTED COUNTRY.—The term ‘permitted 

17 country’ means— 

18 ‘‘(i) Australia; 

19 ‘‘(ii) Canada; 

20 ‘‘(iii) a member country of the European 

21 Union, but does not include a member country with 

22 respect to which— 

23 ‘‘(I) the country’s Annex to the Treaty of 

24 Accession to the European Union 2003 includes 

25 a transitional measure for the regulation of 
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1 human pharmaceutical products that has not 

2 expired; or 

3 ‘‘(II) the Secretary determines that the re4 quirements described in subclauses (I) and (II) 

5 of clause (vii) will not be met by the date on 

6 which such transitional measure for the regula7 tion of human pharmaceutial products expires; 

8 ‘‘(iv) Japan; 

9 ‘‘(v) New Zealand; 

10 ‘‘(vi) Switzerland; and 

11 ‘‘(vii) a country in which the Secretary deter12 mines the following requirements are met: 

13 ‘‘(I) The country has statutory or regu14 latory requirements— 

15 ‘‘(aa) that require the review of drugs 

16 for safety and effectiveness by an entity of 

17 the government of the country; 

18 ‘‘(bb) that authorize the approval of 

19 only those drugs that have been deter20 mined to be safe and effective by experts 

21 employed by or acting on behalf of such 

22 entity and qualified by scientific training 

23 and experience to evaluate the safety and 

24 effectiveness of drugs on the basis of ade25 quate and well-controlled investigations, in-
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1 cluding clinical investigations, conducted 

2 by experts qualified by scientific training 

3 and experience to evaluate the safety and 

4 effectiveness of drugs; 

5 ‘‘(cc) that require the methods used 

6 in, and the facilities and controls used for 

7 the manufacture, processing, and packing 

8 of drugs in the country to be adequate to 

9 preserve their identity, quality, purity, and 

10 strength; 

11 ‘‘(dd) for the reporting of adverse re12 actions to drugs and procedures to with13 draw approval and remove drugs found not 

14 to be safe or effective; and 

15 ‘‘(ee) that require the labeling and 

16 promotion of drugs to be in accordance 

17 with the approval of the drug. 

18 ‘‘(II) The valid marketing authorization 

19 system in the country is equivalent to the sys20 tems in the countries described in clauses (i) 

21 through (vi). 

22 ‘‘(III) The importation of drugs to the 

23 United States from the country will not ad24 versely affect public health. 
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1 ‘‘(b) REGISTRATION OF IMPORTERS AND EXPORT2 ERS.— 

3 ‘‘(1) REGISTRATION OF IMPORTERS AND EX4 PORTERS.—A registration condition is that the im5 porter or exporter involved (referred to in this sub6 section as a ‘registrant’) submits to the Secretary a 

7 registration containing the following: 

8 ‘‘(A)(i) In the case of an exporter, the 

9 name of the exporter and an identification of all 

10 places of business of the exporter that relate to 

11 qualifying drugs, including each warehouse or 

12 other facility owned or controlled by, or oper13 ated for, the exporter. 

14 ‘‘(ii) In the case of an importer, the name 

15 of the importer and an identification of the 

16 places of business of the importer at which the 

17 importer initially receives a qualifying drug 

18 after importation (which shall not exceed 3 

19 places of business except by permission of the 

20 Secretary). 

21 ‘‘(B) Such information as the Secretary 

22 determines to be necessary to demonstrate that 

23 the registrant is in compliance with registration 

24 conditions under— 
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1 ‘‘(i) in the case of an importer, sub2 sections (c), (d), (e), (g), and (j) (relating 

3 to the sources of imported qualifying 

4 drugs; the inspection of facilities of the im5 porter; the payment of fees; compliance 

6 with the standards referred to in section 

7 801(a); and maintenance of records and 

8 samples); or 

9 ‘‘(ii) in the case of an exporter, sub10 sections (c), (d), (f), (g), (h), (i), and (j) 

11 (relating to the sources of exported quali12 fying drugs; the inspection of facilities of 

13 the exporter and the marking of compliant 

14 shipments; the payment of fees; and com15 pliance with the standards referred to in 

16 section 801(a); being licensed as a phar17 macist; conditions for individual importa18 tion; and maintenance of records and sam19 ples). 

20 ‘‘(C) An agreement by the registrant that 

21 the registrant will not under subsection (a) im22 port or export any drug that is not a qualifying 

23 drug. 

24 ‘‘(D) An agreement by the registrant to— 
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1 ‘‘(i) notify the Secretary of a recall or 

2 withdrawal of a qualifying drug distributed 

3 in a permitted country that the registrant 

4 has exported or imported, or intends to ex5 port or import, to the United States under 

6 subsection (a); 

7 ‘‘(ii) provide for the return to the reg8 istrant of such drug; and 

9 ‘‘(iii) cease, or not begin, the expor10 tation or importation of such drug unless 

11 the Secretary has notified the registrant 

12 that exportation or importation of such 

13 drug may proceed. 

14 ‘‘(E) An agreement by the registrant to 

15 ensure and monitor compliance with each reg16 istration condition, to promptly correct any 

17 noncompliance with such a condition, and to 

18 promptly report to the Secretary any such non19 compliance. 

20 ‘‘(F) A plan describing the manner in 

21 which the registrant will comply with the agree22 ment under subparagraph (E). 

23 ‘‘(G) An agreement by the registrant to 

24 enforce a contract under subsection (c)(3)(B) 

25 against a party in the chain of custody of a 
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1 qualifying drug with respect to the authority of 

2 the Secretary under clauses (ii) and (iii) of that 

3 subsection. 

4 ‘‘(H) An agreement by the registrant to 

5 notify the Secretary not more than 30 days be6 fore the registrant intends to make the change, 

7 of— 

8 ‘‘(i) any change that the registrant in9 tends to make regarding information pro10 vided under subparagraph (A) or (B); and 

11 ‘‘(ii) any change that the registrant 

12 intends to make in the compliance plan 

13 under subparagraph (F). 

14 ‘‘(I) In the case of an exporter— 

15 ‘‘(i) An agreement by the exporter 

16 that a qualifying drug will not under sub17 section (a) be exported to any individual 

18 not authorized pursuant to subsection 

19 (a)(2)(B) to be an importer of such drug. 

20 ‘‘(ii) An agreement to post a bond, 

21 payable to the Treasury of the United 

22 States that is equal in value to the lesser 

23 of— 

24 ‘‘(I) the value of drugs exported 

25 by the exporter to the United States 
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•HR 4697 IH 

1 in a typical 4-week period over the 

2 course of a year under this section; or 

3 ‘‘(II) $1,000,000; 

4 ‘‘(iii) An agreement by the exporter to 

5 comply with applicable provisions of Cana6 dian law, or the law of the permitted coun7 try designated under subsection 

8 (a)(4)(D)(i)(II) in which the exporter is lo9 cated, that protect the privacy of personal 

10 information with respect to each individual 

11 importing a prescription drug from the ex12 porter under subsection (a)(2)(B). 

13 ‘‘(iv) An agreement by the exporter to 

14 report to the Secretary— 

15 ‘‘(I) not later than August 1 of 

16 each fiscal year, the total price and 

17 the total volume of drugs exported to 

18 the United States by the exporter dur19 ing the 6-month period from January 

20 1 through June 30 of that year; and 

21 ‘‘(II) not later than January 1 of 

22 each fiscal year, the total price and 

23 the total volume of drugs exported to 

24 the United States by the exporter dur25 ing the previous fiscal year. 
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1 ‘‘(J) In the case of an importer, an agree2 ment by the importer to report to the Sec3 retary— 

4 ‘‘(i) not later than August 1 of each 

5 fiscal year, the total price and the total 

6 volume of drugs imported to the United 

7 States by the importer during the 6-month 

8 period from January 1 through June 30 of 

9 that fiscal year; and 

10 ‘‘(ii) not later than January 1 of each 

11 fiscal year, the total price and the total 

12 volume of drugs imported to the United 

13 States by the importer during the previous 

14 fiscal year. 

15 ‘‘(K) Such other provisions as the Sec16 retary may require by regulation to protect the 

17 public health while permitting— 

18 ‘‘(i) the importation by pharmacies, 

19 groups of pharmacies, and wholesalers as 

20 registered importers of qualifying drugs 

21 under subsection (a); and 

22 ‘‘(ii) importation by individuals of 

23 qualifying drugs under subsection (a). 

24 ‘‘(2) APPROVAL OR DISAPPROVAL OF REGISTRA25 TION.— 
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1 ‘‘(A) IN GENERAL.—Not later than 90 

2 days after the date on which a registrant sub3 mits to the Secretary a registration under para4 graph (1), the Secretary shall notify the reg5 istrant whether the registration is approved or 

6 is disapproved. The Secretary shall disapprove 

7 a registration if there is reason to believe that 

8 the registrant is not in compliance with one or 

9 more registration conditions, and shall notify 

10 the registrant of such reason. In the case of a 

11 disapproved registration, the Secretary shall 

12 subsequently notify the registrant that the reg13 istration is approved if the Secretary deter14 mines that the registrant is in compliance with 

15 such conditions. 

16 ‘‘(B) CHANGES IN REGISTRATION INFOR17 MATION.—Not later than 30 days after receiv18 ing a notice under paragraph (1)(H) from a 

19 registrant, the Secretary shall determine wheth20 er the change involved affects the approval of 

21 the registration of the registrant under para22 graph (1), and shall inform the registrant of 

23 the determination. 

24 ‘‘(3) PUBLICATION OF CONTACT INFORMATION

25 FOR REGISTERED EXPORTERS.—Through the Inter-
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1 net website of the Food and Drug Administration 

2 and a toll-free telephone number, the Secretary shall 

3 make readily available to the public a list of reg4 istered exporters, including contact information for 

5 the exporters. Promptly after the approval of a reg6 istration submitted under paragraph (1), the Sec7 retary shall update the Internet website and the in8 formation provided through the toll-free telephone 

9 number accordingly. 

10 ‘‘(4) SUSPENSION AND TERMINATION.— 

11 ‘‘(A) SUSPENSION.—With respect to the 

12 effectiveness of a registration submitted under 

13 paragraph (1): 

14 ‘‘(i) Subject to clause (ii), the Sec15 retary may suspend the registration if the 

16 Secretary determines, after notice and op17 portunity for a hearing, that the registrant 

18 has failed to maintain substantial compli19 ance with a registration condition. 

20 ‘‘(ii) If the Secretary determines that, 

21 under color of the registration, the ex22 porter has exported a drug or the importer 

23 has imported a drug that is not a quali24 fying drug, or a drug that does not comply 

25 with subsection (g)(2)(A) or (g)(4), or has 
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1 exported a qualifying drug to an individual 

2 in violation of subsection (i)(2)(F), the 

3 Secretary shall immediately suspend the 

4 registration. A suspension under the pre5 ceding sentence is not subject to the provi6 sion by the Secretary of prior notice, and 

7 the Secretary shall provide to the reg8 istrant an opportunity for a hearing not 

9 later than 10 days after the date on which 

10 the registration is suspended. 

11 ‘‘(iii) The Secretary may reinstate the 

12 registration, whether suspended under 

13 clause (i) or (ii), if the Secretary deter14 mines that the registrant has demonstrated 

15 that further violations of registration con16 ditions will not occur. 

17 ‘‘(B) TERMINATION.—The Secretary, after 

18 notice and opportunity for a hearing, may ter19 minate the registration under paragraph (1) of 

20 a registrant if the Secretary determines that 

21 the registrant has engaged in a pattern or prac22 tice of violating 1 or more registration condi23 tions, or if on 1 or more occasions the Secretary 

24 has under subparagraph (A)(ii) suspended the 

25 registration of the registrant. The Secretary 
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•HR 4697 IH 

1 may make the termination permanent, or for a 

2 fixed period of not less than 1 year. During the 

3 period in which the registration is terminated, 

4 any registration submitted under paragraph (1) 

5 by the registrant, or a person that is a partner 

6 in the export or import enterprise, or a prin7 cipal officer in such enterprise, and any reg8 istration prepared with the assistance of the 

9 registrant or such a person, has no legal effect 

10 under this section. 

11 ‘‘(5) DEFAULT OF BOND.—A bond required to 

12 be posted by an exporter under paragraph (1)(I)(ii) 

13 shall be defaulted and paid to the Treasury of the 

14 United States if, after opportunity for an informal 

15 hearing, the Secretary determines that the exporter 

16 has— 

17 ‘‘(A) exported a drug to the United States 

18 that is not a qualifying drug or that is not in 

19 compliance with subsection (g)(2)(A), (g)(4), or 

20 (i); or 

21 ‘‘(B) failed to permit the Secretary to con22 duct an inspection described under subsection 

23 (d). 

24 ‘‘(c) SOURCES OF QUALIFYING DRUGS.—A registra25 tion condition is that the exporter or importer involved 
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1 agrees that a qualifying drug will under subsection (a) be 

2 exported or imported into the United States only if there 

3 is compliance with the following: 

4 ‘‘(1) The drug was manufactured in an estab5 lishment— 

6 ‘‘(A) required to register under subsection 

7 (h) or (i) of section 510; and 

8 ‘‘(B)(i) inspected by the Secretary; or 

9 ‘‘(ii) for which the Secretary has elected to 

10 rely on a satisfactory report of a good manufac11 turing practice inspection of the establishment 

12 from a permitted country whose regulatory sys13 tem the Secretary recognizes as equivalent 

14 under a mutual recognition agreement, as pro15 vided for under section 510(i)(3), section 803, 

16 or part 26 of title 21, Code of Federal Regula17 tions (or any corresponding successor rule or 

18 regulation). 

19 ‘‘(2) The establishment is located in any coun20 try, and the establishment manufactured the drug 

21 for distribution in the United States or for distribu22 tion in 1 or more of the permitted countries (without 

23 regard to whether in addition the drug is manufac24 tured for distribution in a foreign country that is 

25 not a permitted country). 
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1 ‘‘(3) The exporter or importer obtained the 

2 drug— 

3 ‘‘(A) directly from the establishment; or 

4 ‘‘(B) directly from an entity that, by con5 tract with the exporter or importer— 

6 ‘‘(i) provides to the exporter or im7 porter a statement (in such form and con8 taining such information as the Secretary 

9 may require) that, for the chain of custody 

10 from the establishment, identifies each 

11 prior sale, purchase, or trade of the drug 

12 (including the date of the transaction and 

13 the names and addresses of all parties to 

14 the transaction); 

15 ‘‘(ii) agrees to permit the Secretary to 

16 inspect such statements and related 

17 records to determine their accuracy; 

18 ‘‘(iii) agrees, with respect to the quali19 fying drugs involved, to permit the Sec20 retary to inspect warehouses and other fa21 cilities, including records, of the entity for 

22 purposes of determining whether the facili23 ties are in compliance with any standards 

24 under this Act that are applicable to facili25 ties of that type in the United States; and 
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1 ‘‘(iv) has ensured, through such con2 tractual relationships as may be necessary, 

3 that the Secretary has the same authority 

4 regarding other parties in the chain of cus5 tody from the establishment that the Sec6 retary has under clauses (ii) and (iii) re7 garding such entity. 

8 ‘‘(4)(A) The foreign country from which the im9 porter will import the drug is a permitted country; 

10 or 

11 ‘‘(B) The foreign country from which the ex12 porter will export the drug is the permitted country 

13 in which the exporter is located. 

14 ‘‘(5) During any period in which the drug was 

15 not in the control of the manufacturer of the drug, 

16 the drug did not enter any country that is not a per17 mitted country. 

18 ‘‘(6) The exporter or importer retains a sample 

19 of each lot of the drug sufficient for testing by the 

20 Secretary. 

21 ‘‘(d) INSPECTION OF FACILITIES; MARKING OF SHIP22 MENTS.— 

23 ‘‘(1) INSPECTION OF FACILITIES.—A registra24 tion condition is that, for the purpose of assisting 

25 the Secretary in determining whether the exporter 
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1 involved is in compliance with all other registration 

2 conditions— 

3 ‘‘(A) the exporter agrees to permit the Sec4 retary— 

5 ‘‘(i) to conduct onsite inspections, in6 cluding monitoring on a day-to-day basis, 

7 of places of business of the exporter that 

8 relate to qualifying drugs, including each 

9 warehouse or other facility owned or con10 trolled by, or operated for, the exporter; 

11 ‘‘(ii) to have access, including on a 

12 day-to-day basis, to— 

13 ‘‘(I) records of the exporter that 

14 relate to the export of such drugs, in15 cluding financial records; and 

16 ‘‘(II) samples of such drugs; 

17 ‘‘(iii) to carry out the duties described 

18 in paragraph (3); and 

19 ‘‘(iv) to carry out any other functions 

20 determined by the Secretary to be nec21 essary regarding the compliance of the ex22 porter; and 

23 ‘‘(B) the Secretary has assigned 1 or more 

24 employees of the Secretary to carry out the 

25 functions described in this subsection for the 
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1 Secretary randomly, but not less than 12 times 

2 annually, on the premises of places of busi3 nesses referred to in subparagraph (A)(i), and 

4 such an assignment remains in effect on a con5 tinuous basis. 

6 ‘‘(2) MARKING OF COMPLIANT SHIPMENTS.—A 

7 registration condition is that the exporter involved 

8 agrees to affix to each shipping container of quali9 fying drugs exported under subsection (a) such 

10 markings as the Secretary determines to be nec11 essary to identify the shipment as being in compli12 ance with all registration conditions. Markings under 

13 the preceding sentence shall— 

14 ‘‘(A) be designed to prevent affixation of 

15 the markings to any shipping container that is 

16 not authorized to bear the markings; and 

17 ‘‘(B) include anticounterfeiting or track18 and-trace technologies, taking into account the 

19 economic and technical feasibility of those tech20 nologies. 

21 ‘‘(3) CERTAIN DUTIES RELATING TO EXPORT22 ERS.—Duties of the Secretary with respect to an ex23 porter include the following: 

24 ‘‘(A) Inspecting, randomly, but not less 

25 than 12 times annually, the places of business 
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1 of the exporter at which qualifying drugs are 

2 stored and from which qualifying drugs are 

3 shipped. 

4 ‘‘(B) During the inspections under sub5 paragraph (A), verifying the chain of custody of 

6 a statistically significant sample of qualifying 

7 drugs from the establishment in which the drug 

8 was manufactured to the exporter, which shall 

9 be accomplished or supplemented by the use of 

10 anticounterfeiting or track-and-trace tech11 nologies, taking into account the economic and 

12 technical feasibility of those technologies, except 

13 that a drug that lacks such technologies from 

14 the point of manufacture shall not for that rea15 son be excluded from importation by an ex16 porter. 

17 ‘‘(C) Randomly reviewing records of ex18 ports to individuals for the purpose of deter19 mining whether the drugs are being imported 

20 by the individuals in accordance with the condi21 tions under subsection (i). Such reviews shall be 

22 conducted in a manner that will result in a sta23 tistically significant determination of compli24 ance with all such conditions. 
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1 ‘‘(D) Monitoring the affixing of markings 

2 under paragraph (2). 

3 ‘‘(E) Inspecting as the Secretary deter4 mines is necessary the warehouses and other fa5 cilities, including records, of other parties in the 

6 chain of custody of qualifying drugs. 

7 ‘‘(F) Determining whether the exporter is 

8 in compliance with all other registration condi9 tions. 

10 ‘‘(4) PRIOR NOTICE OF SHIPMENTS.—A reg11 istration condition is that, not less than 8 hours and 

12 not more than 5 days in advance of the time of the 

13 importation of a shipment of qualifying drugs, the 

14 importer involved agrees to submit to the Secretary 

15 a notice with respect to the shipment of drugs to be 

16 imported or offered for import into the United 

17 States under subsection (a). A notice under the pre18 ceding sentence shall include— 

19 ‘‘(A) the name and complete contact infor20 mation of the person submitting the notice; 

21 ‘‘(B) the name and complete contact infor22 mation of the importer involved; 

23 ‘‘(C) the identity of the drug, including the 

24 established name of the drug, the quantity of 
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•HR 4697 IH 

1 the drug, and the lot number assigned by the 

2 manufacturer; 

3 ‘‘(D) the identity of the manufacturer of 

4 the drug, including the identity of the establish5 ment at which the drug was manufactured; 

6 ‘‘(E) the country from which the drug is 

7 shipped; 

8 ‘‘(F) the name and complete contact infor9 mation for the shipper of the drug; 

10 ‘‘(G) anticipated arrival information, in11 cluding the port of arrival and crossing location 

12 within that port, and the date and time; 

13 ‘‘(H) a summary of the chain of custody of 

14 the drug from the establishment in which the 

15 drug was manufactured to the importer; 

16 ‘‘(I) a declaration as to whether the Sec17 retary has ordered that importation of the drug 

18 from the permitted country cease under sub19 section (g)(2)(C) or (D); and 

20 ‘‘(J) such other information as the Sec21 retary may require by regulation. 

22 ‘‘(5) MARKING OF COMPLIANT SHIPMENTS.—A 

23 registration condition is that the importer involved 

24 agrees, before wholesale distribution (as defined in 

25 section 503(e)) of a qualifying drug that has been 
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•HR 4697 IH 

1 imported under subsection (a), to affix to each con2 tainer of such drug such markings or other tech3 nology as the Secretary determines necessary to 

4 identify the shipment as being in compliance with all 

5 registration conditions, except that the markings or 

6 other technology shall not be required on a drug 

7 that bears comparable, compatible markings or tech8 nology from the manufacturer of the drug. Markings 

9 or other technology under the preceding sentence 

10 shall— 

11 ‘‘(A) be designed to prevent affixation of 

12 the markings or other technology to any con13 tainer that is not authorized to bear the mark14 ings; and 

15 ‘‘(B) shall include anticounterfeiting or 

16 track-and-trace technologies, taking into ac17 count the economic and technical feasibility of 

18 such technologies. 

19 ‘‘(6) CERTAIN DUTIES RELATING TO IMPORT20 ERS.—Duties of the Secretary with respect to an im21 porter include the following: 

22 ‘‘(A) Inspecting, randomly, but not less 

23 than 12 times annually, the places of business 

24 of the importer at which a qualifying drug is 

25 initially received after importation. 
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•HR 4697 IH 

1 ‘‘(B) During the inspections under sub2 paragraph (A), verifying the chain of custody of 

3 a statistically significant sample of qualifying 

4 drugs from the establishment in which the drug 

5 was manufactured to the importer, which shall 

6 be accomplished or supplemented by the use of 

7 anticounterfeiting or track-and-trace tech8 nologies, taking into account the economic and 

9 technical feasibility of those technologies, except 

10 that a drug that lacks such technologies from 

11 the point of manufacture shall not for that rea12 son be excluded from importation by an im13 porter. 

14 ‘‘(C) Reviewing notices under paragraph 

15 (4). 

16 ‘‘(D) Inspecting as the Secretary deter17 mines is necessary the warehouses and other fa18 cilities, including records of other parties in the 

19 chain of custody of qualifying drugs. 

20 ‘‘(E) Determining whether the importer is 

21 in compliance with all other registration condi22 tions. 

23 ‘‘(e) IMPORTER FEES.— 

24 ‘‘(1) REGISTRATION FEE.—A registration con25 dition is that the importer involved pays to the Sec-
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•HR 4697 IH 

1 retary a fee of $10,000 due on the date on which 

2 the importer first submits the registration to the 

3 Secretary under subsection (b). 

4 ‘‘(2) INSPECTION FEE.—A registration condi5 tion is that the importer involved pays a fee to the 

6 Secretary in accordance with this subsection. Such 

7 fee shall be paid not later than October 1 and April 

8 1 of each fiscal year in the amount provided for 

9 under paragraph (3). 

10 ‘‘(3) AMOUNT OF INSPECTION FEE.— 

11 ‘‘(A) AGGREGATE TOTAL OF FEES.—Not 

12 later than 30 days before the start of each fis13 cal year, the Secretary, in consultation with the 

14 Secretary of Homeland Security and the Sec15 retary of the Treasury, shall establish an aggre16 gate total of fees to be collected under para17 graph (2) for importers for that fiscal year that 

18 is sufficient, and not more than necessary, to 

19 pay the costs for that fiscal year of admin20 istering this section with respect to registered 

21 importers, including the costs associated with— 

22 ‘‘(i) inspecting the facilities of reg23 istered importers, and of other entities in 

24 the chain of custody of a qualifying drug 

25 as necessary, under subsection (d)(6); 
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•HR 4697 IH 

1 ‘‘(ii) developing, implementing, and 

2 operating under such subsection an elec3 tronic system for submission and review of 

4 the notices required under subsection 

5 (d)(4) with respect to shipments of quali6 fying drugs under subsection (a) to assess 

7 compliance with all registration conditions 

8 when such shipments are offered for im9 port into the United States; and 

10 ‘‘(iii) inspecting such shipments as 

11 necessary, when offered for import into the 

12 United States to determine if such a ship13 ment should be refused admission under 

14 subsection (g)(5). 

15 ‘‘(B) LIMITATION.—Subject to subpara16 graph (C), the aggregate total of fees collected 

17 under paragraph (2) for a fiscal year shall not 

18 exceed 1 percent of the total price of qualifying 

19 drugs imported during that fiscal year into the 

20 United States by registered importers under 

21 subsection (a). 

22 ‘‘(C) TOTAL PRICE OF DRUGS.— 

23 ‘‘(i) ESTIMATE.—For the purposes of 

24 complying with the limitation described in 

25 subparagraph (B) when establishing under 
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•HR 4697 IH 

1 subparagraph (A) the aggregate total of 

2 fees to be collected under paragraph (2) 

3 for a fiscal year, the Secretary shall esti4 mate the total price of qualifying drugs im5 ported into the United States by registered 

6 importers during that fiscal year by adding 

7 the total price of qualifying drugs imported 

8 by each registered importer during the 6- 

9 month period from January 1 through 

10 June 30 of the previous fiscal year, as re11 ported to the Secretary by each registered 

12 importer under subsection (b)(1)(J). 

13 ‘‘(ii) CALCULATION.—Not later than 

14 March 1 of the fiscal year that follows the 

15 fiscal year for which the estimate under 

16 clause (i) is made, the Secretary shall cal17 culate the total price of qualifying drugs 

18 imported into the United States by reg19 istered importers during that fiscal year by 

20 adding the total price of qualifying drugs 

21 imported by each registered importer dur22 ing that fiscal year, as reported to the Sec23 retary by each registered importer under 

24 subsection (b)(1)(J). 
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1 ‘‘(iii) ADJUSTMENT.—If the total 

2 price of qualifying drugs imported into the 

3 United States by registered importers dur4 ing a fiscal year as calculated under clause 

5 (ii) is less than the aggregate total of fees 

6 collected under paragraph (2) for that fis7 cal year, the Secretary shall provide for a 

8 pro-rata reduction in the fee due from each 

9 registered importer on April 1 of the sub10 sequent fiscal year so that the limitation 

11 described in subparagraph (B) is observed. 

12 ‘‘(D) INDIVIDUAL IMPORTER FEE.—Sub13 ject to the limitation described in subparagraph 

14 (B), the fee under paragraph (2) to be paid on 

15 October 1 and April 1 by an importer shall be 

16 an amount that is proportional to a reasonable 

17 estimate by the Secretary of the semiannual 

18 share of the importer of the volume of quali19 fying drugs imported by importers under sub20 section (a). 

21 ‘‘(4) USE OF FEES.— 

22 ‘‘(A) IN GENERAL.—Subject to appropria23 tions Acts, fees collected by the Secretary under 

24 paragraphs (1) and (2) shall be credited to the 

25 appropriation account for salaries and expenses 
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1 of the Food and Drug Administration until ex2 pended (without fiscal year limitation), and the 

3 Secretary may, in consultation with the Sec4 retary of Homeland Security and the Secretary 

5 of the Treasury, transfer some proportion of 

6 such fees to the appropriation account for sala7 ries and expenses of the Bureau of Customs 

8 and Border Protection until expended (without 

9 fiscal year limitation). 

10 ‘‘(B) SOLE PURPOSE.—Fees collected by 

11 the Secretary under paragraphs (1) and (2) are 

12 only available to the Secretary and, if trans13 ferred, to the Secretary of Homeland Security, 

14 and are for the sole purpose of paying the costs 

15 referred to in paragraph (3)(A). 

16 ‘‘(5) COLLECTION OF FEES.—In any case where 

17 the Secretary does not receive payment of a fee as18 sessed under paragraph (1) or (2) within 30 days 

19 after it is due, such fee shall be treated as a claim 

20 of the United States Government subject to sub21 chapter II of chapter 37 of title 31, United States 

22 Code. 

23 ‘‘(f) EXPORTER FEES.— 

24 ‘‘(1) REGISTRATION FEE.—A registration con25 dition is that the exporter involved pays to the Sec-
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•HR 4697 IH 

1 retary a fee of $10,000 due on the date on which 

2 the exporter first submits that registration to the 

3 Secretary under subsection (b). 

4 ‘‘(2) INSPECTION FEE.—A registration condi5 tion is that the exporter involved pays a fee to the 

6 Secretary in accordance with this subsection. Such 

7 fee shall be paid not later than October 1 and April 

8 1 of each fiscal year in the amount provided for 

9 under paragraph (3). 

10 ‘‘(3) AMOUNT OF INSPECTION FEE.— 

11 ‘‘(A) AGGREGATE TOTAL OF FEES.—Not 

12 later than 30 days before the start of each fis13 cal year, the Secretary, in consultation with the 

14 Secretary of Homeland Security and the Sec15 retary of the Treasury, shall establish an aggre16 gate total of fees to be collected under para17 graph (2) for exporters for that fiscal year that 

18 is sufficient, and not more than necessary, to 

19 pay the costs for that fiscal year of admin20 istering this section with respect to registered 

21 exporters, including the costs associated with— 

22 ‘‘(i) inspecting the facilities of reg23 istered exporters, and of other entities in 

24 the chain of custody of a qualifying drug 

25 as necessary, under subsection (d)(3); 
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1 ‘‘(ii) developing, implementing, and 

2 operating under such subsection a system 

3 to screen marks on shipments of qualifying 

4 drugs under subsection (a) that indicate 

5 compliance with all registration conditions, 

6 when such shipments are offered for im7 port into the United States; and 

8 ‘‘(iii) screening such markings, and 

9 inspecting such shipments as necessary, 

10 when offered for import into the United 

11 States to determine if such a shipment 

12 should be refused admission under sub13 section (g)(5). 

14 ‘‘(B) LIMITATION.—Subject to subpara15 graph (C), the aggregate total of fees collected 

16 under paragraph (2) for a fiscal year shall not 

17 exceed 1 percent of the total price of qualifying 

18 drugs imported during that fiscal year into the 

19 United States by registered exporters under 

20 subsection (a). 

21 ‘‘(C) TOTAL PRICE OF DRUGS.— 

22 ‘‘(i) ESTIMATE.—For the purposes of 

23 complying with the limitation described in 

24 subparagraph (B) when establishing under 

25 subparagraph (A) the aggregate total of 
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•HR 4697 IH 

1 fees to be collected under paragraph (2) 

2 for a fiscal year, the Secretary shall esti3 mate the total price of qualifying drugs im4 ported into the United States by registered 

5 exporters during that fiscal year by adding 

6 the total price of qualifying drugs exported 

7 by each registered exporter during the 6- 

8 month period from January 1 through 

9 June 30 of the previous fiscal year, as re10 ported to the Secretary by each registered 

11 exporter under subsection (b)(1)(I)(iv). 

12 ‘‘(ii) CALCULATION.—Not later than 

13 March 1 of the fiscal year that follows the 

14 fiscal year for which the estimate under 

15 clause (i) is made, the Secretary shall cal16 culate the total price of qualifying drugs 

17 imported into the United States by reg18 istered exporters during that fiscal year by 

19 adding the total price of qualifying drugs 

20 exported by each registered exporter dur21 ing that fiscal year, as reported to the Sec22 retary by each registered exporter under 

23 subsection (b)(1)(I)(iv). 

24 ‘‘(iii) ADJUSTMENT.—If the total 

25 price of qualifying drugs imported into the 
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1 United States by registered exporters dur2 ing a fiscal year as calculated under clause 

3 (ii) is less than the aggregate total of fees 

4 collected under paragraph (2) for that fis5 cal year, the Secretary shall provide for a 

6 pro-rata reduction in the fee due from each 

7 registered exporter on April 1 of the subse8 quent fiscal year so that the limitation de9 scribed in subparagraph (B) is observed. 

10 ‘‘(D) INDIVIDUAL EXPORTER FEE.—Sub11 ject to the limitation described in subparagraph 

12 (B), the fee under paragraph (2) to be paid on 

13 October 1 and April 1 by an exporter shall be 

14 an amount that is proportional to a reasonable 

15 estimate by the Secretary of the semiannual 

16 share of the exporter of the volume of quali17 fying drugs exported by exporters under sub18 section (a). 

19 ‘‘(4) USE OF FEES.— 

20 ‘‘(A) IN GENERAL.—Subject to appropria21 tions Acts, fees collected by the Secretary under 

22 paragraphs (1) and (2) shall be credited to the 

23 appropriation account for salaries and expenses 

24 of the Food and Drug Administration until ex25 pended (without fiscal year limitation), and the 
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1 Secretary may, in consultation with the Sec2 retary of Homeland Security and the Secretary 

3 of the Treasury, transfer some proportion of 

4 such fees to the appropriation account for sala5 ries and expenses of the Bureau of Customs 

6 and Border Protection until expended (without 

7 fiscal year limitation). 

8 ‘‘(B) SOLE PURPOSE.—Fees collected by 

9 the Secretary under paragraphs (1) and (2) are 

10 only available to the Secretary and, if trans11 ferred, to the Secretary of Homeland Security, 

12 and are for the sole purpose of paying the costs 

13 referred to in paragraph (3)(A). 

14 ‘‘(5) COLLECTION OF FEES.—In any case where 

15 the Secretary does not receive payment of a fee as16 sessed under paragraph (1) or (2) within 30 days 

17 after it is due, such fee shall be treated as a claim 

18 of the United States Government subject to sub19 chapter II of chapter 37 of title 31, United States 

20 Code. 

21 ‘‘(g) COMPLIANCE WITH SECTION 801(a).— 

22 ‘‘(1) IN GENERAL.—A registration condition is 

23 that each qualifying drug exported under subsection 

24 (a) by the registered exporter involved or imported 

25 under subsection (a) by the registered importer in-
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1 volved is in compliance with the standards referred 

2 to in section 801(a) regarding admission of the drug 

3 into the United States, subject to paragraphs (2), 

4 (3), and (4). 

5 ‘‘(2) SECTION 505; APPROVAL STATUS.— 

6 ‘‘(A) IN GENERAL.—A qualifying drug that 

7 is imported or offered for import under sub8 section (a) shall comply with the conditions es9 tablished in the approved application under sec10 tion 505(b) for the U.S. label drug as described 

11 under this subsection. 

12 ‘‘(B) NOTICE BY MANUFACTURER; GEN13 ERAL PROVISIONS.— 

14 ‘‘(i) IN GENERAL.—The person that 

15 manufactures a qualifying drug that is, or 

16 will be, introduced for commercial distribu17 tion in a permitted country shall in accord18 ance with this paragraph submit to the 

19 Secretary a notice that— 

20 ‘‘(I) includes each difference in 

21 the qualifying drug from a condition 

22 established in the approved applica23 tion for the U.S. label drug beyond— 

24 ‘‘(aa) the variations provided 

25 for in the application; and 
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1 ‘‘(bb) any difference in label2 ing (except ingredient labeling); 

3 or 

4 ‘‘(II) states that there is no dif5 ference in the qualifying drug from a 

6 condition established in the approved 

7 application for the U.S. label drug be8 yond— 

9 ‘‘(aa) the variations provided 

10 for in the application; and 

11 ‘‘(bb) any difference in label12 ing (except ingredient labeling). 

13 ‘‘(ii) INFORMATION IN NOTICE.—A 

14 notice under clause (i)(I) shall include the 

15 information that the Secretary may require 

16 under section 506A, any additional infor17 mation the Secretary may require (which 

18 may include data on bioequivalence if such 

19 data are not required under section 506A), 

20 and, with respect to the permitted country 

21 that approved the qualifying drug for com22 mercial distribution, or with respect to 

23 which such approval is sought, include the 

24 following: 
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1 ‘‘(I) The date on which the quali2 fying drug with such difference was, 

3 or will be, introduced for commercial 

4 distribution in the permitted country. 

5 ‘‘(II) Information demonstrating 

6 that the person submitting the notice 

7 has also notified the government of 

8 the permitted country in writing that 

9 the person is submitting to the Sec10 retary a notice under clause (i)(I), 

11 which notice describes the difference 

12 in the qualifying drug from a condi13 tion established in the approved appli14 cation for the U.S. label drug. 

15 ‘‘(III) The information that the 

16 person submitted or will submit to the 

17 government of the permitted country 

18 for purposes of obtaining approval for 

19 commercial distribution of the drug in 

20 the country which, if in a language 

21 other than English, shall be accom22 panied by an English translation 

23 verified to be complete and accurate, 

24 with the name, address, and a brief 
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1 statement of the qualifications of the 

2 person that made the translation. 

3 ‘‘(iii) CERTIFICATIONS.—The chief ex4 ecutive officer and the chief medical officer 

5 of the manufacturer involved shall each 

6 certify in the notice under clause (i) that— 

7 ‘‘(I) the information provided in 

8 the notice is complete and true; and 

9 ‘‘(II) a copy of the notice has 

10 been provided to the Federal Trade 

11 Commission and to the State attor12 neys general. 

13 ‘‘(iv) FEE.—If a notice submitted 

14 under clause (i) includes a difference that 

15 would, under section 506A, require the 

16 submission of a supplemental application if 

17 made as a change to the U.S. label drug, 

18 the person that submits the notice shall 

19 pay to the Secretary a fee in the same 

20 amount as would apply if the person were 

21 paying a fee pursuant to section 

22 736(a)(1)(A)(ii). Subject to appropriations 

23 Acts, fees collected by the Secretary under 

24 the preceding sentence are available only to 

25 the Secretary and are for the sole purpose 
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1 of paying the costs of reviewing notices 

2 submitted under clause (i). 

3 ‘‘(v) TIMING OF SUBMISSION OF NO4 TICES.— 

5 ‘‘(I) PRIOR APPROVAL NO6 TICES.—A notice under clause (i) to 

7 which subparagraph (C) applies shall 

8 be submitted to the Secretary not 

9 later than 120 days before the quali10 fying drug with the difference is intro11 duced for commercial distribution in a 

12 permitted country, unless the country 

13 requires that distribution of the quali14 fying drug with the difference begin 

15 less than 120 days after the country 

16 requires the difference. 

17 ‘‘(II) OTHER APPROVAL NO18 TICES.—A notice under clause (i) to 

19 which subparagraph (D) applies shall 

20 be submitted to the Secretary not 

21 later than the day on which the quali22 fying drug with the difference is intro23 duced for commercial distribution in a 

24 permitted country. 
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1 ‘‘(III) OTHER NOTICES.—A no2 tice under clause (i) to which subpara3 graph (E) applies shall be submitted 

4 to the Secretary on the date that the 

5 qualifying drug is first introduced for 

6 commercial distribution in a permitted 

7 country and annually thereafter. 

8 ‘‘(vi) REVIEW BY SECRETARY.— 

9 ‘‘(I) IN GENERAL.—In this para10 graph, the difference in a qualifying 

11 drug that is submitted in a notice 

12 under clause (i) from the U.S. label 

13 drug shall be treated by the Secretary 

14 as if it were a manufacturing change 

15 to the U.S. label drug under section 

16 506A. 

17 ‘‘(II) STANDARD OF REVIEW.— 

18 Except as provided in subclause (III), 

19 the Secretary shall review and approve 

20 or disapprove the difference in a no21 tice submitted under clause (i), if re22 quired under section 506A, using the 

23 safe and effective standard for ap24 proving or disapproving a manufac25 turing change under section 506A. 
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1 ‘‘(III) BIOEQUIVALENCE.—If the 

2 Secretary would approve the dif3 ference in a notice submitted under 

4 clause (i) using the safe and effective 

5 standard under section 506A and if 

6 the Secretary determines that the 

7 qualifying drug is not bioequivalent to 

8 the U.S. label drug, the Secretary 

9 may— 

10 ‘‘(aa) include in the labeling 

11 provided under paragraph (3) a 

12 prominent advisory that the 

13 qualifying drug is safe and effec14 tive but is not bioequivalent to 

15 the U.S. label drug if the Sec16 retary determines that such an 

17 advisory is necessary for health 

18 care practitioners and patients to 

19 use the qualifying drug safely 

20 and effectively; or 

21 ‘‘(bb) decline to approve the 

22 difference if the Secretary deter23 mines that the availability of 

24 both the qualifying drug and the 
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1 U.S. label drug would pose a 

2 threat to the public health. 

3 ‘‘(IV) REVIEW BY THE SEC4 RETARY.—The Secretary shall review 

5 and approve or disapprove the dif6 ference in a notice submitted under 

7 clause (i), if required under section 

8 506A, not later than 120 days after 

9 the date on which the notice is sub10 mitted. 

11 ‘‘(V) ESTABLISHMENT INSPEC12 TION.—If review of such difference 

13 would require an inspection of the es14 tablishment in which the qualifying 

15 drug is manufactured— 

16 ‘‘(aa) such inspection by the 

17 Secretary shall be authorized; 

18 and 

19 ‘‘(bb) the Secretary may rely 

20 on a satisfactory report of a good 

21 manufacturing practice inspec22 tion of the establishment from a 

23 permitted country whose regu24 latory system the Secretary rec25 ognizes as equivalent under a 
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1 mutual recognition agreement, as 

2 provided under section 510(i)(3), 

3 section 803, or part 26 of title 

4 21, Code of Federal Regulations 

5 (or any corresponding successor 

6 rule or regulation). 

7 ‘‘(vii) PUBLICATION OF INFORMATION

8 ON NOTICES.— 

9 ‘‘(I) IN GENERAL.—Through the 

10 Internet website of the Food and 

11 Drug Administration and a toll-free 

12 telephone number, the Secretary shall 

13 readily make available to the public a 

14 list of notices submitted under clause 

15 (i). 

16 ‘‘(II) CONTENTS.—The list under 

17 subclause (I) shall include the date on 

18 which a notice is submitted and 

19 whether— 

20 ‘‘(aa) a notice is under re21 view; 

22 ‘‘(bb) the Secretary has or23 dered that importation of the 

24 qualifying drug from a permitted 

25 country cease; or 
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1 ‘‘(cc) the importation of the 

2 drug is permitted under sub3 section (a). 

4 ‘‘(III) UPDATE.—The Secretary 

5 shall promptly update the Internet 

6 website with any changes to the list. 

7 ‘‘(C) NOTICE; DRUG DIFFERENCE REQUIR8 ING PRIOR APPROVAL.—In the case of a notice 

9 under subparagraph (B)(i) that includes a dif10 ference that would, under section 506A(c) or 

11 (d)(3)(B)(i), require the approval of a supple12 mental application before the difference could 

13 be made to the U.S. label drug the following 

14 shall occur: 

15 ‘‘(i) Promptly after the notice is sub16 mitted, the Secretary shall notify reg17 istered exporters, registered importers, the 

18 Federal Trade Commission, and the State 

19 attorneys general that the notice has been 

20 submitted with respect to the qualifying 

21 drug involved. 

22 ‘‘(ii) If the Secretary has not made a 

23 determination whether such a supple24 mental application regarding the U.S. label 

25 drug would be approved or disapproved by 
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1 the date on which the qualifying drug in2 volved is to be introduced for commercial 

3 distribution in a permitted country, the 

4 Secretary shall— 

5 ‘‘(I) order that the importation of 

6 the qualifying drug involved from the 

7 permitted country not begin until the 

8 Secretary completes review of the no9 tice; and 

10 ‘‘(II) promptly notify registered 

11 exporters, registered importers, the 

12 Federal Trade Commission, and the 

13 State attorneys general of the order. 

14 ‘‘(iii) If the Secretary determines that 

15 such a supplemental application regarding 

16 the U.S. label drug would not be approved, 

17 the Secretary shall— 

18 ‘‘(I) order that the importation of 

19 the qualifying drug involved from the 

20 permitted country cease, or provide 

21 that an order under clause (ii), if any, 

22 remains in effect; 

23 ‘‘(II) notify the permitted coun24 try that approved the qualifying drug 
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1 for commercial distribution of the de2 termination; and 

3 ‘‘(III) promptly notify registered 

4 exporters, registered importers, the 

5 Federal Trade Commission, and the 

6 State attorneys general of the deter7 mination. 

8 ‘‘(iv) If the Secretary determines that 

9 such a supplemental application regarding 

10 the U.S. label drug would be approved, the 

11 Secretary shall— 

12 ‘‘(I) vacate the order under 

13 clause (ii), if any; 

14 ‘‘(II) consider the difference to 

15 be a variation provided for in the ap16 proved application for the U.S. label 

17 drug; 

18 ‘‘(III) permit importation of the 

19 qualifying drug under subsection (a); 

20 and 

21 ‘‘(IV) promptly notify registered 

22 exporters, registered importers, the 

23 Federal Trade Commission, and the 

24 State attorneys general of the deter25 mination. 
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1 ‘‘(D) NOTICE; DRUG DIFFERENCE NOT RE2 QUIRING PRIOR APPROVAL.—In the case of a 

3 notice under subparagraph (B)(i) that includes 

4 a difference that would, under section 

5 506A(d)(3)(B)(ii), not require the approval of a 

6 supplemental application before the difference 

7 could be made to the U.S. label drug the fol8 lowing shall occur: 

9 ‘‘(i) During the period in which the 

10 notice is being reviewed by the Secretary, 

11 the authority under this subsection to im12 port the qualifying drug involved continues 

13 in effect. 

14 ‘‘(ii) If the Secretary determines that 

15 such a supplemental application regarding 

16 the U.S. label drug would not be approved, 

17 the Secretary shall— 

18 ‘‘(I) order that the importation of 

19 the qualifying drug involved from the 

20 permitted country cease; 

21 ‘‘(II) notify the permitted coun22 try that approved the qualifying drug 

23 for commercial distribution of the de24 termination; and 
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1 ‘‘(III) promptly notify registered 

2 exporters, registered importers, the 

3 Federal Trade Commission, and the 

4 State attorneys general of the deter5 mination. 

6 ‘‘(iii) If the Secretary determines that 

7 such a supplemental application regarding 

8 the U.S. label drug would be approved, the 

9 difference shall be considered to be a vari10 ation provided for in the approved applica11 tion for the U.S. label drug. 

12 ‘‘(E) NOTICE; DRUG DIFFERENCE NOT RE13 QUIRING APPROVAL; NO DIFFERENCE.—In the 

14 case of a notice under subparagraph (B)(i) that 

15 includes a difference for which, under section 

16 506A(d)(1)(A), a supplemental application 

17 would not be required for the difference to be 

18 made to the U.S. label drug, or that states that 

19 there is no difference, the Secretary— 

20 ‘‘(i) shall consider such difference to 

21 be a variation provided for in the approved 

22 application for the U.S. label drug; 

23 ‘‘(ii) may not order that the importa24 tion of the qualifying drug involved cease; 

25 and 
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1 ‘‘(iii) shall promptly notify registered 

2 exporters and registered importers. 

3 ‘‘(F) DIFFERENCES IN ACTIVE INGRE4 DIENT, ROUTE OF ADMINISTRATION, DOSAGE

5 FORM, OR STRENGTH.— 

6 ‘‘(i) IN GENERAL.—A person who 

7 manufactures a drug approved under sec8 tion 505(b) shall submit an application 

9 under section 505(b) for approval of an10 other drug that is manufactured for dis11 tribution in a permitted country by or for 

12 the person that manufactures the drug ap13 proved under section 505(b) if— 

14 ‘‘(I) there is no qualifying drug 

15 in commercial distribution in per16 mitted countries whose combined pop17 ulation represents at least 50 percent 

18 of the total population of all permitted 

19 countries with the same active ingre20 dient or ingredients, route of adminis21 tration, dosage form, and strength as 

22 the drug approved under section 

23 505(b); and 

24 ‘‘(II) each active ingredient of 

25 the other drug is related to an active 
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1 ingredient of the drug approved under 

2 section 505(b), as defined in clause 

3 (v). 

4 ‘‘(ii) APPLICATION UNDER SECTION

5 505(b).—The application under section 

6 505(b) required under clause (i) shall— 

7 ‘‘(I) request approval of the other 

8 drug for the indication or indications 

9 for which the drug approved under 

10 section 505(b) is labeled; 

11 ‘‘(II) include the information that 

12 the person submitted to the govern13 ment of the permitted country for 

14 purposes of obtaining approval for 

15 commercial distribution of the other 

16 drug in that country, which if in a 

17 language other than English, shall be 

18 accompanied by an English trans19 lation verified to be complete and ac20 curate, with the name, address, and a 

21 brief statement of the qualifications of 

22 the person that made the translation; 

23 ‘‘(III) include a right of reference 

24 to the application for the drug ap25 proved under section 505(b); and 
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1 ‘‘(IV) include such additional in2 formation as the Secretary may re3 quire. 

4 ‘‘(iii) TIMING OF SUBMISSION OF AP5 PLICATION.—An application under section 

6 505(b) required under clause (i) shall be 

7 submitted to the Secretary not later than 

8 the day on which the information referred 

9 to in clause (ii)(II) is submitted to the gov10 ernment of the permitted country. 

11 ‘‘(iv) NOTICE OF DECISION ON APPLI12 CATION.—The Secretary shall promptly no13 tify registered exporters, registered import14 ers, the Federal Trade Commission, and 

15 the State attorneys general of a determina16 tion to approve or to disapprove an appli17 cation under section 505(b) required under 

18 clause (i). 

19 ‘‘(v) RELATED ACTIVE INGREDI20 ENTS.—For purposes of clause (i)(II), 2 

21 active ingredients are related if they are— 

22 ‘‘(I) the same; or 

23 ‘‘(II) different salts, esters, or 

24 complexes of the same moiety. 

25 ‘‘(3) SECTION 502; LABELING.— 
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1 ‘‘(A) IMPORTATION BY REGISTERED IM2 PORTER.— 

3 ‘‘(i) IN GENERAL.—In the case of a 

4 qualifying drug that is imported or offered 

5 for import by a registered importer, such 

6 drug shall be considered to be in compli7 ance with section 502 and the labeling re8 quirements under the approved application 

9 for the U.S. label drug if the qualifying 

10 drug bears— 

11 ‘‘(I) a copy of the labeling ap12 proved for the U.S. label drug under 

13 section 505, without regard to wheth14 er the copy bears any trademark in15 volved; 

16 ‘‘(II) the name of the manufac17 turer and location of the manufac18 turer; 

19 ‘‘(III) the lot number assigned by 

20 the manufacturer; 

21 ‘‘(IV) the name, location, and 

22 registration number of the importer; 

23 and 
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1 ‘‘(V) the National Drug Code 

2 number assigned to the qualifying 

3 drug by the Secretary. 

4 ‘‘(ii) REQUEST FOR COPY OF THE LA5 BELING.—The Secretary shall provide such 

6 copy to the registered importer involved, 

7 upon request of the importer. 

8 ‘‘(iii) REQUESTED LABELING.—The 

9 labeling provided by the Secretary under 

10 clause (ii) shall— 

11 ‘‘(I) include the established 

12 name, as defined in section 502(e)(3), 

13 for each active ingredient in the quali14 fying drug; 

15 ‘‘(II) not include the proprietary 

16 name of the U.S. label drug or any 

17 active ingredient thereof; 

18 ‘‘(III) if required under para19 graph (2)(B)(vi)(III), a prominent ad20 visory that the qualifying drug is safe 

21 and effective but not bioequivalent to 

22 the U.S. label drug; and 

23 ‘‘(IV) if the inactive ingredients 

24 of the qualifying drug are different 
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1 from the inactive ingredients for the 

2 U.S. label drug, include— 

3 ‘‘(aa) a prominent notice 

4 that the ingredients of the quali5 fying drug differ from the ingre6 dients of the U.S. label drug and 

7 that the qualifying drug must be 

8 dispensed with an advisory to 

9 people with allergies about this 

10 difference and a list of ingredi11 ents; and 

12 ‘‘(bb) a list of the ingredi13 ents of the qualifying drug as 

14 would be required under section 

15 502(e). 

16 ‘‘(B) IMPORTATION BY INDIVIDUAL.— 

17 ‘‘(i) IN GENERAL.—In the case of a 

18 qualifying drug that is imported or offered 

19 for import by a registered exporter to an 

20 individual, such drug shall be considered to 

21 be in compliance with section 502 and the 

22 labeling requirements under the approved 

23 application for the U.S. label drug if the 

24 packaging and labeling of the qualifying 

25 drug complies with all applicable regula-
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1 tions promulgated under sections 3 and 4 

2 of the Poison Prevention Packaging Act of 

3 1970 (15 U.S.C. 1471 et seq.) and the la4 beling of the qualifying drug includes— 

5 ‘‘(I) directions for use by the 

6 consumer; 

7 ‘‘(II) the lot number assigned by 

8 the manufacturer; 

9 ‘‘(III) the name and registration 

10 number of the exporter; 

11 ‘‘(IV) if required under para12 graph (2)(B)(vi)(III), a prominent ad13 visory that the drug is safe and effec14 tive but not bioequivalent to the U.S. 

15 label drug; 

16 ‘‘(V) if the inactive ingredients of 

17 the drug are different from the inac18 tive ingredients for the U.S. label 

19 drug— 

20 ‘‘(aa) a prominent advisory 

21 that persons with an allergy 

22 should check the ingredient list 

23 of the drug because the ingredi24 ents of the drug differ from the 
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1 ingredients of the U.S. label 

2 drug; and 

3 ‘‘(bb) a list of the ingredi4 ents of the drug as would be re5 quired under section 502(e); and 

6 ‘‘(VI) a copy of any special label7 ing that would be required by the Sec8 retary had the U.S. label drug been 

9 dispensed by a pharmacist in the 

10 United States, without regard to 

11 whether the special labeling bears any 

12 trademark involved. 

13 ‘‘(ii) REQUEST FOR COPY OF SPECIAL

14 LABELING AND INGREDIENT LIST.—The 

15 Secretary shall provide to the registered 

16 exporter involved a copy of the special la17 beling, the advisory, and the ingredient list 

18 of the drug, upon request of the exporter. 

19 ‘‘(iii) REQUESTED LABELING AND IN20 GREDIENT LIST.—The labeling and ingre21 dient list provided by the Secretary under 

22 clause (ii) shall— 

23 ‘‘(I) include the established 

24 name, as defined in section 502(e)(3), 
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1 for each active ingredient in the drug; 

2 and 

3 ‘‘(II) not include the proprietary 

4 name of the U.S. label drug or any 

5 active ingredient thereof. 

6 ‘‘(4) SECTION 501; ADULTERATION.—A quali7 fying drug that is imported or offered for import 

8 under subsection (a) shall be considered to be in 

9 compliance with section 501 if the drug is in compli10 ance with subsection (c). 

11 ‘‘(5) STANDARDS FOR REFUSING ADMISSION.— 

12 A drug exported under subsection (a) from a reg13 istered exporter or imported by a registered importer 

14 may be refused admission into the United States if 

15 1 or more of the following applies: 

16 ‘‘(A) The drug is not a qualifying drug. 

17 ‘‘(B) A notice for the drug required under 

18 paragraph (2)(B) has not been submitted to the 

19 Secretary. 

20 ‘‘(C) The Secretary has ordered that im21 portation of the drug from the permitted coun22 try cease under paragraph (2) (C) or (D). 

23 ‘‘(D) The drug does not comply with para24 graph (3) or (4). 
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1 ‘‘(E) The shipping container appears dam2 aged in a way that may affect the strength, 

3 quality, or purity of the drug. 

4 ‘‘(F) The Secretary becomes aware that— 

5 ‘‘(i) the drug may be counterfeit; 

6 ‘‘(ii) the drug may have been pre7 pared, packed, or held under insanitary 

8 conditions; or 

9 ‘‘(iii) the methods used in, or the fa10 cilities or controls used for, the manufac11 turing, processing, packing, or holding of 

12 the drug do not conform to good manufac13 turing practice. 

14 ‘‘(G) The Secretary has obtained an in15 junction under section 302 that prohibits the 

16 distribution of the drug in interstate commerce. 

17 ‘‘(H) The Secretary has under section 

18 505(e) withdrawn approval of the drug. 

19 ‘‘(I) The manufacturer of the drug has in20 stituted a recall of the drug. 

21 ‘‘(J) If the drug is imported or offered for 

22 import by a registered importer without submis23 sion of a notice in accordance with subsection 

24 (d)(4). 
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1 ‘‘(K) If the drug is imported or offered for 

2 import from a registered exporter to an indi3 vidual and 1 or more of the following applies: 

4 ‘‘(i) The shipping container for such 

5 drug does not bear the markings required 

6 under subsection (d)(2). 

7 ‘‘(ii) The markings on the shipping 

8 container appear to be counterfeit. 

9 ‘‘(iii) The shipping container or mark10 ings appear to have been tampered with. 

11 ‘‘(h) LICENSING AS PHARMACIST.—A registration 

12 condition is that the exporter involved agrees that a quali13 fying drug will be exported to an individual only if the 

14 Secretary has verified that— 

15 ‘‘(1) the exporter is authorized under the law of 

16 the permitted country in which the exporter is lo17 cated to dispense prescription drugs; and 

18 ‘‘(2) the exporter employs persons that are li19 censed under the law of the permitted country in 

20 which the exporter is located to dispense prescription 

21 drugs in sufficient number to dispense safely the 

22 drugs exported by the exporter to individuals, and 

23 the exporter assigns to those persons responsibility 

24 for dispensing such drugs to individuals. 
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1 ‘‘(i) INDIVIDUALS; CONDITIONS FOR IMPORTA2 TION.— 

3 ‘‘(1) IN GENERAL.—For purposes of subsection 

4 (a)(2)(B), the importation of a qualifying drug by 

5 an individual is in accordance with this subsection if 

6 the following conditions are met: 

7 ‘‘(A) The drug is accompanied by a copy of 

8 a prescription for the drug, which prescrip9 tion— 

10 ‘‘(i) is valid under applicable Federal 

11 and State laws; and 

12 ‘‘(ii) was issued by a practitioner who, 

13 under the law of a State of which the indi14 vidual is a resident, or in which the indi15 vidual receives care from the practitioner 

16 who issues the prescription, is authorized 

17 to administer prescription drugs. 

18 ‘‘(B) The drug is accompanied by a copy 

19 of the documentation that was required under 

20 the law or regulations of the permitted country 

21 in which the exporter is located, as a condition 

22 of dispensing the drug to the individual. 

23 ‘‘(C) The copies referred to in subpara24 graphs (A)(i) and (B) are marked in a manner 

25 sufficient— 
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1 ‘‘(i) to indicate that the prescription, 

2 and the equivalent document in the per3 mitted country in which the exporter is lo4 cated, have been filled; and 

5 ‘‘(ii) to prevent a duplicative filling by 

6 another pharmacist. 

7 ‘‘(D) The individual has provided to the 

8 registered exporter a complete list of all drugs 

9 used by the individual for review by the individ10 uals who dispense the drug. 

11 ‘‘(E) The quantity of the drug does not ex12 ceed a 90-day supply. 

13 ‘‘(F) The drug is not an ineligible subpart 

14 H drug. For purposes of this section, a pre15 scription drug is an ‘ineligible subpart H drug’ 

16 if the drug was approved by the Secretary 

17 under subpart H of part 314 of title 21, Code 

18 of Federal Regulations (relating to accelerated 

19 approval), with restrictions under section 520 of 

20 such part to assure safe use, and the Secretary 

21 has published in the Federal Register a notice 

22 that the Secretary has determined that good 

23 cause exists to prohibit the drug from being im24 ported pursuant to this subsection. 
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1 ‘‘(2) NOTICE REGARDING DRUG REFUSED AD2 MISSION.—If a registered exporter ships a drug to 

3 an individual pursuant to subsection (a)(2)(B) and 

4 the drug is refused admission to the United States, 

5 a written notice shall be sent to the individual and 

6 to the exporter that informs the individual and the 

7 exporter of such refusal and the reason for the re8 fusal. 

9 ‘‘(j) MAINTENANCE OF RECORDS AND SAMPLES.— 

10 ‘‘(1) IN GENERAL.—A registration condition is 

11 that the importer or exporter involved shall— 

12 ‘‘(A) maintain records required under this 

13 section for not less than 2 years; and 

14 ‘‘(B) maintain samples of each lot of a 

15 qualifying drug required under this section for 

16 not less than 2 years. 

17 ‘‘(2) PLACE OF RECORD MAINTENANCE.—The 

18 records described under paragraph (1) shall be 

19 maintained— 

20 ‘‘(A) in the case of an importer, at the 

21 place of business of the importer at which the 

22 importer initially receives the qualifying drug 

23 after importation; or 
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1 ‘‘(B) in the case of an exporter, at the fa2 cility from which the exporter ships the quali3 fying drug to the United States. 

4 ‘‘(k) DRUG RECALLS.— 

5 ‘‘(1) MANUFACTURERS.—A person that manu6 factures a qualifying drug imported from a per7 mitted country under this section shall promptly in8 form the Secretary— 

9 ‘‘(A) if the drug is recalled or withdrawn 

10 from the market in a permitted country; 

11 ‘‘(B) how the drug may be identified, in12 cluding lot number; and 

13 ‘‘(C) the reason for the recall or with14 drawal. 

15 ‘‘(2) SECRETARY.—With respect to each per16 mitted country, the Secretary shall— 

17 ‘‘(A) enter into an agreement with the gov18 ernment of the country to receive information 

19 about recalls and withdrawals of qualifying 

20 drugs in the country; or 

21 ‘‘(B) monitor recalls and withdrawals of 

22 qualifying drugs in the country using any infor23 mation that is available to the public in any 

24 media. 
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1 ‘‘(3) NOTICE.—The Secretary may notify, as 

2 appropriate, registered exporters, registered import3 ers, wholesalers, pharmacies, or the public of a recall 

4 or withdrawal of a qualifying drug in a permitted 

5 country. 

6 ‘‘(l) DRUG LABELING.—When a qualifying drug that 

7 is imported into the United States by an importer under 

8 subsection (a) is dispensed by a pharmacist to an indi9 vidual, the pharmacist shall provide that the packaging 

10 and labeling of the drug complies with all applicable regu11 lations promulgated under sections 3 and 4 of the Poison 

12 Prevention Packaging Act of 1970 (15 U.S.C. 1471 et 

13 seq.) and include with any other labeling provided to the 

14 individual the following: 

15 ‘‘(1) The lot number assigned by the manufac16 turer. 

17 ‘‘(2) The name and registration number of the 

18 importer. 

19 ‘‘(3) If the inactive ingredients of the drug are 

20 different from the inactive ingredients for the U.S. 

21 label drug— 

22 ‘‘(A) a prominent advisory that persons 

23 with allergies should check the ingredient list of 

24 the drug because the ingredients of the drug 
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1 differ from the ingredients of the U.S. label 

2 drug; and 

3 ‘‘(B) a list of the ingredients of the drug 

4 as would be required under section 502(e). 

5 ‘‘(4) If required under paragraph 

6 (2)(B)(vi)(III) of subsection (g), a prominent advi7 sory that the drug is safe and effective but not bio8 equivalent to the U.S. label drug. 

9 ‘‘(m) CHARITABLE CONTRIBUTIONS.—Notwith10 standing any other provision of this section, this section 

11 does not authorize the importation into the United States 

12 of a qualifying drug donated or otherwise supplied for free 

13 or at nominal cost by the manufacturer of the drug to 

14 a charitable or humanitarian organization, including the 

15 United Nations and affiliates, or to a government of a for16 eign country. 

17 ‘‘(n) UNFAIR AND DISCRIMINATORY ACTS AND PRAC18 TICES.— 

19 ‘‘(1) IN GENERAL.—It is unlawful for a manu20 facturer, directly or indirectly (including by being a 

21 party to a licensing agreement or other agreement), 

22 to— 

23 ‘‘(A) discriminate by charging a higher 

24 price for a prescription drug sold to a registered 

25 exporter or other person in a permitted country 
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1 that exports a qualifying drug to the United 

2 States under this section than the price that is 

3 charged, inclusive of rebates or other incentives 

4 to the permitted country or other person, to an5 other person that is in the same country and 

6 that does not export a qualifying drug into the 

7 United States under this section; 

8 ‘‘(B) discriminate by charging a higher 

9 price for a prescription drug sold to a registered 

10 importer or other person that distributes, sells, 

11 or uses a qualifying drug imported into the 

12 United States under this section than the price 

13 that is charged to another person in the United 

14 States that does not import a qualifying drug 

15 under this section, or that does not distribute, 

16 sell, or use such a drug; 

17 ‘‘(C) discriminate by denying, restricting, 

18 or delaying supplies of a prescription drug to a 

19 registered exporter or other person in a per20 mitted country that exports a qualifying drug to 

21 the United States under this section or to a 

22 registered importer or other person that distrib23 utes, sells, or uses a qualifying drug imported 

24 into the United States under this section; 
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1 ‘‘(D) discriminate by publicly, privately, or 

2 otherwise refusing to do business with a reg3 istered exporter or other person in a permitted 

4 country that exports a qualifying drug to the 

5 United States under this section or with a reg6 istered importer or other person that distrib7 utes, sells, or uses a qualifying drug imported 

8 into the United States under this section; 

9 ‘‘(E) knowingly fail to submit a notice 

10 under subsection (g)(2)(B)(i), knowingly fail to 

11 submit such a notice on or before the date spec12 ified in subsection (g)(2)(B)(v) or as otherwise 

13 required under subsection (e) (3), (4), and (5) 

14 of section 4 of the Pharmaceutical Market Ac15 cess and Drug Safety Act of 2005, knowingly 

16 submit such a notice that makes a materially 

17 false, fictitious, or fraudulent statement, or 

18 knowingly fail to provide promptly any informa19 tion requested by the Secretary to review such 

20 a notice; 

21 ‘‘(F) knowingly fail to submit an applica22 tion required under subsection (g)(2)(F), know23 ingly fail to submit such an application on or 

24 before the date specified in subsection 

25 (g)(2)(F)(ii), knowingly submit such an applica-
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1 tion that makes a materially false, fictitious, or 

2 fraudulent statement, or knowingly fail to pro3 vide promptly any information requested by the 

4 Secretary to review such an application; 

5 ‘‘(G) cause there to be a difference (includ6 ing a difference in active ingredient, route of 

7 administration, dosage form, strength, formula8 tion, manufacturing establishment, manufac9 turing process, or person that manufactures the 

10 drug) between a prescription drug for distribu11 tion in the United States and the drug for dis12 tribution in a permitted country; 

13 ‘‘(H) refuse to allow an inspection author14 ized under this section of an establishment that 

15 manufactures a qualifying drug that is, or will 

16 be, introduced for commercial distribution in a 

17 permitted country; 

18 ‘‘(I) fail to conform to the methods used 

19 in, or the facilities used for, the manufacturing, 

20 processing, packing, or holding of a qualifying 

21 drug that is, or will be, introduced for commer22 cial distribution in a permitted country to good 

23 manufacturing practice under this Act; 

24 ‘‘(J) become a party to a licensing agree25 ment or other agreement related to a qualifying 
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1 drug that fails to provide for compliance with 

2 all requirements of this section with respect to 

3 such drug; 

4 ‘‘(K) enter into a contract that restricts, 

5 prohibits, or delays the importation of a quali6 fying drug under this section; 

7 ‘‘(L) engage in any other action to restrict, 

8 prohibit, or delay the importation of a quali9 fying drug under this section; or 

10 ‘‘(M) engage in any other action that the 

11 Federal Trade Commission determines to dis12 criminate against a person that engages or at13 tempts to engage in the importation of a quali14 fying drug under this section. 

15 ‘‘(2) AFFIRMATIVE DEFENSE.— 

16 ‘‘(A) DISCRIMINATION.—It shall be an af17 firmative defense to a charge that a manufac18 turer has discriminated under subparagraph 

19 (A), (B), (C), (D), or (M) of paragraph (1) that 

20 the higher price charged for a prescription drug 

21 sold to a person, the denial, restriction, or delay 

22 of supplies of a prescription drug to a person, 

23 the refusal to do business with a person, or 

24 other discriminatory activity against a person, 

25 is not based, in whole or in part, on— 
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1 ‘‘(i) the person exporting or importing 

2 a qualifying drug into the United States 

3 under this section; or 

4 ‘‘(ii) the person distributing, selling, 

5 or using a qualifying drug imported into 

6 the United States under this section. 

7 ‘‘(B) DRUG DIFFERENCES.—It shall be an 

8 affirmative defense to a charge that a manufac9 turer has caused there to be a difference de10 scribed in subparagraph (G) of paragraph (1) 

11 that— 

12 ‘‘(i) the difference was required by the 

13 country in which the drug is distributed; 

14 ‘‘(ii) the Secretary has determined 

15 that the difference was necessary to im16 prove the safety or effectiveness of the 

17 drug; 

18 ‘‘(iii) the person manufacturing the 

19 drug for distribution in the United States 

20 has given notice to the Secretary under 

21 subsection (g)(2)(B)(i) that the drug for 

22 distribution in the United States is not dif23 ferent from a drug for distribution in per24 mitted countries whose combined popu25 lation represents at least 50 percent of the 
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1 total population of all permitted countries; 

2 or 

3 ‘‘(iv) the difference was not caused, in 

4 whole or in part, for the purpose of re5 stricting importation of the drug into the 

6 United States under this section. 

7 ‘‘(3) EFFECT OF SUBSECTION.— 

8 ‘‘(A) SALES IN OTHER COUNTRIES.—This 

9 subsection applies only to the sale or distribu10 tion of a prescription drug in a country if the 

11 manufacturer of the drug chooses to sell or dis12 tribute the drug in the country. Nothing in this 

13 subsection shall be construed to compel the 

14 manufacturer of a drug to distribute or sell the 

15 drug in a country. 

16 ‘‘(B) DISCOUNTS TO INSURERS, HEALTH

17 PLANS, PHARMACY BENEFIT MANAGERS, AND

18 COVERED ENTITIES.—Nothing in this sub19 section shall be construed to— 

20 ‘‘(i) prevent or restrict a manufac21 turer of a prescription drug from providing 

22 discounts to an insurer, health plan, phar23 macy benefit manager in the United 

24 States, or covered entity in the drug dis25 count program under section 340B of the 
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1 Public Health Service Act (42 U.S.C. 

2 256b) in return for inclusion of the drug 

3 on a formulary; 

4 ‘‘(ii) require that such discounts be 

5 made available to other purchasers of the 

6 prescription drug; or 

7 ‘‘(iii) prevent or restrict any other 

8 measures taken by an insurer, health plan, 

9 or pharmacy benefit manager to encourage 

10 consumption of such prescription drug. 

11 ‘‘(C) CHARITABLE CONTRIBUTIONS.— 

12 Nothing in this subsection shall be construed 

13 to— 

14 ‘‘(i) prevent a manufacturer from do15 nating a prescription drug, or supplying a 

16 prescription drug at nominal cost, to a 

17 charitable or humanitarian organization, 

18 including the United Nations and affili19 ates, or to a government of a foreign coun20 try; or 

21 ‘‘(ii) apply to such donations or sup22 plying of a prescription drug. 

23 ‘‘(4) ENFORCEMENT.— 

24 ‘‘(A) UNFAIR OR DECEPTIVE ACT OR PRAC25 TICE.—A violation of this subsection shall be 
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1 treated as a violation of a rule defining an un2 fair or deceptive act or practice prescribed 

3 under section 18(a)(1)(B) of the Federal Trade 

4 Commission Act (15 U.S.C. 57a(a)(1)(B)). 

5 ‘‘(B) ACTIONS BY THE COMMISSION.—The 

6 Federal Trade Commission— 

7 ‘‘(i) shall enforce this subsection in 

8 the same manner, by the same means, and 

9 with the same jurisdiction, powers, and du10 ties as though all applicable terms and pro11 visions of the Federal Trade Commission 

12 Act (15 U.S.C. 41 et seq.) were incor13 porated into and made a part of this sec14 tion; and 

15 ‘‘(ii) may seek monetary relief three16 fold the damages sustained, in addition to 

17 any other remedy available to the Federal 

18 Trade Commission under the Federal 

19 Trade Commission Act (15 U.S.C. 41 et 

20 seq.). 

21 ‘‘(5) ACTIONS BY STATES.— 

22 ‘‘(A) IN GENERAL.— 

23 ‘‘(i) CIVIL ACTIONS.—In any case in 

24 which the attorney general of a State has 

25 reason to believe that an interest of the 
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1 residents of that State have been adversely 

2 affected by any manufacturer that violates 

3 paragraph (1), the attorney general of a 

4 State may bring a civil action on behalf of 

5 the residents of the State, and persons 

6 doing business in the State, in a district 

7 court of the United States of appropriate 

8 jurisdiction to— 

9 ‘‘(I) enjoin that practice; 

10 ‘‘(II) enforce compliance with 

11 this subsection; 

12 ‘‘(III) obtain damages, restitu13 tion, or other compensation on behalf 

14 of residents of the State and persons 

15 doing business in the State, including 

16 threefold the damages; or 

17 ‘‘(IV) obtain such other relief as 

18 the court may consider to be appro19 priate. 

20 ‘‘(ii) NOTICE.— 

21 ‘‘(I) IN GENERAL.—Before filing 

22 an action under clause (i), the attor23 ney general of the State involved shall 

24 provide to the Federal Trade Commis25 sion— 
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1 ‘‘(aa) written notice of that 

2 action; and 

3 ‘‘(bb) a copy of the com4 plaint for that action. 

5 ‘‘(II) EXEMPTION.—Subclause 

6 (I) shall not apply with respect to the 

7 filing of an action by an attorney gen8 eral of a State under this paragraph, 

9 if the attorney general determines 

10 that it is not feasible to provide the 

11 notice described in that subclause be12 fore filing of the action. In such case, 

13 the attorney general of a State shall 

14 provide notice and a copy of the com15 plaint to the Federal Trade Commis16 sion at the same time as the attorney 

17 general files the action. 

18 ‘‘(B) INTERVENTION.— 

19 ‘‘(i) IN GENERAL.—On receiving no20 tice under subparagraph (A)(ii), the Fed21 eral Trade Commission shall have the right 

22 to intervene in the action that is the sub23 ject of the notice. 

24 ‘‘(ii) EFFECT OF INTERVENTION.—If 

25 the Federal Trade Commission intervenes 
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1 in an action under subparagraph (A), it 

2 shall have the right— 

3 ‘‘(I) to be heard with respect to 

4 any matter that arises in that action; 

5 and 

6 ‘‘(II) to file a petition for appeal. 

7 ‘‘(C) CONSTRUCTION.—For purposes of 

8 bringing any civil action under subparagraph 

9 (A), nothing in this subsection shall be con10 strued to prevent an attorney general of a State 

11 from exercising the powers conferred on the at12 torney general by the laws of that State to— 

13 ‘‘(i) conduct investigations; 

14 ‘‘(ii) administer oaths or affirmations; 

15 or 

16 ‘‘(iii) compel the attendance of wit17 nesses or the production of documentary 

18 and other evidence. 

19 ‘‘(D) ACTIONS BY THE COMMISSION.—In 

20 any case in which an action is instituted by or 

21 on behalf of the Federal Trade Commission for 

22 a violation of paragraph (1), a State may not, 

23 during the pendency of that action, institute an 

24 action under subparagraph (A) for the same 
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1 violation against any defendant named in the 

2 complaint in that action. 

3 ‘‘(E) VENUE.—Any action brought under 

4 subparagraph (A) may be brought in the dis5 trict court of the United States that meets ap6 plicable requirements relating to venue under 

7 section 1391 of title 28, United States Code. 

8 ‘‘(F) SERVICE OF PROCESS.—In an action 

9 brought under subparagraph (A), process may 

10 be served in any district in which the defend11 ant— 

12 ‘‘(i) is an inhabitant; or 

13 ‘‘(ii) may be found. 

14 ‘‘(G) MEASUREMENT OF DAMAGES.—In 

15 any action under this paragraph to enforce a 

16 cause of action under this subsection in which 

17 there has been a determination that a defend18 ant has violated a provision of this subsection, 

19 damages may be proved and assessed in the ag20 gregate by statistical or sampling methods, by 

21 the computation of illegal overcharges or by 

22 such other reasonable system of estimating ag23 gregate damages as the court in its discretion 

24 may permit without the necessity of separately 

25 proving the individual claim of, or amount of 
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1 damage to, persons on whose behalf the suit 

2 was brought. 

3 ‘‘(H) EXCLUSION ON DUPLICATIVE RE4 LIEF.—The district court shall exclude from the 

5 amount of monetary relief awarded in an action 

6 under this paragraph brought by the attorney 

7 general of a State any amount of monetary re8 lief which duplicates amounts which have been 

9 awarded for the same injury. 

10 ‘‘(6) EFFECT ON ANTITRUST LAWS.—Nothing 

11 in this subsection shall be construed to modify, im12 pair, or supersede the operation of the antitrust 

13 laws. For the purpose of this subsection, the term 

14 ‘antitrust laws’ has the meaning given it in the first 

15 section of the Clayton Act, except that it includes 

16 section 5 of the Federal Trade Commission Act to 

17 the extent that such section 5 applies to unfair 

18 methods of competition. 

19 ‘‘(7) MANUFACTURER.—In this subsection, the 

20 term ‘manufacturer’ means any entity, including any 

21 affiliate or licensee of that entity, that is engaged 

22 in— 

23 ‘‘(A) the production, preparation, propaga24 tion, compounding, conversion, or processing of 

25 a prescription drug, either directly or indirectly 
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1 by extraction from substances of natural origin, 

2 or independently by means of chemical syn3 thesis, or by a combination of extraction and 

4 chemical synthesis; or 

5 ‘‘(B) the packaging, repackaging, labeling, 

6 relabeling, or distribution of a prescription 

7 drug.’’. 

8 (2) PROHIBITED ACTS.—The Federal Food, 

9 Drug, and Cosmetic Act is amended— 

10 (A) in section 301 (21 U.S.C. 331), by 

11 striking paragraph (aa) and inserting the fol12 lowing: 

13 ‘‘(aa)(1) The sale or trade by a pharmacist, or by 

14 a business organization of which the pharmacist is a part, 

15 of a qualifying drug that under section 804(a)(2)(A) was 

16 imported by the pharmacist, other than— 

17 ‘‘(A) a sale at retail made pursuant to dis18 pensing the drug to a customer of the pharmacist or 

19 organization; or 

20 ‘‘(B) a sale or trade of the drug to a pharmacy 

21 or a wholesaler registered to import drugs under sec22 tion 804. 

23 ‘‘(2) The sale or trade by an individual of a qualifying 

24 drug that under section 804(a)(2)(B) was imported by the 

25 individual. 
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1 ‘‘(3) The making of a materially false, fictitious, or 

2 fraudulent statement or representation, or a material 

3 omission, in a notice under clause (i) of section 

4 804(g)(2)(B) or in an application required under section 

5 804(g)(2)(F), or the failure to submit such a notice or 

6 application. 

7 ‘‘(4) The importation of a drug in violation of a reg8 istration condition or other requirement under section 

9 804, the falsification of any record required to be main10 tained, or provided to the Secretary, under such section, 

11 or the violation of any registration condition or other re12 quirement under such section.’’; and 

13 (B) in section 303(a) (21 U.S.C. 333(a)), 

14 by striking paragraph (6) and inserting the fol15 lowing: 

16 ‘‘(6) Notwithstanding subsection (a), any person that 

17 knowingly violates section 301(i) (2) or (3) or section 

18 301(aa)(4) shall be imprisoned not more than 10 years, 

19 or fined in accordance with title 18, United States Code, 

20 or both.’’. 

21 (3) AMENDMENT OF CERTAIN PROVISIONS.— 

22 (A) IN GENERAL.—Section 801 of the Fed23 eral Food, Drug, and Cosmetic Act (21 U.S.C. 

24 381) is amended by striking subsection (g) and 

25 inserting the following: 
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•HR 4697 IH 

1 ‘‘(g) With respect to a prescription drug that is im2 ported or offered for import into the United States by an 

3 individual who is not in the business of such importation, 

4 that is not shipped by a registered exporter under section 

5 804, and that is refused admission under subsection (a), 

6 the Secretary shall notify the individual that— 

7 ‘‘(1) the drug has been refused admission be8 cause the drug was not a lawful import under sec9 tion 804; 

10 ‘‘(2) the drug is not otherwise subject to a 

11 waiver of the requirements of subsection (a); 

12 ‘‘(3) the individual may under section 804 law13 fully import certain prescription drugs from export14 ers registered with the Secretary under section 804; 

15 and 

16 ‘‘(4) the individual can find information about 

17 such importation, including a list of registered ex18 porters, on the Internet website of the Food and 

19 Drug Administration or through a toll-free telephone 

20 number required under section 804.’’. 

21 (B) ESTABLISHMENT REGISTRATION.— 

22 Section 510(i) of the Federal Food, Drug, and 

23 Cosmetic Act (21 U.S.C. 360(i)) is amended in 

24 paragraph (1) by inserting after ‘‘import into 

25 the United States’’ the following: ‘‘, including a 
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1 drug that is, or may be, imported or offered for 

2 import into the United States under section 

3 804,’’. 

4 (C) EFFECTIVE DATE.—The amendments 

5 made by this subsection shall take effect on the 

6 date that is 90 days after the date of enactment 

7 of this Act. 

8 (4) EXHAUSTION.— 

9 (A) IN GENERAL.—Section 271 of title 35, 

10 United States Code, is amended— 

11 (i) by redesignating subsections (h) 

12 and (i) as (i) and (j), respectively; and 

13 (ii) by inserting after subsection (g) 

14 the following: 

15 ‘‘(h) It shall not be an act of infringement to use, 

16 offer to sell, or sell within the United States or to import 

17 into the United States any patented invention under sec18 tion 804 of the Federal Food, Drug, and Cosmetic Act 

19 that was first sold abroad by or under authority of the 

20 owner or licensee of such patent.’’. 

21 (B) RULE OF CONSTRUCTION.—Nothing in 

22 the amendment made by paragraph (1) shall be 

23 construed to affect the ability of a patent owner 

24 or licensee to enforce their patent, subject to 

25 such amendment. 
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1 (5) EFFECT OF SECTION 804.— 

2 (A) IN GENERAL.—Section 804 of the Fed3 eral Food, Drug, and Cosmetic Act, as added 

4 by subsection (a), shall permit the importation 

5 of qualifying drugs (as defined in such section 

6 804) into the United States without regard to 

7 the status of the issuance of implementing reg8 ulations— 

9 (i) from exporters registered under 

10 such section 804 on the date that is 90 

11 days after the date of enactment of this 

12 Act; and 

13 (ii) from permitted countries, as de14 fined in such section 804, by importers 

15 registered under such section 804 on the 

16 date that is 1 year after the date of enact17 ment of this Act. 

18 (B) REVIEW OF REGISTRATION BY CER19 TAIN EXPORTERS.— 

20 (i) REVIEW PRIORITY.—In the review 

21 of registrations submitted under subsection 

22 (b) of such section 804, registrations sub23 mitted by entities in Canada that are sig24 nificant exporters of prescription drugs to 

25 individuals in the United States as of the 
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1 date of enactment of this Act will have pri2 ority during the 90 day period that begins 

3 on such date of enactment. 

4 (ii) PERIOD FOR REVIEW.—During 

5 such 90-day period, the reference in sub6 section (b)(2)(A) of such section 804 to 90 

7 days (relating to approval or disapproval of 

8 registrations) is, as applied to such enti9 ties, deemed to be 30 days. 

10 (iii) LIMITATION.—That an exporter 

11 in Canada exports, or has exported, pre12 scription drugs to individuals in the United 

13 States on or before the date that is 90 

14 days after the date of enactment of this 

15 Act shall not serve as a basis, in whole or 

16 in part, for disapproving a registration 

17 under such section 804 from the exporter. 

18 (iv) FIRST YEAR LIMIT ON NUMBER

19 OF EXPORTERS.—During the 1-year period 

20 beginning on the date of enactment of this 

21 Act, the Secretary of Health and Human 

22 Services (referred to in this section as the 

23 ‘‘Secretary’’) may limit the number of reg24 istered exporters under such section 804 to 

25 not less than 50, so long as the Secretary 
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1 gives priority to those exporters with dem2 onstrated ability to process a high volume 

3 of shipments of drugs to individuals in the 

4 United States. 

5 (v) SECOND YEAR LIMIT ON NUMBER

6 OF EXPORTERS.—During the 1-year period 

7 beginning on the date that is 1 year after 

8 the date of enactment of this Act, the Sec9 retary may limit the number of registered 

10 exporters under such section 804 to not 

11 less than 100, so long as the Secretary 

12 gives priority to those exporters with dem13 onstrated ability to process a high volume 

14 of shipments of drugs to individuals in the 

15 United States. 

16 (vi) FURTHER LIMIT ON NUMBER OF

17 EXPORTERS.—The Secretary shall report 

18 to Congress to request the authority to im19 pose a limitation on the number of reg20 istered exporters under such section 804 

21 during any period beginning on a date that 

22 is not less than 2 years after the date of 

23 enactment of this Act if the Secretary de24 termines that— 
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1 (I) a limitation on the number of 

2 registered exporters is necessary for 

3 the effective and efficient enforcement 

4 of the requirements of such section 

5 804 with respect to such exporters; 

6 and 

7 (II) such limitation will not re8 strict the ability of individuals to im9 port prescription drugs for personal 

10 use from registered exporters under 

11 such section 804. 

12 (C) LIMITS ON NUMBER OF IMPORTERS.— 

13 (i) FIRST YEAR LIMIT ON NUMBER OF

14 IMPORTERS.—During the 1-year period be15 ginning on the date that is 1 year after the 

16 date of enactment of this Act, the Sec17 retary may limit the number of registered 

18 importers under such section 804 to not 

19 less than 100 (of which at least a signifi20 cant number shall be groups of phar21 macies, to the extent feasible given the ap22 plications submitted by such groups), so 

23 long as the Secretary gives priority to 

24 those importers with demonstrated ability 
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1 to process a high volume of shipments of 

2 drugs imported into the United States. 

3 (ii) SECOND YEAR LIMIT ON NUMBER

4 OF IMPORTERS.—During the 1-year period 

5 beginning on the date that is 2 years after 

6 the date of enactment of this Act, the Sec7 retary may limit the number of registered 

8 importers under such section 804 to not 

9 less than 200 (of which at least a signifi10 cant number shall be groups of phar11 macies, to the extent feasible given the ap12 plications submitted by such groups), so 

13 long as the Secretary gives priority to 

14 those importers with demonstrated ability 

15 to process a high volume of shipments of 

16 drugs to individuals in the United States. 

17 (iii) FURTHER LIMIT ON NUMBER OF

18 IMPORTERS.—The Secretary shall report to 

19 Congress to request the authority to im20 pose a limitation on the number of reg21 istered importers under such section 804 

22 during any period beginning on a date that 

23 is not less than 3 years after the date of 

24 enactment of this Act if the Secretary de25 termines that— 
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1 (I) a limitation on the number of 

2 registered importers is necessary for 

3 the effective and efficient enforcement 

4 of the requirements of such section 

5 804 with respect to such importers; 

6 and 

7 (II) such limitation will not re8 strict the ability of individuals to pur9 chase qualifying drugs imported under 

10 such section 804 or savings available 

11 to individuals by purchasing such 

12 qualifying drugs. 

13 (D) NOTICES FOR DRUGS FOR IMPORT

14 FROM CANADA.—The notice with respect to a 

15 qualifying drug introduced for commercial dis16 tribution in Canada as of the date of enactment 

17 of this Act that is required under subsection 

18 (g)(2)(B)(i) of such section 804 shall be sub19 mitted to the Secretary not later than 30 days 

20 after the date of enactment of this Act if— 

21 (i) the U.S. label drug (as defined in 

22 such section 804) for the qualifying drug is 

23 1 of the 100 prescription drugs with the 

24 highest dollar volume of sales in the 

25 United States based on the 12 calendar 
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1 month period most recently completed be2 fore the date of enactment of this Act; or 

3 (ii) the notice is a notice under sub4 section (g)(2)(B)(i)(II) of such section 

5 804. 

6 (E) NOTICE FOR DRUGS FOR IMPORT

7 FROM OTHER COUNTRIES.—The notice with re8 spect to a qualifying drug introduced for com9 mercial distribution in a permitted country 

10 other than Canada as of the date of enactment 

11 of this Act that is required under subsection 

12 (g)(2)(B)(i) of such section 804 shall be sub13 mitted to the Secretary not later than 180 days 

14 after the date of enactment of this Act if— 

15 (i) the U.S. label drug for the quali16 fying drug is 1 of the 100 prescription 

17 drugs with the highest dollar volume of 

18 sales in the United States based on the 12 

19 calendar month period that is first com20 pleted on the date that is 120 days after 

21 the date of enactment of this Act; or 

22 (ii) the notice is a notice under sub23 section (g)(2)(B)(i)(II) of such section 

24 804. 
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1 (F) NOTICE FOR OTHER DRUGS FOR IM2 PORT.— 

3 (i) GUIDANCE ON SUBMISSION

4 DATES.—The Secretary shall by guidance 

5 establish a series of submission dates for 

6 the notices under subsection (g)(2)(B)(i) of 

7 such section 804 with respect to qualifying 

8 drugs introduced for commercial distribu9 tion as of the date of enactment of this Act 

10 and that are not required to be submitted 

11 under subparagraph (D) or (E). 

12 (ii) CONSISTENT AND EFFICIENT USE

13 OF RESOURCES.—The Secretary shall es14 tablish the dates described under clause (i) 

15 so that such notices described under such 

16 clause are submitted and reviewed at a 

17 rate that allows consistent and efficient 

18 use of the resources and staff available to 

19 the Secretary for such reviews. Review of 

20 all such notices shall be completed not 

21 later than 5 years after the date of enact22 ment of this Act. 

23 (iii) PRIORITY FOR DRUGS WITH

24 HIGHER SALES.—The Secretary shall es25 tablish the dates described under clause (i) 
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1 so that the Secretary reviews the notices 

2 described under such clause with respect to 

3 qualifying drugs with higher dollar volume 

4 of sales in the United States before the no5 tices with respect to drugs with lower sales 

6 in the United States. 

7 (G) NOTICES FOR DRUGS APPROVED

8 AFTER EFFECTIVE DATE.—The notice required 

9 under subsection (g)(2)(B)(i) of such section 

10 804 for a qualifying drug first introduced for 

11 commercial distribution in a permitted country 

12 (as defined in such section 804) after the date 

13 of enactment of this Act shall be submitted to 

14 and reviewed by the Secretary as provided 

15 under subsection (g)(2)(B) of such section 804, 

16 without regard to subparagraph (D), (E), or 

17 (F). 

18 (H) REPORT.—Beginning with fiscal year 

19 2007, not later than 90 days after the end of 

20 each fiscal year during which the Secretary re21 views a notice referred to in subparagraph (D), 

22 (E), or (F), the Secretary shall submit a report 

23 to Congress concerning the progress of the 

24 Food and Drug Administration in reviewing the 
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1 notices referred to in subparagraphs (D), (E), 

2 and (F). 

3 (I) USER FEES.— 

4 (i) EXPORTERS.—When establishing 

5 an aggregate total of fees to be collected 

6 from exporters under subsection (f)(2) of 

7 such section 804, the Secretary shall, 

8 under subsection (f)(3)(C)(i) of such sec9 tion 804, estimate the total price of drugs 

10 imported under subsection (a) of such sec11 tion 804 into the United States by reg12 istered exporters during fiscal year 2007 to 

13 be $1,000,000,000. 

14 (ii) IMPORTERS.—When establishing 

15 an aggregate total of fees to be collected 

16 from importers under subsection (e)(2) of 

17 such section 804, the Secretary shall, 

18 under subsection (e)(3)(C)(i) of such sec19 tion 804, estimate the total price of drugs 

20 imported under subsection (a) of such sec21 tion 804 into the United States by reg22 istered importers during— 

23 (I) fiscal year 2007 to be 

24 $1,000,000,000; and 
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1 (II) fiscal year 2008 to be 

2 $10,000,000,000. 

3 (iii) FISCAL YEAR 2008 ADJUST4 MENT.— 

5 (I) REPORTS.—Not later than 

6 February 20, 2008, registered import7 ers shall report to the Secretary the 

8 total price and the total volume of 

9 drugs imported to the United States 

10 by the importer during the 4-month 

11 period from October 1, 2007, through 

12 January 31, 2008. 

13 (II) REESTIMATE.—Notwith14 standing subsection (e)(3)(C)(ii) of 

15 such section 804 or clause (ii), the 

16 Secretary shall reestimate the total 

17 price of qualifying drugs imported 

18 under subsection (a) of such section 

19 804 into the United States by reg20 istered importers during fiscal year 

21 2008. Such reestimate shall be equal 

22 to— 

23 (aa) the total price of quali24 fying drugs imported by each im-
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1 porter as reported under sub2 clause (I); multiplied by 

3 (bb) 3. 

4 (III) ADJUSTMENT.—The Sec5 retary shall adjust the fee due on 

6 April 1, 2008, from each importer so 

7 that the aggregate total of fees col8 lected under paragraph (5)(B) for fis9 cal year 2008 does not exceed the 

10 total price of qualifying drugs im11 ported under subsection (a) of such 

12 section 804 into the United States by 

13 registered importers during fiscal year 

14 2008 as reestimated under subclause 

15 (II). 

16 (iv) ANNUAL REPORT.— 

17 (I) FOOD AND DRUG ADMINIS18 TRATION.—Beginning with fiscal year 

19 2007, not later than 180 days after 

20 the end of each fiscal year during 

21 which fees are collected under sub22 section (e), (f), or (g)(2)(B)(iv) of 

23 such section 804, the Secretary shall 

24 prepare and submit to the House of 

25 Representatives and the Senate a re-
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1 port on the implementation of the au2 thority for such fees during such fis3 cal year and the use, by the Food and 

4 Drug Administration, of the fees col5 lected for the fiscal year for which the 

6 report is made and credited to the 

7 Food and Drug Administration. 

8 (II) CUSTOMS AND BORDER CON9 TROL.—Beginning with fiscal year 

10 2007, not later than 180 days after 

11 the end of each fiscal year during 

12 which fees are collected under sub13 section (e) or (f) of such section 804, 

14 the Secretary of Homeland Security, 

15 in consultation with the Secretary of 

16 the Treasury, shall prepare and sub17 mit to the House of Representatives 

18 and the Senate a report on the use, 

19 by the Bureau of Customs and Border 

20 Protection, of the fees, if any, trans21 ferred by the Secretary to the Bureau 

22 of Customs and Border Protection for 

23 the fiscal year for which the report is 

24 made. 

25 (6) IMPLEMENTATION OF SECTION 804.— 
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1 (A) INTERIM RULE.—The Secretary may 

2 promulgate an interim rule for implementing 

3 section 804 of the Federal Food, Drug, and 

4 Cosmetic Act, as added by subsection (a) of this 

5 section. 

6 (B) NO NOTICE OF PROPOSED RULE7 MAKING.—The interim rule described under 

8 subparagraph (A) may be developed and pro9 mulgated by the Secretary without providing 

10 general notice of proposed rulemaking. 

11 (C) FINAL RULE.—Not later than 1 year 

12 after the date on which the Secretary promul13 gates an interim rule under subparagraph (A), 

14 the Secretary shall, in accordance with proce15 dures under section 553 of title 5, United 

16 States Code, promulgate a final rule for imple17 menting such section 804, which may incor18 porate by reference provisions of the interim 

19 rule provided for under subparagraph (A), to 

20 the extent that such provisions are not modi21 fied. 

22 (7) CONSUMER EDUCATION.—The Secretary 

23 shall carry out activities that educate consumers— 

24 (A) with regard to the availability of quali25 fying drugs for import for personal use from an 
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1 exporter registered with and approved by the 

2 Food and Drug Administration under section 

3 804 of the Federal Food, Drug, and Cosmetic 

4 Act, as added by this section, including infor5 mation on how to verify whether an exporter is 

6 registered and approved by use of the Internet 

7 website of the Food and Drug Administration 

8 and the toll-free telephone number required by 

9 this Act; 

10 (B) that drugs that consumers attempt to 

11 import from an exporter that is not registered 

12 with and approved by the Food and Drug Ad13 ministration can be seized by the United States 

14 Customs Service and destroyed, and that such 

15 drugs may be counterfeit, unapproved, unsafe, 

16 or ineffective; and 

17 (C) with regard to the availability at do18 mestic retail pharmacies of qualifying drugs im19 ported under such section 804 by domestic 

20 wholesalers and pharmacies registered with and 

21 approved by the Food and Drug Administra22 tion. 

23 (8) EFFECT ON ADMINISTRATION PRACTICES.— 

24 Notwithstanding any provision of this Act (and the 

25 amendments made by this Act), nothing in this Act 
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1 (or the amendments made by this Act) shall be con2 strued to change, limit, or restrict the practices of 

3 the Food and Drug Administration or the Bureau of 

4 Customs and Border Protection in effect on January 

5 1, 2004, with respect to the importation of prescrip6 tion drugs into the United States by an individual, 

7 on the person of such individual, for personal use. 

8 (c) DISPOSITION OF CERTAIN DRUGS DENIED AD9 MISSION INTO UNITED STATES.— 

10 (1) IN GENERAL.—Chapter VIII of the Federal 

11 Food, Drug, and Cosmetic Act (21 U.S.C. 381 et 

12 seq.), as amended by this section, is further amend13 ed by adding at the end the following section: 

14 ‘‘SEC. 805. DISPOSITION OF CERTAIN DRUGS DENIED AD15 MISSION. 

16 ‘‘(a) IN GENERAL.—The Secretary of Homeland Se17 curity shall deliver to the Secretary a shipment of drugs 

18 that is imported or offered for import into the United 

19 States if— 

20 ‘‘(1) the shipment has a declared value of less 

21 than $10,000; and 

22 ‘‘(2)(A) the shipping container for such drugs 

23 does not bear the markings required under section 

24 804(d)(2); or 
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1 ‘‘(B) the Secretary has requested delivery of 

2 such shipment of drugs. 

3 ‘‘(b) NO BOND OR EXPORT.—Section 801(b) does 

4 not authorize the delivery to the owner or consignee of 

5 drugs delivered to the Secretary under subsection (a) pur6 suant to the execution of a bond, and such drugs may not 

7 be exported. 

8 ‘‘(c) DESTRUCTION OF VIOLATIVE SHIPMENT.—The 

9 Secretary shall destroy a shipment of drugs delivered by 

10 the Secretary of Homeland Security to the Secretary 

11 under subsection (a) if— 

12 ‘‘(1) in the case of drugs that are imported or 

13 offered for import from a registered exporter under 

14 section 804, the drugs are in violation of any stand15 ard described in section 804(g)(5); or 

16 ‘‘(2) in the case of drugs that are not imported 

17 or offered for import from a registered exporter 

18 under section 804, the drugs are in violation of a 

19 standard referred to in section 801(a) or 801(d)(1). 

20 ‘‘(d) CERTAIN PROCEDURES.— 

21 ‘‘(1) IN GENERAL.—The delivery and destruc22 tion of drugs under this section may be carried out 

23 without notice to the importer, owner, or consignee 

24 of the drugs except as required by section 801(g) or 

25 section 804(i)(2). The issuance of receipts for the 
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1 drugs, and recordkeeping activities regarding the 

2 drugs, may be carried out on a summary basis. 

3 ‘‘(2) OBJECTIVE OF PROCEDURES.—Procedures 

4 promulgated under paragraph (1) shall be designed 

5 toward the objective of ensuring that, with respect to 

6 efficiently utilizing Federal resources available for 

7 carrying out this section, a substantial majority of 

8 shipments of drugs subject to described in sub9 section (c) are identified and destroyed. 

10 ‘‘(e) EVIDENCE EXCEPTION.—Drugs may not be de11 stroyed under subsection (c) to the extent that the Attor12 ney General of the United States determines that the 

13 drugs should be preserved as evidence or potential evi14 dence with respect to an offense against the United States. 

15 ‘‘(f) RULE OF CONSTRUCTION.—This section may 

16 not be construed as having any legal effect on applicable 

17 law with respect to a shipment of drugs that is imported 

18 or offered for import into the United States and has a 

19 declared value equal to or greater than $10,000.’’. 

20 (2) PROCEDURES.—Procedures for carrying out 

21 section 805 of the Federal Food, Drug, and Cos22 metic Act, as added by this subsection, shall be es23 tablished not later than 90 days after the date of the 

24 enactment of this Act. 
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1 (3) EFFECTIVE DATE.—The amendments made 

2 by this subsection shall take effect on the date that 

3 is 90 days after the date of enactment of this Act. 

4 (d) CIVIL ACTIONS REGARDING PROPERTY.— 

5 (1) IN GENERAL.—Section 303 of the Federal 

6 Food, Drug, and Cosmetic Act (21 U.S.C. 333) is 

7 amended by adding at the end the following sub8 section: 

9 ‘‘(g)(1) If a person is alienating or disposing of prop10 erty, or intends to alienate or dispose of property, that 

11 is obtained as a result of or is traceable to a drug imported 

12 in violation of section 801(a) or 801(d), the Attorney Gen13 eral may commence a civil action in any Federal court— 

14 ‘‘(A) to enjoin such alienation or disposition of 

15 property; or 

16 ‘‘(B) for a restraining order to— 

17 ‘‘(i) prohibit any person from withdrawing, 

18 transferring, removing, dissipating, or disposing 

19 of any such property or property of equivalent 

20 value; and 

21 ‘‘(ii) appoint a temporary receiver to ad22 minister such restraining order. 

23 ‘‘(2) Proceedings under paragraph (1) shall be car24 ried out in the same manner as applies under section 1345 

25 of title 18, United States Code.’’. 
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1 (2) EFFECTIVE DATE.—The amendment made 

2 by this subsection shall take effect on the day that 

3 is 90 days after the date of enactment of this Act. 

4 (e) WHOLESALE DISTRIBUTION OF DRUGS; STATE5 MENTS REGARDING PRIOR SALE, PURCHASE, OR

6 TRADE.— 

7 (1) STRIKING OF EXEMPTIONS; APPLICABILITY

8 TO REGISTERED EXPORTERS.—Section 503(e) of the 

9 Federal Food, Drug, and Cosmetic Act (21 U.S.C. 

10 353(e)) is amended— 

11 (A) in paragraph (1)— 

12 (i) by striking ‘‘and who is not the 

13 manufacturer or an authorized distributor 

14 of record of such drug’’; 

15 (ii) by striking ‘‘to an authorized dis16 tributor of record or’’; and 

17 (iii) by striking subparagraph (B) and 

18 inserting the following: 

19 ‘‘(B) The fact that a drug subject to subsection (b) 

20 is exported from the United States does not with respect 

21 to such drug exempt any person that is engaged in the 

22 business of the wholesale distribution of the drug from 

23 providing the statement described in subparagraph (A) to 

24 the person that receives the drug pursuant to the export 

25 of the drug. 
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1 ‘‘(C)(i) The Secretary shall by regulation establish re2 quirements that supersede subparagraph (A) (referred to 

3 in this subparagraph as ‘alternative requirements’) to 

4 identify the chain of custody of a drug subject to sub5 section (b) from the manufacturer of the drug throughout 

6 the wholesale distribution of the drug to a pharmacist who 

7 intends to sell the drug at retail if the Secretary deter8 mines that the alternative requirements, which may in9 clude standardized anti-counterfeiting or track-and-trace 

10 technologies, will identify such chain of custody or the 

11 identity of the discrete package of the drug from which 

12 the drug is dispensed with equal or greater certainty to 

13 the requirements of subparagraph (A), and that the alter14 native requirements are economically and technically fea15 sible. 

16 ‘‘(ii) When the Secretary promulgates a final rule to 

17 establish such alternative requirements, the final rule in 

18 addition shall, with respect to the registration condition 

19 established in clause (i) of section 804(c)(3)(B), establish 

20 a condition equivalent to the alternative requirements, and 

21 such equivalent condition may be met in lieu of the reg22 istration condition established in such clause (i).’’; 

23 (B) in paragraph (2)(A), by adding at the 

24 end the following: ‘‘The preceding sentence may 

25 not be construed as having any applicability 
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1 with respect to a registered exporter under sec2 tion 804.’’; and 

3 (C) in paragraph (3), by striking ‘‘and 

4 subsection (d)—’’ in the matter preceding sub5 paragraph (A) and all that follows through ‘‘the 

6 term ‘wholesale distribution’ means’’ in sub7 paragraph (B) and inserting the following: ‘‘and 

8 subsection (d), the term ‘wholesale distribution’ 

9 means’’. 

10 (2) CONFORMING AMENDMENT.—Section 

11 503(d) of the Federal Food, Drug, and Cosmetic 

12 Act (21 U.S.C. 353(d)) is amended by adding at the 

13 end the following: 

14 ‘‘(4) Each manufacturer of a drug subject to sub15 section (b) shall maintain at its corporate offices a current 

16 list of the authorized distributors of record of such drug. 

17 ‘‘(5) For purposes of this subsection, the term ‘au18 thorized distributors of record’ means those distributors 

19 with whom a manufacturer has established an ongoing re20 lationship to distribute such manufacturer’s products.’’. 

21 (3) EFFECTIVE DATE.— 

22 (A) IN GENERAL.—The amendments made 

23 by subparagraphs (A) and (C) of paragraph (1) 

24 and by paragraph (2) shall take effect on Janu25 ary 1, 2011. 
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1 (B) DRUGS IMPORTED BY REGISTERED IM2 PORTERS UNDER SECTION 804.—Notwith3 standing subparagraph (A), the amendments 

4 made by subparagraphs (A) and (C) of para5 graph (1) and by paragraph (2) shall take ef6 fect on the date that is 90 days after the date 

7 of enactment of this Act with respect to quali8 fying drugs imported under section 804 of the 

9 Federal Food, Drug, and Cosmetic Act, as 

10 added by this section. 

11 (C) HIGH-RISK DRUGS.— 

12 (i) IN GENERAL.—Notwithstanding 

13 subparagraph (A), the Secretary of Health 

14 and Human Services (referred to in this 

15 section as the ‘‘Secretary’’) may apply the 

16 amendments made by subparagraphs (A) 

17 and (C) of paragraph (1) and by para18 graph (2) before January 1, 2011, with re19 spect to a prescription drug if the Sec20 retary— 

21 (I) determines that the drug is at 

22 high risk for being counterfeited; and 

23 (II) publishes the determination 

24 and the basis for the determination in 

25 the Federal Register. 
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1 (ii) PEDIGREE NOT REQUIRED.—Not2 withstanding a determination under clause 

3 (i) with respect to a prescription drug, the 

4 amendments described in such clause shall 

5 not apply with respect to a wholesale dis6 tribution of such drug if the drug is dis7 tributed by the manufacturer of the drug 

8 to a person that distributes the drug to a 

9 retail pharmacy for distribution to the con10 sumer or patient, with no other intervening 

11 transactions. 

12 (iii) LIMITATION.—The Secretary may 

13 make the determination under clause (i) 

14 with respect to not more than 50 drugs be15 fore January 1, 2011. 

16 (D) EFFECT WITH RESPECT TO REG17 ISTERED EXPORTERS.—The amendment made 

18 by paragraph (1)(B) shall take effect on the 

19 date that is 90 days after the date of enactment 

20 of this Act. 

21 (E) ALTERNATIVE REQUIREMENTS.—The 

22 Secretary shall issue regulations to establish the 

23 alternative requirements, referred to in the 

24 amendment made by paragraph (1)(A), that 

25 take effect not later than— 
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1 (i) January 1, 2009, with respect to a 

2 prescription drug determined under sub3 paragraph (C)(i) to be at high risk for 

4 being counterfeited; and 

5 (ii) January 1, 2011, with respect to 

6 all other prescription drugs. 

7 (F) INTERMEDIATE REQUIREMENTS.— 

8 With respect to the prescription drugs described 

9 under subparagraph (E)(ii), the Secretary shall 

10 by regulation require the use of standardized 

11 anti-counterfeiting or track-and-trace tech12 nologies on such prescription drugs at the case 

13 and pallet level effective not later than January 

14 1, 2010. 

15 (f) INTERNET SALES OF PRESCRIPTION DRUGS.— 

16 (1) IN GENERAL.—Chapter V of the Federal 

17 Food, Drug, and Cosmetic Act (21 U.S.C. 351 et 

18 seq.) is amended by inserting after section 503A the 

19 following: 

20 ‘‘SEC. 503B. INTERNET SALES OF PRESCRIPTION DRUGS. 

21 ‘‘(a) REQUIREMENTS REGARDING INFORMATION ON

22 INTERNET SITE.— 

23 ‘‘(1) IN GENERAL.—A person may not dispense 

24 a prescription drug pursuant to a sale of the drug 

25 by such person if— 
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1 ‘‘(A) the purchaser of the drug submitted 

2 the purchase order for the drug, or conducted 

3 any other part of the sales transaction for the 

4 drug, through an Internet site; 

5 ‘‘(B) the person dispenses the drug to the 

6 purchaser by mailing or shipping the drug to 

7 the purchaser; and 

8 ‘‘(C) such site, or any other Internet site 

9 used by such person for purposes of sales of a 

10 prescription drug, fails to meet each of the re11 quirements specified in paragraph (2), other 

12 than a site or pages on a site that— 

13 ‘‘(i) are not intended to be accessed 

14 by purchasers or prospective purchasers; or 

15 ‘‘(ii) provide an Internet information 

16 location tool within the meaning of section 

17 231(e)(5) of the Communications Act of 

18 1934 (47 U.S.C. 231(e)(5)). 

19 ‘‘(2) REQUIREMENTS.—With respect to an 

20 Internet site, the requirements referred to in sub21 paragraph (C) of paragraph (1) for a person to 

22 whom such paragraph applies are as follows: 

23 ‘‘(A) Each page of the site shall include ei24 ther the following information or a link to a 

25 page that provides the following information: 
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1 ‘‘(i) The name of such person. 

2 ‘‘(ii) Each State in which the person 

3 is authorized by law to dispense prescrip4 tion drugs. 

5 ‘‘(iii) The address and telephone num6 ber of each place of business of the person 

7 with respect to sales of prescription drugs 

8 through the Internet, other than a place of 

9 business that does not mail or ship pre10 scription drugs to purchasers. 

11 ‘‘(iv) The name of each individual who 

12 serves as a pharmacist for prescription 

13 drugs that are mailed or shipped pursuant 

14 to the site, and each State in which the in15 dividual is authorized by law to dispense 

16 prescription drugs. 

17 ‘‘(v) If the person provides for medical 

18 consultations through the site for purposes 

19 of providing prescriptions, the name of 

20 each individual who provides such con21 sultations; each State in which the indi22 vidual is licensed or otherwise authorized 

23 by law to provide such consultations or 

24 practice medicine; and the type or types of 
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1 health professions for which the individual 

2 holds such licenses or other authorizations. 

3 ‘‘(B) A link to which paragraph (1) applies 

4 shall be displayed in a clear and prominent 

5 place and manner, and shall include in the cap6 tion for the link the words ‘licensing and con7 tact information’. 

8 ‘‘(b) INTERNET SALES WITHOUT APPROPRIATE

9 MEDICAL RELATIONSHIPS.— 

10 ‘‘(1) IN GENERAL.—Except as provided in para11 graph (2), a person may not dispense a prescription 

12 drug, or sell such a drug, if— 

13 ‘‘(A) for purposes of such dispensing or 

14 sale, the purchaser communicated with the per15 son through the Internet; 

16 ‘‘(B) the patient for whom the drug was 

17 dispensed or purchased did not, when such 

18 communications began, have a prescription for 

19 the drug that is valid in the United States; 

20 ‘‘(C) pursuant to such communications, the 

21 person provided for the involvement of a practi22 tioner, or an individual represented by the per23 son as a practitioner, and the practitioner or 

24 such individual issued a prescription for the 

25 drug that was purchased; 
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1 ‘‘(D) the person knew, or had reason to 

2 know, that the practitioner or the individual re3 ferred to in subparagraph (C) did not, when 

4 issuing the prescription, have a qualifying med5 ical relationship with the patient; and 

6 ‘‘(E) the person received payment for the 

7 dispensing or sale of the drug. 

8 For purposes of subparagraph (E), payment is re9 ceived if money or other other valuable consideration 

10 is received. 

11 ‘‘(2) EXCEPTIONS.—Paragraph (1) does not 

12 apply to— 

13 ‘‘(A) the dispensing or selling of a pre14 scription drug pursuant to telemedicine prac15 tices sponsored by— 

16 ‘‘(i) a hospital that has in effect a 

17 provider agreement under title XVIII of 

18 the Social Security Act (relating to the 

19 Medicare program); or 

20 ‘‘(ii) a group practice that has not 

21 fewer than 100 physicians who have in ef22 fect provider agreements under such title; 

23 or 

24 ‘‘(B) the dispensing or selling of a pre25 scription drug pursuant to practices that pro-
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1 mote the public health, as determined by the 

2 Secretary by regulation. 

3 ‘‘(3) QUALIFYING MEDICAL RELATIONSHIP.— 

4 ‘‘(A) IN GENERAL.—With respect to 

5 issuing a prescription for a drug for a patient, 

6 a practitioner has a qualifying medical relation7 ship with the patient for purposes of this sec8 tion if— 

9 ‘‘(i) at least one in-person medical 

10 evaluation of the patient has been con11 ducted by the practitioner; or 

12 ‘‘(ii) the practitioner conducts a med13 ical evaluation of the patient as a covering 

14 practitioner. 

15 ‘‘(B) IN-PERSON MEDICAL EVALUATION.— 

16 A medical evaluation by a practitioner is an in17 person medical evaluation for purposes of this 

18 section if the practitioner is in the physical 

19 presence of the patient as part of conducting 

20 the evaluation, without regard to whether por21 tions of the evaluation are conducted by other 

22 health professionals. 

23 ‘‘(C) COVERING PRACTITIONER.—With re24 spect to a patient, a practitioner is a covering 

25 practitioner for purposes of this section if the 
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1 practitioner conducts a medical evaluation of 

2 the patient at the request of a practitioner who 

3 has conducted at least one in-person medical 

4 evaluation of the patient and is temporarily un5 available to conduct the evaluation of the pa6 tient. A practitioner is a covering practitioner 

7 without regard to whether the practitioner has 

8 conducted any in-person medical evaluation of 

9 the patient involved. 

10 ‘‘(4) RULES OF CONSTRUCTION.— 

11 ‘‘(A) INDIVIDUALS REPRESENTED AS

12 PRACTITIONERS.—A person who is not a practi13 tioner (as defined in subsection (e)(1)) lacks 

14 legal capacity under this section to have a 

15 qualifying medical relationship with any patient. 

16 ‘‘(B) STANDARD PRACTICE OF PHAR17 MACY.—Paragraph (1) may not be construed as 

18 prohibiting any conduct that is a standard prac19 tice in the practice of pharmacy. 

20 ‘‘(C) APPLICABILITY OF REQUIRE21 MENTS.—Paragraph (3) may not be construed 

22 as having any applicability beyond this section, 

23 and does not affect any State law, or interpre24 tation of State law, concerning the practice of 

25 medicine. 
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1 ‘‘(c) ACTIONS BY STATES.— 

2 ‘‘(1) IN GENERAL.—Whenever an attorney gen3 eral of any State has reason to believe that the in4 terests of the residents of that State have been or 

5 are being threatened or adversely affected because 

6 any person has engaged or is engaging in a pattern 

7 or practice that violates section 301(l), the State 

8 may bring a civil action on behalf of its residents in 

9 an appropriate district court of the United States to 

10 enjoin such practice, to enforce compliance with such 

11 section (including a nationwide injunction), to obtain 

12 damages, restitution, or other compensation on be13 half of residents of such State, to obtain reasonable 

14 attorneys fees and costs if the State prevails in the 

15 civil action, or to obtain such further and other relief 

16 as the court may deem appropriate. 

17 ‘‘(2) NOTICE.—The State shall serve prior writ18 ten notice of any civil action under paragraph (1) or 

19 (5)(B) upon the Secretary and provide the Secretary 

20 with a copy of its complaint, except that if it is not 

21 feasible for the State to provide such prior notice, 

22 the State shall serve such notice immediately upon 

23 instituting such action. Upon receiving a notice re24 specting a civil action, the Secretary shall have the 

25 right— 
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1 ‘‘(A) to intervene in such action; 

2 ‘‘(B) upon so intervening, to be heard on 

3 all matters arising therein; and 

4 ‘‘(C) to file petitions for appeal. 

5 ‘‘(3) CONSTRUCTION.—For purposes of bring6 ing any civil action under paragraph (1), nothing in 

7 this chapter shall prevent an attorney general of a 

8 State from exercising the powers conferred on the 

9 attorney general by the laws of such State to con10 duct investigations or to administer oaths or affir11 mations or to compel the attendance of witnesses or 

12 the production of documentary and other evidence. 

13 ‘‘(4) VENUE; SERVICE OF PROCESS.—Any civil 

14 action brought under paragraph (1) in a district 

15 court of the United States may be brought in the 

16 district in which the defendant is found, is an inhab17 itant, or transacts business or wherever venue is 

18 proper under section 1391 of title 28, United States 

19 Code. Process in such an action may be served in 

20 any district in which the defendant is an inhabitant 

21 or in which the defendant may be found. 

22 ‘‘(5) ACTIONS BY OTHER STATE OFFICIALS.— 

23 ‘‘(A) Nothing contained in this section 

24 shall prohibit an authorized State official from 

25 proceeding in State court on the basis of an al-
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1 leged violation of any civil or criminal statute of 

2 such State. 

3 ‘‘(B) In addition to actions brought by an 

4 attorney general of a State under paragraph 

5 (1), such an action may be brought by officers 

6 of such State who are authorized by the State 

7 to bring actions in such State on behalf of its 

8 residents. 

9 ‘‘(d) EFFECT OF SECTION.—This section shall not 

10 apply to a person that is a registered exporter under sec11 tion 804. 

12 ‘‘(e) GENERAL DEFINITIONS.—For purposes of this 

13 section: 

14 ‘‘(1) The term ‘practitioner’ means a practi15 tioner referred to in section 503(b)(1) with respect 

16 to issuing a written or oral prescription. 

17 ‘‘(2) The term ‘prescription drug’ means a drug 

18 that is described in section 503(b)(1). 

19 ‘‘(3) The term ‘qualifying medical relationship’, 

20 with respect to a practitioner and a patient, has the 

21 meaning indicated for such term in subsection (b). 

22 ‘‘(f) INTERNET-RELATED DEFINITIONS.— 

23 ‘‘(1) IN GENERAL.—For purposes of this sec24 tion: 
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1 ‘‘(A) The term ‘Internet’ means collectively 

2 the myriad of computer and telecommunications 

3 facilities, including equipment and operating 

4 software, which comprise the interconnected 

5 world-wide network of networks that employ the 

6 transmission control protocol/internet protocol, 

7 or any predecessor or successor protocols to 

8 such protocol, to communicate information of 

9 all kinds by wire or radio. 

10 ‘‘(B) The term ‘link’, with respect to the 

11 Internet, means one or more letters, words, 

12 numbers, symbols, or graphic items that appear 

13 on a page of an Internet site for the purpose 

14 of serving, when activated, as a method for exe15 cuting an electronic command— 

16 ‘‘(i) to move from viewing one portion 

17 of a page on such site to another portion 

18 of the page; 

19 ‘‘(ii) to move from viewing one page 

20 on such site to another page on such site; 

21 or 

22 ‘‘(iii) to move from viewing a page on 

23 one Internet site to a page on another 

24 Internet site. 
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1 ‘‘(C) The term ‘page’, with respect to the 

2 Internet, means a document or other file 

3 accessed at an Internet site. 

4 ‘‘(D)(i) The terms ‘site’ and ‘address’, with 

5 respect to the Internet, mean a specific location 

6 on the Internet that is determined by Internet 

7 Protocol numbers. Such term includes the do8 main name, if any. 

9 ‘‘(ii) The term ‘domain name’ means a 

10 method of representing an Internet address 

11 without direct reference to the Internet Protocol 

12 numbers for the address, including methods 

13 that use designations such as ‘.com’, ‘.edu’, 

14 ‘.gov’, ‘.net’, or ‘.org’. 

15 ‘‘(iii) The term ‘Internet Protocol num16 bers’ includes any successor protocol for deter17 mining a specific location on the Internet. 

18 ‘‘(2) AUTHORITY OF SECRETARY.—The Sec19 retary may by regulation modify any definition 

20 under paragraph (1) to take into account changes in 

21 technology. 

22 ‘‘(g) INTERACTIVE COMPUTER SERVICE; ADVER23 TISING.—No provider of an interactive computer service, 

24 as defined in section 230(f)(2) of the Communications Act 

25 of 1934 (47 U.S.C. 230(f)(2)), or of advertising services 
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1 shall be liable under this section for dispensing or selling 

2 prescription drugs in violation of this section on account 

3 of another person’s selling or dispensing such drugs, pro4 vided that the provider of the interactive computer service 

5 or of advertising services does not own or exercise cor6 porate control over such person.’’. 

7 (2) INCLUSION AS PROHIBITED ACT.—Section 

8 301 of the Federal Food, Drug, and Cosmetic Act 

9 (21 U.S.C. 331) is amended by inserting after sub10 section (k) the following: 

11 ‘‘(l) The dispensing or selling of a prescription drug 

12 in violation of section 503B.’’. 

13 (3) INTERNET SALES OF PRESCRIPTION DRUGS; 

14 CONSIDERATION BY SECRETARY OF PRACTICES AND

15 PROCEDURES FOR CERTIFICATION OF LEGITIMATE

16 BUSINESSES.—In carrying out section 503B of the 

17 Federal Food, Drug, and Cosmetic Act (as added by 

18 this section), the Secretary of Health and Human 

19 Services shall take into consideration the practices 

20 and procedures of public or private entities that cer21 tify that businesses selling prescription drugs 

22 through Internet sites are legitimate businesses, in23 cluding practices and procedures regarding disclo24 sure formats and verification programs. 
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1 (4) REPORTS REGARDING INTERNET-RELATED

2 VIOLATIONS OF FEDERAL AND STATE LAWS ON DIS3 PENSING OF DRUGS.— 

4 (A) IN GENERAL.—The Secretary of 

5 Health and Human Services (referred to in this 

6 paragraph as the ‘‘Secretary’’) shall, pursuant 

7 to the submission of an application meeting the 

8 criteria of the Secretary, make an award of a 

9 grant or contract to the National Clearinghouse 

10 on Internet Prescribing (operated by the Fed11 eration of State Medical Boards) for the pur12 pose of— 

13 (i) identifying Internet sites that ap14 pear to be in violation of Federal or State 

15 laws concerning the dispensing of drugs; 

16 (ii) reporting such sites to State med17 ical licensing boards and State pharmacy 

18 licensing boards, and to the Attorney Gen19 eral and the Secretary, for further inves20 tigation; and 

21 (iii) submitting, for each fiscal year 

22 for which the award under this subsection 

23 is made, a report to the Secretary describ24 ing investigations undertaken with respect 

25 to violations described in clause (i). 
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1 (B) AUTHORIZATION OF APPROPRIA2 TIONS.—For the purpose of carrying out sub3 paragraph (A), there is authorized to be appro4 priated $100,000 for each of the fiscal years 

5 2006 through 2008. 

6 (5) EFFECTIVE DATE.—The amendments made 

7 by paragraphs (1) and (2) take effect 90 days after 

8 the date of enactment of this Act, without regard to 

9 whether a final rule to implement such amendments 

10 has been promulgated by the Secretary of Health 

11 and Human Services under section 701(a) of the 

12 Federal Food, Drug, and Cosmetic Act. The pre13 ceding sentence may not be construed as affecting 

14 the authority of such Secretary to promulgate such 

15 a final rule. 

16 (g) IMPORTATION EXEMPTION UNDER CONTROLLED

17 SUBSTANCES IMPORT AND EXPORT ACT.—Section 

18 1006(a)(2) of the Controlled Substances Import and Ex19 port Act (21 U.S.C. 956(a)(2)) is amended by striking 

20 ‘‘not import the controlled substance into the United 

21 States in an amount that exceeds 50 dosage units of the 

22 controlled substance.’’ and inserting ‘‘import into the 

23 United States not more than 10 dosage units combined 

24 of all such controlled substances.’’. 
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1 SEC. 7. REASONABLE PRICE AGREEMENT FOR FEDERALLY 

2 FUNDED RESEARCH. 

3 (a) IN GENERAL.—If any Federal agency or any non4 profit entity undertakes federally funded health care re5 search and development and is to convey or provide a pat6 ent or other exclusive right to use such research and devel7 opment for a drug or other health care technology, such 

8 agency or entity shall not make such conveyance or pro9 vide such patent or other right until the person who will 

10 receive such conveyance or patent or other right first 

11 agrees to a reasonable pricing agreement with the Sec12 retary of Health and Human Services or the Secretary 

13 makes a determination that the public interest is served 

14 by a waiver of the reasonable pricing agreement provided 

15 in accordance with subsection (c). 

16 (b) CONSIDERATION OF COMPETITIVE BIDDING.—In 

17 cases where the Federal Government conveys or licenses 

18 exclusive rights to federally funded research under sub19 section (a), consideration shall be given to mechanisms for 

20 determining reasonable prices which are based upon a 

21 competitive bidding process. When appropriate, the mech22 anisms should be considered where— 

23 (1) qualified bidders compete on the basis of 

24 the lowest prices that will be charged to consumers; 

25 (2) qualified bidders compete on the basis of 

26 the least sales revenues before prices are adjusted in 
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1 accordance with a cost based reasonable pricing for2 mula; 

3 (3) qualified bidders compete on the basis of 

4 the least period of time before prices are adjusted in 

5 accordance with a cost based reasonable pricing for6 mula; 

7 (4) qualified bidders compete on the basis of 

8 the shortest period of exclusivity; or 

9 (5) qualified bidders compete under other com10 petitive bidding systems. 

11 Such competitive bidding process may incorporate require12 ments for minimum levels of expenditures on research, 

13 marketing, maximum price, or other factors. 

14 (c) WAIVER.—No waiver shall take effect under sub15 section (a) before the public is given notice of the proposed 

16 waiver and provided a reasonable opportunity to comment 

17 on the proposed waiver. A decision to grant a waiver shall 

18 set out the Secretary’s finding that such a waiver is in 

19 the public interest. 

20 SEC. 8. GAO ONGOING STUDIES AND REPORTS ON PRO21 GRAM; MISCELLANEOUS REPORTS. 

22 (a) ONGOING STUDY.—The Comptroller General of 

23 the United States shall conduct an ongoing study and 

24 analysis of the prescription medicine benefit program 

25 under part D of the medicare program under title XVIII 
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1 of the Social Security Act (as added by section 4 of this 

2 Act), including an analysis of each of the following: 

3 (1) The extent to which the administering enti4 ties have achieved volume-based discounts similar to 

5 the favored price paid by other large purchasers. 

6 (2) Whether access to the benefits under such 

7 program are in fact available to all beneficiaries, 

8 with special attention given to access for bene9 ficiaries living in rural and hard-to-serve areas. 

10 (3) The success of such program in reducing 

11 medication error and adverse medicine reactions and 

12 improving quality of care, and whether it is probable 

13 that the program has resulted in savings through re14 duced hospitalizations and morbidity due to medica15 tion errors and adverse medicine reactions. 

16 (4) Whether patient medical record confiden17 tiality is being maintained and safe-guarded. 

18 (5) Such other issues as the Comptroller Gen19 eral may consider. 

20 (b) REPORTS.—The Comptroller General shall issue 

21 such reports on the results of the ongoing study described 

22 in (a) as the Comptroller General shall deem appropriate 

23 and shall notify Congress on a timely basis of significant 

24 problems in the operation of the part D prescription medi-
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1 cine program and the need for legislative adjustments and 

2 improvements. 

3 (c) MISCELLANEOUS STUDIES AND REPORTS.— 

4 (1) STUDY ON METHODS TO ENCOURAGE ADDI5 TIONAL RESEARCH ON BREAKTHROUGH PHARMA6 CEUTICALS.— 

7 (A) IN GENERAL.—The Secretary of 

8 Health and Human Services shall seek the ad9 vice of the Secretary of the Treasury on pos10 sible tax and trade law changes to encourage 

11 increased original research on new pharma12 ceutical breakthrough products designed to ad13 dress disease and illness. 

14 (B) REPORT.—Not later than January 1, 

15 2007, the Secretary shall submit to Congress a 

16 report on such study. The report shall include 

17 recommended methods to encourage the phar18 maceutical industry to devote more resources to 

19 research and development of new covered prod20 ucts than it devotes to overhead expenses. 

21 (2) STUDY ON PHARMACEUTICAL SALES PRAC22 TICES AND IMPACT ON COSTS AND QUALITY OF

23 CARE.— 

24 (A) IN GENERAL.—The Secretary of 

25 Health and Human Services shall conduct a 
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1 study on the methods used by the pharma2 ceutical industry to advertise and sell to con3 sumers and educate and sell to providers. 

4 (B) REPORT.—Not later than January 1, 

5 2007, the Secretary shall submit to Congress a 

6 report on such study. The report shall include 

7 the estimated direct and indirect costs of the 

8 sales methods used, the quality of the informa9 tion conveyed, and whether such sales efforts 

10 leads (or could lead) to inappropriate pre11 scribing. Such report may include legislative 

12 and regulatory recommendations to encourage 

13 more appropriate education and prescribing 

14 practices. 

15 (3) STUDY ON COST OF PHARMACEUTICAL RE16 SEARCH.— 

17 (A) IN GENERAL.—The Secretary of 

18 Health and Human Services shall conduct a 

19 study on the costs of, and needs for, the phar20 maceutical research and the role that the tax21 payer provides in encouraging such research. 

22 (B) REPORT.—Not later than January 1, 

23 2007, the Secretary shall submit to Congress a 

24 report on such study. The report shall include 

25 a description of the full-range of taxpayer-as-
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1 sisted programs impacting pharmaceutical re2 search, including tax, trade, government re3 search, and regulatory assistance. The report 

4 may also include legislative and regulatory rec5 ommendations that are designed to ensure that 

6 the taxpayer’s investment in pharmaceutical re7 search results in the availability of pharma8 ceuticals at reasonable prices. 

9 (4) REPORT ON PHARMACEUTICAL PRICES IN

10 MAJOR FOREIGN NATIONS.—Not later than January 

11 1, 2007, the Secretary of Health and Human Serv12 ices shall submit to Congress a report on the retail 

13 price of major pharmaceutical products in various 

14 developed nations, compared to prices for the same 

15 or similar products in the United States. The report 

16 shall include a description of the principal reasons 

17 for any price differences that may exist. 

18 SEC. 9. MEDIGAP TRANSITION PROVISIONS. 

19 (a) IN GENERAL.—Notwithstanding any other provi20 sion of law, no new medicare supplemental policy that pro21 vides coverage of expenses for prescription drugs may be 

22 issued under section 1882 of the Social Security Act on 

23 or after January 1, 2007, to an individual unless it re24 places a medicare supplemental policy that was issued to 
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1 that individual and that provided some coverage of ex2 penses for prescription drugs. 

3 (b) ISSUANCE OF SUBSTITUTE POLICIES IF OBTAIN

4 PRESCRIPTION DRUG COVERAGE THROUGH MEDICARE.— 

5 (1) IN GENERAL.—The issuer of a medicare 

6 supplemental policy— 

7 (A) may not deny or condition the issuance 

8 or effectiveness of a medicare supplemental pol9 icy that has a benefit package classified as ‘‘A’’, 

10 ‘‘B’’, ‘‘C’’, ‘‘D’’, ‘‘E’’, ‘‘F’’, or ‘‘G’’ (under the 

11 standards established under subsection (p)(2) of 

12 section 1882 of the Social Security Act, 42 

13 U.S.C. 1395ss) and that is offered and is avail14 able for issuance to new enrollees by such 

15 issuer; 

16 (B) may not discriminate in the pricing of 

17 such policy, because of health status, claims ex18 perience, receipt of health care, or medical con19 dition; and 

20 (C) may not impose an exclusion of bene21 fits based on a pre-existing condition under 

22 such policy, 

23 in the case of an individual described in paragraph 

24 (2) who seeks to enroll under the policy not later 

25 than 63 days after the date of the termination of en-
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1 rollment described in such paragraph and who sub2 mits evidence of the date of termination or 

3 disenrollment along with the application for such 

4 medicare supplemental policy. 

5 (2) INDIVIDUAL COVERED.—An individual de6 scribed in this paragraph is an individual who— 

7 (A) enrolls in a prescription drug plan 

8 under part D of title XVIII of the Social Secu9 rity Act; and 

10 (B) at the time of such enrollment was en11 rolled and terminates enrollment in a medicare 

12 supplemental policy which has a benefit pack13 age classified as ‘‘H’’, ‘‘I’’, or ‘‘J’’ under the 

14 standards referred to in paragraph (1)(A) or 

15 terminates enrollment in a policy to which such 

16 standards do not apply but which provides ben17 efits for prescription drugs. 

18 (3) ENFORCEMENT.—The provisions of para19 graph (1) shall be enforced as though they were in20 cluded in section 1882(s) of the Social Security Act 

21 (42 U.S.C. 1395ss(s)) on and after January 1, 

22 2007. 

23 (4) DEFINITIONS.—For purposes of this sub24 section, the term ‘‘medicare supplemental policy’’ 
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1 has the meaning given such term in section 1882(g) 

2 of the Social Security Act (42 U.S.C. 1395ss(g)). 

Æ