I 

116TH CONGRESS 

1ST SESSION H. R. 3 

To establish a fair price negotiation program, protect the Medicare program 

from excessive price increases, and establish an out-of-pocket maximum 

for Medicare part D enrollees, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

SEPTEMBER 19, 2019 

Mr. PALLONE (for himself, Mr. NEAL, and Mr. SCOTT of Virginia) introduced 

the following bill; which was referred to the Committee on Energy and 

Commerce, and in addition to the Committees on Ways and Means, and 

Education and Labor, 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 establish a fair price negotiation program, protect the 

Medicare program from excessive price increases, and 

establish an out-of-pocket maximum for Medicare part 

D enrollees, and for other purposes. 

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

4 (a) IN GENERAL.—This Act may be cited as the 

5 ‘‘Lower Drug Costs Now Act of 2019’’. 


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

2 as follows: 

Sec. 1. Short title; table of contents. 

TITLE I—LOWERING PRICES THROUGH FAIR DRUG PRICE 

NEGOTIATION 

Sec. 101. Providing for lower prices for certain high-priced single source drugs. 

Sec. 102. Selected drug manufacturer excise tax imposed during noncompliance 

periods. 

TITLE II—MEDICARE PARTS B AND D PRESCRIPTION DRUG 

INFLATION REBATES 

Sec. 201. Medicare part B rebate by manufacturers. 

Sec. 202. Medicare part D rebate by manufacturers. 

TITLE III—PART D IMPROVEMENTS AND MAXIMUM OUT-OFPOCKET CAP FOR MEDICARE BENEFICIARIES 

Sec. 301. Medicare part D benefit redesign. 

3 TITLE I—LOWERING PRICES 

4 THROUGH FAIR DRUG PRICE 

5 NEGOTIATION 

6 SEC. 101. PROVIDING FOR LOWER PRICES FOR CERTAIN 

7 HIGH-PRICED SINGLE SOURCE DRUGS. 

8 (a) PROGRAM TO LOWER PRICES FOR CERTAIN

9 HIGH-PRICED SINGLE SOURCE DRUGS.—Title XI of the 

10 Social Security Act (42 U.S.C. 1301 et seq.) is amended 

11 by adding at the end the following new part: 

12 ‘‘PART E—FAIR PRICE NEGOTIATION PROGRAM 

13 TO LOWER PRICES FOR CERTAIN HIGH14 PRICED SINGLE SOURCE DRUGS 

15 ‘‘SEC. 1191. ESTABLISHMENT OF PROGRAM. 

16 ‘‘(a) IN GENERAL.—The Secretary shall establish a 

17 Fair Price Negotiation Program (in this part referred to 


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1 as the ‘program’). Under the program, with respect to 

2 each price applicability period, the Secretary shall— 

3 ‘‘(1) publish a list of selected drugs in accord4 ance with section 1192; 

5 ‘‘(2) enter into agreements with manufacturers 

6 of selected drugs with respect to such period, in ac7 cordance with section 1193; 

8 ‘‘(3) negotiate and, if applicable, renegotiate 

9 maximum fair prices for such selected drugs, in ac10 cordance with section 1194; and 

11 ‘‘(4) carry out the administrative duties de12 scribed in section 1196. 

13 ‘‘(b) DEFINITIONS RELATING TO TIMING.—For pur14 poses of this part: 

15 ‘‘(1) INITIAL PRICE APPLICABILITY YEAR.—The 

16 term ‘initial price applicability year’ means a plan 

17 year (beginning with plan year 2023) or, if agreed 

18 to in an agreement under section 1193 by the Sec19 retary and manufacturer involved, a period of more 

20 than one plan year (beginning on or after January 

21 1, 2023). 

22 ‘‘(2) PRICE APPLICABILITY PERIOD.—The term 

23 ‘price applicability period’ means, with respect to a 

24 drug, the period beginning with the initial price ap25 plicability year with respect to which such drug is a 


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1 selected drug and ending with the last plan year 

2 during which the drug is a selected drug. 

3 ‘‘(3) SELECTED DRUG PUBLICATION DATE.— 

4 The term ‘selected drug publication date’ means, 

5 with respect to each initial price applicability year, 

6 April 15 of the plan year that begins 2 years prior 

7 to such year. 

8 ‘‘(4) VOLUNTARY NEGOTIATION PERIOD.—The 

9 term ‘voluntary negotiation period’ means, with re10 spect to an initial price applicability year with re11 spect to a selected drug, the period— 

12 ‘‘(A) beginning on the sooner of— 

13 ‘‘(i) the date on which the manufac14 turer of the drug and the Secretary enter 

15 into an agreement under section 1193 with 

16 respect to such drug; or 

17 ‘‘(ii) June 15 following the selected 

18 drug publication date with respect to such 

19 selected drug; and 

20 ‘‘(B) ending on March 31 of the year that 

21 begins one year prior to the initial price appli22 cability year. 

23 ‘‘(c) OTHER DEFINITIONS.—For purposes of this 

24 part: 


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1 ‘‘(1) FAIR PRICE ELIGIBLE INDIVIDUAL.—The 

2 term ‘fair price eligible individual’ means, with re3 spect to a selected drug, an individual who is— 

4 ‘‘(A) enrolled under a prescription drug 

5 plan under part D of title XVIII or an MA–PD 

6 plan under part C of such title under which 

7 coverage is provided for such drug; 

8 ‘‘(B) enrolled under a group health plan or 

9 health insurance coverage offered in the group 

10 or individual market (as such terms are defined 

11 in section 2791 of the Public Health Service 

12 Act) with respect to which there is in effect an 

13 agreement with the Secretary under section 

14 1197 with respect to such selected drug; or 

15 ‘‘(C) entitled to benefits under part A of 

16 title XVIII or enrolled under part B of such 

17 title. 

18 ‘‘(2) MAXIMUM FAIR PRICE.—The term ‘max19 imum fair price’ means, with respect to a plan year 

20 during a price applicability period and with respect 

21 to a selected drug (as defined in section 1192(c)) 

22 with respect to such period, the price published pur23 suant to section 1195 in the Federal Register for 

24 such drug and year. 


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1 ‘‘(3) AVERAGE INTERNATIONAL MARKET PRICE

2 DEFINED.— 

3 ‘‘(A) IN GENERAL.—The terms ‘average 

4 international market price’ and ‘AIM price’ 

5 mean, with respect to a drug, the average price 

6 (which shall be the net average price, if prac7 ticable, and volume-weighted, if practicable) for 

8 any dosage form and strength of a unit (as de9 fined in subparagraph (C)) for the drug for 

10 sales of such drug, as computed (as of the date 

11 of publication of such drug as a selected drug 

12 under section 1192(a)) in all countries de13 scribed in clause (ii) of subparagraph (B) that 

14 are applicable countries (as described in clause 

15 (i) of such subparagraph) with respect to such 

16 drug. 

17 ‘‘(B) APPLICABLE COUNTRIES.— 

18 ‘‘(i) IN GENERAL.—For purposes of 

19 subparagraph (A), a country described in 

20 clause (ii) is an applicable country de21 scribed in this clause with respect to a 

22 drug if there is available an average price 

23 for any unit for the drug for sales of such 

24 drug in such country. 


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1 ‘‘(ii) COUNTRIES DESCRIBED.—For 

2 purposes of this paragraph, the following 

3 are countries described in this clause: 

4 ‘‘(I) Australia. 

5 ‘‘(II) Canada. 

6 ‘‘(III) France. 

7 ‘‘(IV) Germany. 

8 ‘‘(V) Japan. 

9 ‘‘(VI) The United Kingdom. 

10 ‘‘(C) UNIT.—The term ‘unit’ means, with 

11 respect to a drug, the lowest identifiable quan12 tity (such as a capsule or tablet, milligram of 

13 molecules, or grams) of the drug that is dis14 pensed. 

15 ‘‘SEC. 1192. SELECTION OF NEGOTIATION-ELIGIBLE DRUGS 

16 AS SELECTED DRUGS. 

17 ‘‘(a) IN GENERAL.—Not later than the selected drug 

18 publication date with respect to an initial price applica19 bility year, the Secretary shall select and publish in the 

20 Federal Register a list of— 

21 ‘‘(1) at least 25 negotiation-eligible drugs de22 scribed in subparagraphs (A) and (B), but not sub23 paragraph (C), of subsection (d)(1) (or, with respect 

24 to an initial price applicability year beginning after 

25 2023, the maximum number (if such number is less 


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1 than 25) of such negotiation-eligible drugs for the 

2 year) with respect to such year; and 

3 ‘‘(2) all negotiation-eligible drugs described in 

4 subparagraph (C) of such subsection with respect to 

5 such year. 

6 Each drug published on the list pursuant to the previous 

7 sentence shall be subject to the negotiation process under 

8 section 1194 for the voluntary negotiation period with re9 spect to such initial price applicability year (and the re10 negotiation process under such section as applicable for 

11 any subsequent year during the applicable price applica12 bility period). In applying this subsection, any negotiation13 eligible drug that is selected under this subsection for an 

14 initial price applicability year shall not count toward the 

15 required minimum amount of drugs to be selected under 

16 paragraph (1) for any subsequent year, including such a 

17 drug so selected that is subject to renegotiation under sec18 tion 1194. 

19 ‘‘(b) SELECTION OF DRUGS.—In carrying out sub20 section (a)(1) the Secretary shall select for inclusion on 

21 the published list described in subsection (a) with respect 

22 to a price applicability period, the negotiation-eligible 

23 drugs that the Secretary projects will result in the greatest 

24 savings to the Federal Government or fair price eligible 

25 individuals during the price applicability period. In making 


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1 this projection of savings for drugs for which there is an 

2 AIM price for a price applicability period, the savings shall 

3 be projected taking into consideration both the volume of 

4 drugs for which payment is made, to the extent such data 

5 is available, and the amount by which the net price for 

6 the drugs exceeds the AIM price for the drugs. 

7 ‘‘(c) SELECTED DRUG.—For purposes of this part, 

8 each drug included on the list published under subsection 

9 (a) with respect to an initial price applicability year shall 

10 be referred to as a ‘selected drug’ with respect to such 

11 year and each subsequent plan year beginning before the 

12 first plan year beginning after the date on which the Sec13 retary determines the drug is no longer a qualifying single 

14 source drug. 

15 ‘‘(d) NEGOTIATION-ELIGIBLE DRUG.— 

16 ‘‘(1) IN GENERAL.—For purposes of this part, 

17 the term ‘negotiation-eligible drug’ means, with re18 spect to the selected drug publication date with re19 spect to an initial price applicability year, a quali20 fying single source drug, as defined in subsection 

21 (e), that meets any of the following criteria: 

22 ‘‘(A) COVERED PART D DRUGS.—The drug 

23 is among the 125 covered part D drugs (as de24 fined in section 1860D–2(e)) for which there 

25 was an estimated greatest net spending under 


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1 parts C and D of title XVIII, as determined by 

2 the Secretary, during the most recent plan year 

3 prior to such drug publication date for which 

4 data are available. 

5 ‘‘(B) OTHER DRUGS.—The drug is among 

6 the 125 drugs for which there was an estimated 

7 greatest net spending in the United States, as 

8 determined by the Secretary, during the most 

9 recent plan year prior to such drug publication 

10 date for which data are available. 

11 ‘‘(C) INSULIN.—The drug is a qualifying 

12 single source drug described in subsection 

13 (e)(3). 

14 ‘‘(2) CLARIFICATION.—In determining whether 

15 a qualifying single source drug satisfies any of the 

16 criteria described in paragraph (1), the Secretary 

17 shall, to the extent practicable, use data that is ag18 gregated across strengths and dosage forms and 

19 routes of administration of the drug. 

20 ‘‘(3) PUBLICATION.—Not later than the se21 lected drug publication date with respect to an ini22 tial price applicability year, the Secretary shall pub23 lish in the Federal Register a list of negotiation-eli24 gible drugs with respect to such selected drug publi25 cation date. 


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1 ‘‘(e) QUALIFYING SINGLE SOURCE DRUG.—For pur2 poses of this part, the term ‘qualifying single source drug’ 

3 means any of the following: 

4 ‘‘(1) DRUG PRODUCTS.—A drug that— 

5 ‘‘(A) is approved under section 505(c) of 

6 the Federal Food, Drug, and Cosmetic Act and 

7 continues to be marketed pursuant to such ap8 proval; and 

9 ‘‘(B) is not the listed drug for any drug 

10 that is approved and continues to be marketed 

11 under section 505(j) of such Act. 

12 ‘‘(2) BIOLOGICAL PRODUCTS.—A biological 

13 product that— 

14 ‘‘(A) is licensed under section 351(a) of 

15 the Public Health Service Act, including any 

16 product that has been deemed to be licensed 

17 under section 351 of such Act pursuant to sec18 tion 7002(e)(4) of the Biologics Price Competi19 tion and Innovation Act of 2009, and continues 

20 to be marketed under section 351 of such Act; 

21 and 

22 ‘‘(B) is not the reference product for any 

23 biological product that is licensed and continues 

24 to be marketed under section 351(k) of such 

25 Act. 


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1 ‘‘(3) INSULIN PRODUCT.—Notwithstanding 

2 paragraphs (1) and (2), any insulin product that is 

3 approved under subsection (c) or (j) of section 505 

4 of the Federal Food, Drug, and Cosmetic Act or li5 censed under subsection (a) or (k) of section 351 of 

6 the Public Health Service Act and continues to be 

7 marketed under such section 505 or 351. 

8 For purposes of applying paragraphs (1)(B) and (2)(B), 

9 a drug or biological product that is marketed by the same 

10 sponsor or manufacturer (or an affiliate thereof or a cross11 licensed producer or distributor) as the listed drug or ref12 erence product described in such respective paragraph 

13 shall not be taken into consideration. 

14 ‘‘(f) INFORMATION ON INTERNATIONAL DRUG

15 PRICES.—For purposes of determining which negotiation16 eligible drugs to select under subsection (a) and, in the 

17 case of such drugs that are selected drugs, to determine 

18 the maximum fair price of such drug and whether such 

19 maximum fair price should be renegotiated under section 

20 1194, the Secretary shall use data relating to the AIM 

21 price with respect to such drugs as available or provided 

22 to the Secretary and shall on an ongoing basis request 

23 from manufacturers of selected drugs information on the 

24 AIM price of such drugs. 


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1 ‘‘SEC. 1193. MANUFACTURER AGREEMENTS. 

2 ‘‘(a) IN GENERAL.—For purposes of section 

3 1191(a)(2), the Secretary shall enter into agreements with 

4 manufacturers of selected drugs with respect to a price 

5 applicability period, by not later than June 15 following 

6 the selected drug publication date with respect to such se7 lected drug, under which— 

8 ‘‘(1) during the voluntary negotiation period for 

9 the initial price applicability year for the selected 

10 drug, the Secretary and manufacturer, in accordance 

11 with section 1194, negotiate to determine (and, by 

12 not later than the last date of such period and in ac13 cordance with subsection (c), agree to) a maximum 

14 fair price for the selected drug of the manufacturer 

15 in order to provide access to such price— 

16 ‘‘(A) to fair price eligible individuals de17 scribed in subparagraph (A) or (B) of section 

18 1191(c)(1) furnished such drug during, subject 

19 to subparagraph (2), the price applicability pe20 riod; and 

21 ‘‘(B) to hospitals, physicians, and other 

22 providers of services and suppliers with respect 

23 to fair price eligible individuals described in 

24 subparagraph (C) of such section administered 

25 such drug during, subject to subparagraph (2), 

26 the price applicability period; 


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1 ‘‘(2) the Secretary and the manufacturer shall, 

2 in accordance with a process and during a period 

3 specified by the Secretary pursuant to rulemaking, 

4 renegotiate (and, by not later than the last date of 

5 such period and in accordance with subsection (c), 

6 agree to) the maximum fair price for the drug if the 

7 Secretary determines that there is a material change 

8 in any of the factors described in section 1194(d) re9 lating to the drug, including changes in the AIM 

10 price for the drug, in order to provide access to such 

11 maximum fair price (as so renegotiated)— 

12 ‘‘(A) to fair price eligible individuals de13 scribed in subparagraph (A) or (B) of section 

14 1191(c)(1) furnished such drug during any year 

15 during the price applicability period (beginning 

16 after such renegotiation) with respect to such 

17 selected drug; and 

18 ‘‘(B) to hospitals, physicians, and other 

19 providers of services and suppliers with respect 

20 to fair price eligible individuals described in 

21 subparagraph (C) of such section administered 

22 such drug during any year described in sub23 paragraph (A); 

24 ‘‘(3) the maximum fair price (including as re25 negotiated pursuant to paragraph (2)), with respect 


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1 to such a selected drug, shall be provided to fair 

2 price eligible individuals described in subparagraph 

3 (A) or (B) of section 1191(c)(1) at the pharmacy or 

4 by the mail order service at the point-of-sale of such 

5 drug; 

6 ‘‘(4) the manufacturer, subject to subsection 

7 (c), submits to the Secretary, in a form and manner 

8 specified by the Secretary— 

9 ‘‘(A) for the voluntary negotiation period 

10 for the price applicability period (and, if appli11 cable, before any period of renegotiation speci12 fied pursuant to paragraph (2)) with respect to 

13 such drug all information that the Secretary re14 quires to carry out the negotiation (or renegoti15 ation process) under this part, including infor16 mation described in section 1192(f) and section 

17 1194(d)(1); and 

18 ‘‘(B) on an ongoing basis, information on 

19 changes in prices for the drug that would affect 

20 the AIM price for the drug or otherwise provide 

21 a basis for renegotiation of the maximum fair 

22 price of such drug pursuant to paragraph (2); 

23 ‘‘(5) the manufacturer agrees that in the case 

24 the selected drug of a manufacturer is a drug de25 scribed in subsection (c), the manufacturer will, in 


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1 accordance with such subsection, make any payment 

2 required under such subsection with respect to such 

3 drug; and 

4 ‘‘(6) the manufacturer complies with require5 ments imposed by the Secretary for purposes of ad6 ministering the program, including with respect to 

7 the duties described in section 1196. 

8 ‘‘(b) AGREEMENT IN EFFECT UNTIL DRUG IS NO

9 LONGER A SELECTED DRUG.—An agreement entered into 

10 under this section shall be effective, with respect to a drug, 

11 until such drug is no longer considered a selected drug 

12 under section 1192(c). 

13 ‘‘(c) SPECIAL RULE FOR CERTAIN SELECTED DRUGS

14 WITHOUT AIM PRICE.— 

15 ‘‘(1) IN GENERAL.—In the case of a selected 

16 drug for which there is no AIM price available with 

17 respect to the initial price applicability year for such 

18 drug and for which an AIM price becomes available 

19 beginning with respect to a subsequent plan year 

20 during the price applicability period for such drug, 

21 if the Secretary determines that the amount de22 scribed in paragraph (2)(A) for such drug is greater 

23 than the amount described in paragraph (2)(B) for 

24 such drug, then by not later than one year after the 

25 date of such determination, the manufacturer of 


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1 such selected drug shall pay to the Treasury an 

2 amount equal to the difference between such amount 

3 described in paragraph (2)(A) for such drug and 

4 such amount described in paragraph (2)(B) for such 

5 drug. 

6 ‘‘(2) AMOUNTS DESCRIBED.— 

7 ‘‘(A) WEIGHTED AVERAGE PRICE BEFORE

8 AIM PRICE AVAILABLE.—For purposes of para9 graph (1), the amount described in this sub10 paragraph for a selected drug described in such 

11 paragraph, is the amount equal to the weighted 

12 average manufacturer price for such dosage 

13 strength and form for the drug during the pe14 riod beginning with the first plan year for 

15 which the drug is included on the list of nego16 tiation-eligible drugs published under section 

17 1192(d) and ending with the last plan year dur18 ing the price applicability period for such drug 

19 with respect to which there is no AIM price 

20 available for such drug. 

21 ‘‘(B) AMOUNT MULTIPLIER AFTER AIM

22 PRICE AVAILABLE.—For purposes of paragraph 

23 (1), the amount described in this subparagraph 

24 for a selected drug described in such paragraph, 

25 is the amount equal to 200 percent of the AIM 


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1 price for such drug with respect to the first 

2 plan year during the price applicability period 

3 for such drug with respect to which there is an 

4 AIM price available for such drug. 

5 ‘‘(d) CONFIDENTIALITY OF INFORMATION.—Infor6 mation submitted to the Secretary under this part by a 

7 manufacturer of a selected drug that is proprietary infor8 mation of such manufacturer (as determined by the Sec9 retary) may be used only by the Secretary or disclosed 

10 to and used by the Comptroller General of the United 

11 States or the Medicare Payment Advisory Commission for 

12 purposes of carrying out this part. 

13 ‘‘(e) REGULATIONS.— 

14 ‘‘(1) IN GENERAL.—The Secretary shall, pursu15 ant to rulemaking, specify, in accordance with para16 graph (2), the information that must be submitted 

17 under subsection (a)(4). 

18 ‘‘(2) INFORMATION SPECIFIED.—Information 

19 described in paragraph (1), with respect to a se20 lected drug, shall include information on sales of the 

21 drug (by the manufacturer of the drug or by another 

22 entity under license or other agreement with the 

23 manufacturer, with respect to the sales of such drug, 

24 regardless of the name under which the drug is sold) 

25 in any foreign country that is part of the AIM price. 


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1 The Secretary shall verify, to the extent practicable, 

2 such sales from appropriate officials of the govern3 ment of the foreign country involved. 

4 ‘‘(f) COMPLIANCE WITH REQUIREMENTS FOR AD5 MINISTRATION OF PROGRAM.—Each manufacturer with 

6 an agreement in effect under this section shall comply with 

7 requirements imposed by the Secretary or a third party 

8 with a contract under section 1196(c)(1), as applicable, 

9 for purposes of administering the program. 

10 ‘‘SEC. 1194. NEGOTIATION AND RENEGOTIATION PROCESS. 

11 ‘‘(a) IN GENERAL.—For purposes of this part, under 

12 an agreement under section 1193 between the Secretary 

13 and a manufacturer of a selected drug, with respect to 

14 the period for which such agreement is in effect and in 

15 accordance with subsections (b) and (c), the Secretary and 

16 the manufacturer— 

17 ‘‘(1) shall during the voluntary negotiation pe18 riod with respect to the initial price applicability 

19 year for such drug, in accordance with this section, 

20 negotiate a maximum fair price for such drug for 

21 the purpose described in section 1193(a)(1); and 

22 ‘‘(2) as applicable pursuant to section 

23 1193(a)(2) and in accordance with the process speci24 fied pursuant to such section, renegotiate such maxVerDate Sep 11 2014 01:18 Sep 20, 2019 Jkt 089200 PO 00000 Frm 00019 Fmt 6652 Sfmt 6201 E:\BILLS\H3.IH H3

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1 imum fair price for such drug for the purpose de2 scribed in such section. 

3 ‘‘(b) NEGOTIATING METHODOLOGY AND OBJEC4 TIVE.— 

5 ‘‘(1) IN GENERAL.—The Secretary shall develop 

6 and use a consistent methodology for negotiations 

7 under subsection (a) that, in accordance with para8 graph (2) and subject to paragraph (3), achieves the 

9 lowest maximum fair price for each selected drug 

10 while appropriately rewarding innovation. 

11 ‘‘(2) PRIORITIZING FACTORS.—In considering 

12 the factors described in subsection (d) in negotiating 

13 (and, as applicable, renegotiating) the maximum fair 

14 price for a selected drug, the Secretary shall, to the 

15 extent practicable, consider all of the available fac16 tors listed but shall prioritize the following factors: 

17 ‘‘(A) RESEARCH AND DEVELOPMENT

18 COSTS.—The factor described in paragraph 

19 (1)(A) of subsection (d). 

20 ‘‘(B) MARKET DATA.—The factor de21 scribed in paragraph (1)(B) of such subsection. 

22 ‘‘(C) UNIT COSTS OF PRODUCTION AND

23 DISTRIBUTION.—The factor described in para24 graph (1)(C) of such subsection. 


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1 ‘‘(D) COMPARISON TO EXISTING THERA2 PEUTIC ALTERNATIVES.—The factor described 

3 in paragraph (2)(A) of such subsection. 

4 ‘‘(3) REQUIREMENT.— 

5 ‘‘(A) IN GENERAL.—In negotiating the 

6 maximum fair price of a selected drug, with re7 spect to an initial price applicability year for 

8 the selected drug, and, as applicable, in renego9 tiating the maximum fair price for such drug, 

10 with respect to a subsequent year during the 

11 price applicability period for such drug, in the 

12 case that the manufacturer of the selected drug 

13 offers under the negotiation or renegotiation, as 

14 applicable, a price for such drug that is not 

15 more than the target price described in sub16 paragraph (B) for such drug for the respective 

17 year, the Secretary shall agree under such ne18 gotiation or renegotiation, respectively, to such 

19 offered price as the maximum fair price. 

20 ‘‘(B) TARGET PRICE.— 

21 ‘‘(i) IN GENERAL.—Subject to clause 

22 (ii), the target price described in this sub23 paragraph for a selected drug with respect 

24 to a year, is the average price (which shall 

25 be the net average price, if practicable, and 


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1 volume-weighted, if practicable) for any 

2 dosage form and strength of a unit for the 

3 drug for sales of such drug, as computed 

4 in the applicable country described in sec5 tion 1191(c)(3)(B) with respect to such 

6 drug that, with respect to such year, has 

7 the lowest average price for such drug as 

8 compared to the average prices (as so com9 puted) for such drug with respect to such 

10 year in the other applicable countries de11 scribed in such section with respect to such 

12 drug. 

13 ‘‘(ii) SELECTED DRUGS WITHOUT AIM

14 PRICE.—In applying this paragraph in the 

15 case of negotiating the maximum fair price 

16 of a selected drug for which there is no 

17 AIM price available with respect to the ini18 tial price applicability year for such drug, 

19 or, as applicable, renegotiating the max20 imum fair price for such drug with respect 

21 to a subsequent year during the price ap22 plicability period for such drug before the 

23 first plan year for which there is an AIM 

24 price available for such drug, the target 

25 price described in this subparagraph for 


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1 such drug and respective year is the 

2 amount that is 80 percent of the average 

3 manufacturer price for such drug and 

4 year. 

5 ‘‘(4) ANNUAL REPORT.—After the completion 

6 of each voluntary negotiation period, the Secretary 

7 shall submit to Congress a report on the maximum 

8 fair prices negotiated (or, as applicable, renegoti9 ated) for such period. Such report shall include in10 formation on how such prices so negotiated (or re11 negotiated) meet the requirements of this part, in12 cluding the requirements of this subsection. 

13 ‘‘(c) LIMITATION.— 

14 ‘‘(1) IN GENERAL.—Subject to paragraph (2), 

15 the maximum fair price negotiated (including as re16 negotiated) under this section for a selected drug, 

17 with respect to each plan year during a price appli18 cability period for such drug, shall not exceed 120 

19 percent of the AIM price applicable to such drug 

20 with respect to such year. 

21 ‘‘(2) SELECTED DRUGS WITHOUT AIM PRICE.— 

22 In the case of a selected drug for which there is no 

23 AIM price available with respect to the initial price 

24 applicability year for such drug, for each plan year 

25 during the price applicability period before the first 


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1 plan year for which there is an AIM price available 

2 for such drug, the maximum fair price negotiated 

3 (including as renegotiated) under this section for the 

4 selected drug shall not exceed the amount equal to 

5 85 percent of the average manufacturer price for the 

6 drug with respect to such year. 

7 ‘‘(d) CONSIDERATIONS.—For purposes of negotiating 

8 and, as applicable, renegotiating (including for purposes 

9 of determining whether to renegotiate) the maximum fair 

10 price of a selected drug under this part with the manufac11 turer of the drug, the Secretary shall, consistent with sub12 section (b)(2), take into consideration the following fac13 tors: 

14 ‘‘(1) MANUFACTURER-SPECIFIC INFORMA15 TION.—The following information, including as sub16 mitted by the manufacturer: 

17 ‘‘(A) Research and development costs of 

18 the manufacturer for the drug and the extent to 

19 which the manufacturer has recouped research 

20 and development costs. 

21 ‘‘(B) Market data for the drug, including 

22 the distribution of sales across different pro23 grams and purchasers and projected future rev24 enues for the drug. 


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1 ‘‘(C) Unit costs of production and distribu2 tion of the drug. 

3 ‘‘(D) Prior Federal financial support for 

4 novel therapeutic discovery and development 

5 with respect to the drug. 

6 ‘‘(E) Data on patent and on existing and 

7 pending exclusivity for the drug. 

8 ‘‘(F) National sales data for the drug. 

9 ‘‘(G) Information on clinical trials for the 

10 drug in the United States or in applicable coun11 tries described in section 1191(c)(3)(B). 

12 ‘‘(2) INFORMATION ON ALTERNATIVE PROD13 UCTS.—The following information: 

14 ‘‘(A) The extent to which the drug rep15 resents a therapeutic advance as compared to 

16 existing therapeutic alternatives and, to the ex17 tent such information is available, the costs of 

18 such existing therapeutic alternatives. 

19 ‘‘(B) Information on approval by the Food 

20 and Drug Administration of alternative drug 

21 products. 

22 ‘‘(C) Information on comparative effective23 ness analysis for such products. 

24 ‘‘(3) FOREIGN SALES INFORMATION.—To the 

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1 vided by a manufacturer of the selected drug or oth2 erwise, information on sales of the selected drug in 

3 each of the countries described in section 

4 1191(c)(3)(B). 

5 ‘‘(4) ADDITIONAL INFORMATION.—Information 

6 submitted to the Secretary, in accordance with a 

7 process specified by the Secretary, by other parties 

8 that are affected by the establishment of a maximum 

9 fair price for the selected drug. 

10 ‘‘(e) REQUEST FOR INFORMATION.—For purposes of 

11 negotiating and, as applicable, renegotiating (including for 

12 purposes of determining whether to renegotiate) the max13 imum fair price of a selected drug under this part with 

14 the manufacturer of the drug, with respect to a price ap15 plicability period, and other relevant data for purposes of 

16 this section— 

17 ‘‘(1) the Secretary shall, not later than the se18 lected drug publication date with respect to the ini19 tial price applicability year of such period, request 

20 drug pricing information from the manufacturer of 

21 such selected drug, including information described 

22 in subsection (d)(1); and 

23 ‘‘(2) by not later than October 1 following the 

24 selected drug publication date, the manufacturer of 

25 such selected drug shall submit to the Secretary 


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1 such requested information in such form and man2 ner as the Secretary may require. 

3 The Secretary shall request, from the manufacturer or 

4 others, such additional information as may be needed to 

5 carry out the negotiation and renegotiation process under 

6 this section. 

7 ‘‘SEC. 1195. PUBLICATION OF MAXIMUM FAIR PRICES. 

8 ‘‘(a) IN GENERAL.—With respect to an initial price 

9 applicability year and selected drug with respect to such 

10 year, not later than May 1 of the plan year prior to such 

11 initial price applicability year, the Secretary shall publish 

12 in the Federal Register the maximum fair price negotiated 

13 under this part with the manufacturer of such drug. 

14 ‘‘(b) UPDATES.— 

15 ‘‘(1) SUBSEQUENT YEAR MAXIMUM FAIR

16 PRICES.—For a selected drug, for each plan year 

17 subsequent to the initial price applicability year for 

18 such drug with respect to which an agreement for 

19 such drug is in effect under section 1193, the Sec20 retary shall publish in the Federal Register— 

21 ‘‘(A) subject to subparagraph (B), the 

22 amount equal to the maximum fair price pub23 lished for such drug for the previous year, in24 creased by the annual percentage increase in 

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1 sumers (all items; U.S. city average) as of Sep2 tember of such previous year; or 

3 ‘‘(B) in the case the maximum fair price 

4 for such drug was renegotiated, for the first 

5 year for which such price as so renegotiated ap6 plies, such renegotiated maximum fair price. 

7 ‘‘(2) PRICES NEGOTIATED AFTER DEADLINE.— 

8 In the case of a selected drug with respect to an ini9 tial price applicability year for which the maximum 

10 fair price is determined under this part after the 

11 date of publication under this section, the Secretary 

12 shall publish such maximum fair price in the Fed13 eral Register by not later than 30 days after the 

14 date such maximum price is so determined. 

15 ‘‘SEC. 1196. ADMINISTRATIVE DUTIES; COORDINATION PRO16 VISIONS. 

17 ‘‘(a) ADMINISTRATIVE DUTIES.— 

18 ‘‘(1) IN GENERAL.—For purposes of section 

19 1191, the administrative duties described in this sec20 tion are the following: 

21 ‘‘(A) The establishment of procedures (in22 cluding through agreements with manufacturers 

23 under this part, contracts with prescription 

24 drug plans under part D of title XVIII and 

25 MA–PD plans under part C of such title, and 


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1 agreements under section 1197 with group 

2 health plans and health insurance issuers of 

3 health insurance coverage offered in the indi4 vidual or group market) under which the max5 imum fair price for a selected drug is provided 

6 to fair price eligible individuals described in 

7 subparagraph (A) or (B) of section 1191(c)(1) 

8 at pharmacies or by mail order service at the 

9 point-of-sale of the drug for the applicable price 

10 period for such drug and providing that such 

11 maximum fair price is used for determining 

12 cost-sharing under such plans or coverage for 

13 the selected drug. 

14 ‘‘(B) The establishment of procedures (in15 cluding through agreements with manufacturers 

16 under this part and contracts with hospitals, 

17 physicians, and other providers of services and 

18 suppliers) under which, in the case of a selected 

19 drug administered by such a hospital, physician, 

20 or other provider of services or supplier to fair 

21 price eligible individuals described in subpara22 graph (C) of section 1191(c)(1) and if payment 

23 for such drug may be made under part A of 

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1 vided to such hospitals, physicians, and other 

2 providers of services and suppliers (as applica3 ble) and providing that such maximum fair 

4 price is used for determining cost-sharing under 

5 the respective part, for the selected drug. 

6 ‘‘(C) The establishment of procedures (in7 cluding through agreements and contracts de8 scribed in subparagraphs (A) and (B)) to en9 sure that, not later than 90 days after the dis10 pensing of a selected drug to a fair price eligi11 ble individual by a pharmacy or mail order serv12 ice, the pharmacy or mail order service is reim13 bursed for an amount equal to the difference 

14 between— 

15 ‘‘(i) the lesser of— 

16 ‘‘(I) the wholesale acquisition 

17 cost of the drug; 

18 ‘‘(II) the national average drug 

19 acquisition cost of the drug; and 

20 ‘‘(III) any other similar deter21 mination of pharmacy acquisition 

22 costs of the drug, as determined by 

23 the Secretary; and 

24 ‘‘(ii) the maximum fair price for the 

25 drug. 


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1 ‘‘(D) The establishment of procedures to 

2 ensure that the maximum fair price for a se3 lected drug is applied before— 

4 ‘‘(i) any coverage or financial assist5 ance under other health benefit plans or 

6 programs that provide coverage or finan7 cial assistance for the purchase or provi8 sion of prescription drug coverage on be9 half of fair price eligible individuals as the 

10 Secretary may specify; and 

11 ‘‘(ii) any other discounts. 

12 ‘‘(E) The establishment of procedures to 

13 enter into appropriate agreements and protocols 

14 for the ongoing computation of AIM prices for 

15 selected drugs, including, to the extent possible, 

16 to compute the AIM price for selected drugs 

17 and including by providing that the manufac18 turer of such a selected drug should provide in19 formation for such computation not later than 

20 3 months after the first date of the voluntary 

21 negotiation period for such selected drug. 

22 ‘‘(F) The establishment of procedures to 

23 compute and apply the maximum fair price 

24 across different strengths and dosage forms of 

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1 cific formulation, dosage or strength, pack2 aging, or form of administration. 

3 ‘‘(G) The establishment of procedures to 

4 negotiate and apply the maximum fair price in 

5 a manner that does not include any dispensing 

6 or similar fee. 

7 ‘‘(H) The establishment of procedures to 

8 carry out the provisions of this part with re9 spect to— 

10 ‘‘(i) fair price eligible individuals who 

11 are enrolled under a prescription drug plan 

12 under part D of title XVIII or an MA–PD 

13 plan under part C of such title; and 

14 ‘‘(ii) fair price eligible individuals who 

15 are enrolled under a group health plan or 

16 health insurance coverage offered by a 

17 health insurance issuer in the individual or 

18 group market with respect to which there 

19 is an agreement in effect under section 

20 1197. 

21 ‘‘(I) The establishment of a negotiation 

22 process and renegotiation process in accordance 

23 with section 1194, including a process for ac24 quiring information described in subsection (d) 


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1 of such section and determining amounts de2 scribed in subsection (b) of such section. 

3 ‘‘(J) The provision of a reasonable dispute 

4 resolution mechanism to resolve disagreements 

5 between manufacturers, fair price eligible indi6 viduals, and the third party with a contract 

7 under subsection (c)(1). 

8 ‘‘(2) MONITORING COMPLIANCE.— 

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

10 monitor compliance by a manufacturer with the 

11 terms of an agreement under section 1193, in12 cluding by establishing a mechanism through 

13 which violations of such terms may be reported. 

14 ‘‘(B) NOTIFICATION.—If a third party 

15 with a contract under subsection (c)(1) deter16 mines that the manufacturer is not in compli17 ance with such agreement, the third party shall 

18 notify the Secretary of such noncompliance for 

19 appropriate enforcement under section 4192 of 

20 the Internal Revenue Code of 1986 or section 

21 1198, as applicable. 

22 ‘‘(b) COLLECTION OF DATA.— 

23 ‘‘(1) FROM PRESCRIPTION DRUG PLANS AND

24 MA–PD PLANS.—The Secretary may collect appro25 priate data from prescription drug plans under part 


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1 D of title XVIII and MA–PD plans under part C of 

2 such title in a timeframe that allows for maximum 

3 fair prices to be provided under this part for selected 

4 drugs. 

5 ‘‘(2) FROM HEALTH PLANS.—The Secretary 

6 may collect appropriate data from group health 

7 plans or health insurance issuers offering group or 

8 individual health insurance coverage in a timeframe 

9 that allows for maximum fair prices to be provided 

10 under this part for selected drugs. 

11 ‘‘(c) CONTRACT WITH THIRD PARTIES.— 

12 ‘‘(1) IN GENERAL.—The Secretary shall enter 

13 into a contract with 1 or more third parties to ad14 minister the requirements established by the Sec15 retary in order to carry out this part. At a min16 imum, the contract with a third party under the pre17 ceding sentence shall require that the third party— 

18 ‘‘(A) receive and transmit information be19 tween the Secretary, manufacturers, and other 

20 individuals or entities the Secretary determines 

21 appropriate; 

22 ‘‘(B) receive, distribute, or facilitate the 

23 distribution of funds of manufacturers to ap24 propriate individuals or entities in order to 


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1 meet the obligations of manufacturers under 

2 agreements under this part; 

3 ‘‘(C) provide adequate and timely informa4 tion to manufacturers, consistent with the 

5 agreement with the manufacturer under this 

6 part, as necessary for the manufacturer to ful7 fill its obligations under this part; and 

8 ‘‘(D) permit manufacturers to conduct 

9 periodic audits, directly or through contracts, of 

10 the data and information used by the third 

11 party to determine discounts for applicable 

12 drugs of the manufacturer under the program. 

13 ‘‘(2) PERFORMANCE REQUIREMENTS.—The 

14 Secretary shall establish performance requirements 

15 for a third party with a contract under paragraph 

16 (1) and safeguards to protect the independence and 

17 integrity of the activities carried out by the third 

18 party under the program under this part. 

19 ‘‘(d) COORDINATION WITH 340B PROGRAM.—In the 

20 case of a manufacturer of a selected drug, with respect 

21 to an initial price applicability year, for each year with 

22 respect to which a maximum fair price is applied under 

23 this part for such drug, such drug shall not be considered 

24 a covered outpatient drug subject to an agreement under 

25 section 340B of the Public Health Service Act. 


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1 ‘‘SEC. 1197. VOLUNTARY PARTICIPATION BY OTHER 

2 HEALTH PLANS. 

3 ‘‘(a) IN GENERAL.—Under the program under this 

4 part the Secretary shall be treated as having in effect an 

5 agreement with a group health plan or health insurance 

6 issuer offering health insurance coverage (as such terms 

7 are defined in section 2791 of the Public Health Service 

8 Act), except in the case that such a plan or issuer affirma9 tively elects not to participate under the program, through 

10 a process specified by the Secretary, with respect to a 

11 price applicability period and a selected drug with respect 

12 to such period with respect to which coverage is provided 

13 under such plan or coverage. 

14 ‘‘(b) PUBLICATION OF ELECTION.—With respect to 

15 each price applicability period and each selected drug with 

16 respect to such period, the Secretary and the Secretary 

17 of Labor and the Secretary of the Treasury, as applicable, 

18 shall make public a list of each group health plan and each 

19 issuer of health insurance coverage, with respect to which 

20 coverage is provided under such plan or coverage for such 

21 drug, that has elected under subsection (a) not to partici22 pate under the program with respect to such period and 

23 drug. 

24 ‘‘SEC. 1198. CIVIL MONETARY PENALTY. 

25 ‘‘(a) VIOLATIONS RELATING TO OFFERING OF MAX26 IMUM FAIR PRICE.—Any manufacturer of a selected drug 


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1 that has entered into an agreement under section 1193, 

2 with respect to a plan year during the price applicability 

3 period for such drug, that does not provide access to a 

4 price that is not more than the maximum fair price (or 

5 a lesser price) for such drug for such year— 

6 ‘‘(1) to a fair price eligible individual described 

7 in subparagraph (A) or (B) of section 1191(c)(1) 

8 furnished such drug during such year; or 

9 ‘‘(2) to a hospital, physician, or other provider 

10 of services or supplier with respect to fair price eligi11 ble individuals described in subparagraph (C) of 

12 such section administered such drug during such 

13 year; 

14 shall be subject to a civil monetary penalty equal to ten 

15 times the amount equal to the difference between the price 

16 for such drug made available by such manufacturer with 

17 respect to such individual or hospital, physician, provider, 

18 or supplier and the maximum fair price for such drug for 

19 such year. 

20 ‘‘(b) VIOLATIONS OF CERTAIN TERMS OF AGREE21 MENT.—Any manufacturer of a selected drug that has en22 tered into an agreement under section 1193, with respect 

23 to a plan year during the price applicability period for 

24 such drug, that is in violation of a requirement imposed 

25 pursuant to section 1193(a)(6) shall be subject to a civil 


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1 monetary penalty of not more than $1,000,000 for each 

2 such violation. 

3 ‘‘(c) APPLICATION.—The provisions of section 1128A 

4 (other than subsections (a) and (b)) shall apply to a civil 

5 monetary penalty under this section in the same manner 

6 as such provisions apply to a penalty or proceeding under 

7 section 1128A(a). 

8 ‘‘SEC. 1199. MISCELLANEOUS PROVISIONS. 

9 ‘‘(a) PAPERWORK REDUCTION ACT.—Chapter 35 of 

10 title 44, United States Code, shall not apply to data col11 lected under this part. 

12 ‘‘(b) NATIONAL ACADEMY OF MEDICINE STUDY.— 

13 Not later than December 31, 2025, the National Academy 

14 of Medicine shall conduct a study, and submit to Congress 

15 a report, on recommendations for improvements to the 

16 program under this part, including the determination of 

17 the limits applied under section 1194(c). 

18 ‘‘(c) MEDPAC STUDY.—Not later than December 31, 

19 2025, the Medicare Payment Advisory Commission shall 

20 conduct a study, and submit to Congress a report, on the 

21 program under this part with respect to the Medicare pro22 gram under title XVIII, including with respect to the ef23 fect of the program on individuals entitled to benefits or 

24 enrolled under such title. 


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1 ‘‘(d) LIMITATION ON JUDICIAL REVIEW.—The fol2 lowing shall not be subject to judicial review: 

3 ‘‘(1) The selection of drugs for publication 

4 under section 1192(a). 

5 ‘‘(2) The determination of whether a drug is a 

6 negotiation-eligible drug under section 1192(d). 

7 ‘‘(3) The determination of the maximum fair 

8 price of a selected drug under section 1194. 

9 ‘‘(4) The determination of units of a drug for 

10 purposes of section 1191(c)(3). 

11 ‘‘(e) COORDINATION.—In carrying out this part with 

12 respect to group health plans or health insurance coverage 

13 offered in the group market that are subject to oversight 

14 by the Secretary of Labor or the Secretary of the Treas15 ury, the Secretary of Health and Human Services shall 

16 coordinate with such respective Secretary. 

17 ‘‘(f) DATA SHARING.—The Secretary shall share with 

18 the Secretary of the Treasury such information as is nec19 essary to determine the tax imposed by section 4192 of 

20 the Internal Revenue Code of 1986.’’. 

21 (b) APPLICATION OF MAXIMUM FAIR PRICES AND

22 CONFORMING AMENDMENTS.— 

23 (1) UNDER MEDICARE PRESCRIPTION DRUG

24 PROGRAM.— 


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1 (A) EXCEPTION TO NON-INTER2 FERENCE.—Section 1860D–11(i) of the Social 

3 Security Act (42 U.S.C. 1395w–111(i)) is 

4 amended by inserting ‘‘, except as provided 

5 under part E of title XI,’’ after ‘‘the Sec6 retary’’. 

7 (B) APPLICATION AS NEGOTIATED

8 PRICE.—Section 1860D–2(d)(1) of the Social 

9 Security Act (42 U.S.C. 1395w–102(d)(1)) is 

10 amended— 

11 (i) in subparagraph (B), by inserting 

12 ‘‘, subject to subparagraph (D),’’ after 

13 ‘‘negotiated prices’’; and 

14 (ii) by adding at the end the following 

15 new subparagraph: 

16 ‘‘(D) APPLICATION OF MAXIMUM FAIR

17 PRICE FOR SELECTED DRUGS.—In applying this 

18 section, in the case of a covered part D drug 

19 that is a selected drug (as defined in section 

20 1192(c)), with respect to a price applicability 

21 period (as defined in section 1191(b)(2)), the 

22 negotiated price described in this subsection 

23 shall be the maximum fair price (as defined in 

24 section 1191(c)(2)) for such drug and for each 

25 plan year during such period.’’. 


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1 (C) INFORMATION FROM PRESCRIPTION

2 DRUG PLANS AND MA–PD PLANS REQUIRED.— 

3 (i) PRESCRIPTION DRUG PLANS.—Sec4 tion 1860D–12(b) of the Social Security 

5 Act (42 U.S.C. 1395w–112(b)) is amended 

6 by adding at the end the following new 

7 paragraph: 

8 ‘‘(8) PROVISION OF INFORMATION RELATED TO

9 MAXIMUM FAIR PRICES.—Each contract entered into 

10 with a PDP sponsor under this part with respect to 

11 a prescription drug plan offered by such sponsor 

12 shall require the sponsor to provide information to 

13 the Secretary as requested by the Secretary in ac14 cordance with section 1196(b).’’. 

15 (ii) MA–PD PLANS.—Section 

16 1857(f)(3) of the Social Security Act (42 

17 U.S.C. 1395w–27(f)(3)) is amended by 

18 adding at the end the following new sub19 paragraph: 

20 ‘‘(E) PROVISION OF INFORMATION RE21 LATED TO MAXIMUM FAIR PRICES.—Section 

22 1860D–12(b)(8).’’. 

23 (2) UNDER GROUP HEALTH PLANS AND

24 HEALTH INSURANCE COVERAGE.— 


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1 (A) PHSA.—Part A of title XXVII of the 

2 Public Health Service Act is amended by insert3 ing after section 2729 the following new sec4 tion: 

5 ‘‘SEC. 2729A. FAIR PRICE DRUG NEGOTIATION PROGRAM 

6 AND APPLICATION OF MAXIMUM FAIR 

7 PRICES. 

8 ‘‘(a) IN GENERAL.—In the case of a group health 

9 plan or health insurance issuer offering health insurance 

10 coverage that is treated under section 1197 of the Social 

11 Security Act as having in effect an agreement with the 

12 Secretary under the Fair Price Drug Negotiation Program 

13 under part E of title XI of such Act, with respect to a 

14 price applicability period (as defined in section 1191(b) 

15 of such Act) and a selected drug (as defined in section 

16 1192(c) of such Act) with respect to such period with re17 spect to which coverage is provided under such plan or 

18 coverage— 

19 ‘‘(1) the provisions of such part shall apply to 

20 the plans or coverage offered by such plan or issuer, 

21 and to the individuals enrolled under such plans or 

22 coverage, during such period, with respect to such 

23 selected drug, in the same manner as such provi24 sions apply to prescription drug plans and MA–PD 


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1 plans, and to individuals enrolled under such pre2 scription drug plans and MA–PD plans; 

3 ‘‘(2) the plan or issuer shall apply any cost4 sharing responsibilities under such plan or coverage, 

5 with respect to such selected drug, by substituting 

6 the maximum fair price negotiated under such part 

7 for such drug in lieu of the contracted rate under 

8 such plan or coverage for such selected drug; and 

9 ‘‘(3) the Secretary shall apply the provisions of 

10 such part to such plan, issuer, and coverage, and 

11 such individuals so enrolled in such plans. 

12 ‘‘(b) NOTIFICATION REGARDING NONPARTICIPATION

13 IN FAIR DRUG PRICE NEGOTIATION PROGRAM.—A group 

14 health plan or a health insurance issuer offering group or 

15 individual health insurance coverage shall publicly disclose 

16 in a manner and in accordance with a process specified 

17 by the Secretary any election made under section 1197 

18 of the Social Security Act by the plan or issuer to not 

19 participate in the Fair Drug Price Negotiation Program 

20 under part E of title XI of such Act with respect to a 

21 selected drug (as defined in section 1192(c) of such Act) 

22 for which coverage is provided under such plan or coverage 

23 before the beginning of the plan year for which such elec24 tion was made.’’. 

25 (B) ERISA.— 


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1 (i) IN GENERAL.—Subpart B of part 

2 7 of subtitle B of title I of the Employee 

3 Retirement Income Security Act of 1974 

4 (29 U.S.C. 1181 et. seq.) is amended by 

5 adding at the end the following new sec6 tion: 

7 ‘‘SEC. 716. FAIR PRICE DRUG NEGOTIATION PROGRAM AND 

8 APPLICATION OF MAXIMUM FAIR PRICES. 

9 ‘‘(a) IN GENERAL.—In the case of a group health 

10 plan or health insurance issuer offering group health in11 surance coverage that is treated under section 1197 of the 

12 Social Security Act as having in effect an agreement with 

13 the Secretary under the Fair Price Drug Negotiation Pro14 gram under part E of title XI of such Act, with respect 

15 to a price applicability period (as defined in section 

16 1191(b) of such Act) and a selected drug (as defined in 

17 section 1192(c) of such Act) with respect to such period 

18 with respect to which coverage is provided under such plan 

19 or coverage— 

20 ‘‘(1) the provisions of such part shall apply to 

21 the plans or coverage offered by such plan or issuer, 

22 and to the individuals enrolled under such plans or 

23 coverage, during such period, with respect to such 

24 selected drug, in the same manner as such provi25 sions apply to prescription drug plans and MA–PD 


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1 plans, and to individuals enrolled under such pre2 scription drug plans and MA–PD plans; 

3 ‘‘(2) the plan or issuer shall apply any cost4 sharing responsibilities under such plan or coverage, 

5 with respect to such selected drug, by substituting 

6 the maximum fair price negotiated under such part 

7 for such drug in lieu of the contracted rate under 

8 such plan or coverage for such selected drug; and 

9 ‘‘(3) the Secretary shall apply the provisions of 

10 such part to such plan, issuer, and coverage, and 

11 such individuals so enrolled in such plans. 

12 ‘‘(b) NOTIFICATION REGARDING NONPARTICIPATION

13 IN FAIR DRUG PRICE NEGOTIATION PROGRAM.—A group 

14 health plan or a health insurance issuer offering group 

15 health insurance coverage shall publicly disclose in a man16 ner and in accordance with a process specified by the Sec17 retary any election made under section 1197 of the Social 

18 Security Act by the plan or issuer to not participate in 

19 the Fair Drug Price Negotiation Program under part E 

20 of title XI of such Act with respect to a selected drug (as 

21 defined in section 1192(c) of such Act) for which coverage 

22 is provided under such plan or coverage before the begin23 ning of the plan year for which such election was made.’’. 

24 (ii) CLERICAL AMENDMENT.—The 

25 table of sections for part 7 of subtitle B of 


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1 title I of the Employee Retirement Income 

2 Security Act of 1974 is amended by adding 

3 at the end the following: 

‘‘Sec. 716. Fair Price Drug Negotiation Program and application of maximum 

fair prices.’’. 

4 (C) IRC.— 

5 (i) IN GENERAL.—Subchapter B of 

6 chapter 100 of the Internal Revenue Code 

7 of 1986 is amended by adding at the end 

8 the following new section: 

9 ‘‘SEC. 9816. FAIR PRICE DRUG NEGOTIATION PROGRAM 

10 AND APPLICATION OF MAXIMUM FAIR 

11 PRICES. 

12 ‘‘(a) IN GENERAL.—In the case of a group health 

13 plan that is treated under section 1197 of the Social Secu14 rity Act as having in effect an agreement with the Sec15 retary under the Fair Price Drug Negotiation Program 

16 under part E of title XI of such Act, with respect to a 

17 price applicability period (as defined in section 1191(b) 

18 of such Act) and a selected drug (as defined in section 

19 1192(c) of such Act) with respect to such period with re20 spect to which coverage is provided under such plan— 

21 ‘‘(1) the provisions of such part shall apply to 

22 the plans offered by such plan, and to the individ23 uals enrolled under such plans, during such period, 

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1 ner as such provisions apply to prescription drug 

2 plans and MA–PD plans, and to individuals enrolled 

3 under such prescription drug plans and MA–PD 

4 plans; 

5 ‘‘(2) the plan shall apply any cost-sharing re6 sponsibilities under such plan, with respect to such 

7 selected drug, by substituting the maximum fair 

8 price negotiated under such part for such drug in 

9 lieu of the contracted rate under such plan for such 

10 selected drug; and 

11 ‘‘(3) the Secretary shall apply the provisions of 

12 such part to such plan and such individuals so en13 rolled in such plan. 

14 ‘‘(b) NOTIFICATION REGARDING NONPARTICIPATION

15 IN FAIR DRUG PRICE NEGOTIATION PROGRAM.—A group 

16 health plan shall publicly disclose in a manner and in ac17 cordance with a process specified by the Secretary any 

18 election made under section 1197 of the Social Security 

19 Act by the plan to not participate in the Fair Drug Price 

20 Negotiation Program under part E of title XI of such Act 

21 with respect to a selected drug (as defined in section 

22 1192(c) of such Act) for which coverage is provided under 

23 such plan before the beginning of the plan year for which 

24 such election was made.’’. 


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1 (ii) CLERICAL AMENDMENT.—The 

2 table of sections for subchapter B of chap3 ter 100 of such Code is amended by add4 ing at the end the following new item: 

‘‘Sec. 9816. Fair Price Drug Negotiation Program and application of maximum 

fair prices.’’. 

5 SEC. 102. SELECTED DRUG MANUFACTURER EXCISE TAX 

6 IMPOSED DURING NONCOMPLIANCE PERI7 ODS. 

8 (a) IN GENERAL.—Subchapter E of chapter 32 of the 

9 Internal Revenue Code of 1986 is amended by adding at 

10 the end the following new section: 

11 ‘‘SEC. 4192. SELECTED DRUGS DURING NONCOMPLIANCE 

12 PERIODS. 

13 ‘‘(a) IN GENERAL.—There is hereby imposed on the 

14 sale by the manufacturer, producer, or importer of any 

15 selected drug during a day described in subsection (b) a 

16 tax in an amount such that the applicable percentage is 

17 equal to the ratio of— 

18 ‘‘(1) such tax, divided by 

19 ‘‘(2) the sum of such tax and the price for 

20 which so sold. 

21 ‘‘(b) NONCOMPLIANCE PERIODS.—A day is described 

22 in this subsection with respect to a selected drug if it is 

23 a day during one of the following periods: 


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1 ‘‘(1) The period beginning on the June 16th 

2 immediately following the selected drug publication 

3 date and ending on the first date during which the 

4 manufacturer of the drug has in place an agreement 

5 described in subsection (a) of section 1193 of the 

6 Social Security Act with respect to such drug. 

7 ‘‘(2) The period beginning on the April 1st im8 mediately following the June 16th described in para9 graph (1) and ending on the first date during which 

10 the manufacturer of the drug has agreed to a max11 imum fair price under such agreement. 

12 ‘‘(3) In the case of a selected drug with respect 

13 to which the Secretary of Health and Human Serv14 ices has specified a renegotiation period under such 

15 agreement, the period beginning on the first date 

16 after the last date of such renegotiation period and 

17 ending on the first date during which the manufac18 turer of the drug has agreed to a renegotiated max19 imum fair price under such agreement. 

20 ‘‘(4) With respect to information that is re21 quired to be submitted to the Secretary of Health 

22 and Human Services under such agreement, the pe23 riod beginning on the date on which such Secretary 

24 certifies that such information is overdue and ending 

25 on the date that such information is so submitted. 


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1 ‘‘(5) In the case of a selected drug with respect 

2 to which a payment is due under subsection (c) of 

3 such section 1193, the period beginning on the date 

4 on which the Secretary of Health and Human Serv5 ices certifies that such payment is overdue and end6 ing on the date that such payment is made in full. 

7 ‘‘(c) APPLICABLE PERCENTAGE.—The term ‘applica8 ble percentage’ means— 

9 ‘‘(1) in the case of sales of a selected drug dur10 ing the first 90 days described in subsection (b) with 

11 respect to such drug, 65 percent, 

12 ‘‘(2) in the case of sales of such drug during 

13 the 91st day through the 180th day described in 

14 subsection (b) with respect to such drug, 75 percent, 

15 ‘‘(3) in the case of sales of such drug during 

16 the 181st day through the 270th day described in 

17 subsection (b) with respect to such drug, 85 percent, 

18 and 

19 ‘‘(4) in the case of sales of such drug during 

20 any subsequent day, 95 percent. 

21 ‘‘(d) DEFINITIONS.—The terms ‘selected drug publi22 cation date’ and ‘maximum fair price’ have the meaning 

23 given such terms in section 1191 of the Social Security 

24 Act and the term ‘selected drug’ has the meaning given 

25 such term in section 1192 of such Act. 


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1 ‘‘(e) ANTI-ABUSE RULE.—In the case of a sale which 

2 was timed for the purpose of avoiding the tax imposed by 

3 this section, the Secretary may treat such sale as occur4 ring during a day described in subsection (b).’’. 

5 (b) NO DEDUCTION FOR EXCISE TAX PAYMENTS.— 

6 Section 275 of the Internal Revenue Code of 1986 is 

7 amended by adding ‘‘or by section 4192’’ before the period 

8 at the end of subsection (a)(6). 

9 (c) CONFORMING AMENDMENTS.— 

10 (1) Section 4221(a) of the Internal Revenue 

11 Code of 1986 is amended by inserting ‘‘or 4192’’ 

12 after ‘‘section 4191’’. 

13 (2) Section 6416(b)(2) of such Code is amend14 ed by inserting ‘‘or 4192’’ after ‘‘section 4191’’. 

15 (d) CLERICAL AMENDMENTS.— 

16 (1) The heading of subchapter E of chapter 32 

17 of the Internal Revenue Code of 1986 is amended by 

18 striking ‘‘Medical Devices’’ and inserting 

19 ‘‘Other Medical Products’’. 

20 (2) The table of subchapters for chapter 32 of 

21 such Code is amended by striking the item relating 

22 to subchapter E and inserting the following new 

23 item: 

‘‘SUBCHAPTER E. OTHER MEDICAL PRODUCTS’’. 


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1 (3) The table of sections for subchapter E of 

2 chapter 32 of such Code is amended by adding at 

3 the end the following new item: 

‘‘Sec. 4192. Selected drugs during noncompliance periods.’’. 

4 (e) EFFECTIVE DATE.—The amendments made by 

5 this section shall apply to sales after the date of the enact6 ment of this Act. 

7 TITLE II—MEDICARE PARTS B 

8 AND D PRESCRIPTION DRUG 

9 INFLATION REBATES 

10 SEC. 201. MEDICARE PART B REBATE BY MANUFACTURERS. 

11 (a) IN GENERAL.—Section 1834 of the Social Secu12 rity Act (42 U.S.C. 1395m) is amended by adding at the 

13 end the following new subsection: 

14 ‘‘(x) REBATE BY MANUFACTURERS FOR SINGLE

15 SOURCE DRUGS WITH PRICES INCREASING FASTER

16 THAN INFLATION.— 

17 ‘‘(1) REQUIREMENTS.— 

18 ‘‘(A) SECRETARIAL PROVISION OF INFOR19 MATION.—Not later than 6 months after the 

20 end of each calendar quarter beginning on or 

21 after July 1, 2021, the Secretary shall, for each 

22 part B rebatable drug, report to each manufac23 turer of such part B rebatable drug the fol24 lowing for such calendar quarter: 


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1 ‘‘(i) Information on the total number 

2 of billing units described in subparagraph 

3 (A)(i) of paragraph (3) with respect to 

4 such drug and calendar quarter. 

5 ‘‘(ii) Information on the amount (if 

6 any) of the excess average sales price in7 crease described in subparagraph (A)(ii) of 

8 such paragraph for such drug and calendar 

9 quarter. 

10 ‘‘(iii) The rebate amount specified 

11 under such paragraph for such part B 

12 rebatable drug and calendar quarter. 

13 ‘‘(B) MANUFACTURER REQUIREMENT.— 

14 For each calendar quarter beginning on or after 

15 July 1, 2021, the manufacturer of a part B 

16 rebatable drug shall, for such drug, not later 

17 than 30 days after the date of receipt from the 

18 Secretary of the information described in sub19 paragraph (A) for such calendar quarter, pro20 vide to the Secretary a rebate that is equal to 

21 the amount specified in paragraph (3) for such 

22 drug for such calendar quarter. 

23 ‘‘(2) PART B REBATABLE DRUG DEFINED.— 

24 ‘‘(A) IN GENERAL.—In this subsection, the 

25 term ‘part B rebatable drug’ means a single 


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1 source drug or biological (as defined in sub2 paragraph (D) of section 1847A(c)(6)), includ3 ing a biosimilar biological product (as defined 

4 in subparagraph (H) of such section), paid for 

5 under this part, except such term shall not in6 clude such a drug or biological— 

7 ‘‘(i) if the average total allowed 

8 charges for a year per individual that uses 

9 such a drug or biological, as determined by 

10 the Secretary, are less than, subject to 

11 subparagraph (B), $100; or 

12 ‘‘(ii) that is a vaccine described in 

13 subparagraph (A) or (B) of section 

14 1861(s)(10). 

15 ‘‘(B) INCREASE.—The dollar amount ap16 plied under subparagraph (A)(i)— 

17 ‘‘(i) for 2022, shall be the dollar 

18 amount specified under such subparagraph 

19 for 2021, increased by the percentage in20 crease in the consumer price index for all 

21 urban consumers (United States city aver22 age) as of the first quarter of the previous 

23 year; and 

24 ‘‘(ii) for a subsequent year, shall be 

25 the dollar amount specified in this clause 


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1 (or clause (i)) for the previous year, in2 creased by the percentage increase in the 

3 consumer price index for all urban con4 sumers (United States city average) as of 

5 the first quarter of the previous year. 

6 Any dollar amount specified under this sub7 paragraph that is not a multiple of $10 shall be 

8 rounded to the nearest multiple of $10. 

9 ‘‘(3) REBATE AMOUNT.— 

10 ‘‘(A) IN GENERAL.—For purposes of para11 graph (1)(B), the amount specified in this para12 graph for a part B rebatable drug assigned to 

13 a billing and payment code for a calendar quar14 ter is, subject to paragraph (4), the amount 

15 equal to the product of— 

16 ‘‘(i) subject to subparagraph (B), the 

17 total number of billing units, as described 

18 in section 1847A(b)(6)(B), for such part B 

19 rebatable drug furnished under this part 

20 during the calendar quarter; and 

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

22 ‘‘(I) the payment amount under 

23 subparagraph (B) or (C) of section 

24 1847A(b)(1), as applicable, for such 


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1 part B rebatable drug during the cal2 endar quarter; exceeds 

3 ‘‘(II) the inflation-adjusted pay4 ment amount determined under sub5 paragraph (C) for such part B 

6 rebatable drug during the calendar 

7 quarter. 

8 ‘‘(B) EXCLUDED UNITS.—For purposes of 

9 subparagraph (A)(i), the total number of billing 

10 units for part B rebatable drugs furnished dur11 ing a calendar quarter shall not include— 

12 ‘‘(i) units packaged into the payment 

13 for a related procedure or service under 

14 section 1833(t) or under section 1833(i) 

15 (instead of separately payable under such 

16 respective section); 

17 ‘‘(ii) units included under the single 

18 payment system for renal dialysis services 

19 under section 1881(b)(14); or 

20 ‘‘(iii) units of a part B rebatable drug 

21 of a manufacturer that is furnished to an 

22 individual, if such manufacturer, with re23 spect to the furnishing of such units of 

24 such drug, provides for discounts under 


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1 section 340B of the Public Health Service 

2 Act or for rebates under section 1927. 

3 ‘‘(C) DETERMINATION OF INFLATION-AD4 JUSTED PAYMENT AMOUNT.—The inflation-ad5 justed payment amount determined under this 

6 subparagraph for a part B rebatable drug for 

7 a calendar quarter is— 

8 ‘‘(i) the payment amount for the bill9 ing and payment code for such drug in the 

10 payment amount benchmark quarter (as 

11 defined in subparagraph (D)); increased by 

12 ‘‘(ii) the percentage by which the re13 bate period CPI–U (as defined in subpara14 graph (F)) for the calendar quarter ex15 ceeds the benchmark period CPI–U (as de16 fined in subparagraph (E)). 

17 ‘‘(D) PAYMENT AMOUNT BENCHMARK

18 QUARTER.—The term ‘payment amount bench19 mark quarter’ means the calendar quarter be20 ginning January 1, 2016. 

21 ‘‘(E) BENCHMARK PERIOD CPI–U.—The 

22 term ‘benchmark period CPI–U’ means the con23 sumer price index for all urban consumers 

24 (United States city average) for July 2015. 


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1 ‘‘(F) REBATE PERIOD CPI–U.—The term 

2 ‘rebate period CPI–U’ means, with respect to a 

3 calendar quarter described in subparagraph 

4 (C), the greater of the benchmark period CPI– 

5 U and the consumer price index for all urban 

6 consumers (United States city average) for the 

7 first month of the calendar quarter that is two 

8 calendar quarters prior to such described cal9 endar quarter. 

10 ‘‘(4) SPECIAL TREATMENT OF CERTAIN DRUGS

11 AND EXEMPTION.— 

12 ‘‘(A) SUBSEQUENTLY APPROVED DRUGS.— 

13 Subject to subparagraph (B), in the case of a 

14 part B rebatable drug first approved by the 

15 Food and Drug Administration after July 1, 

16 2015, clause (i) of paragraph (3)(C) shall be 

17 applied as if the term ‘payment amount bench18 mark quarter’ were defined under paragraph 

19 (3)(D) as the third full calendar quarter after 

20 the day on which the drug was first marketed 

21 and clause (ii) of paragraph (3)(C) shall be ap22 plied as if the term ‘benchmark period CPI–U’ 

23 were defined under paragraph (3)(E) as if the 

24 reference to ‘July 2015’ under such paragraph 

25 were a reference to ‘the first month of the first 


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1 full calendar quarter after the day on which the 

2 drug was first marketed’. 

3 ‘‘(B) TIMELINE FOR PROVISION OF RE4 BATES FOR NEW DRUGS.—In the case of a part 

5 B rebatable drug first approved by the Food 

6 and Drug Administration after July 1, 2015, 

7 clause (i) of paragraph (1)(B) shall be applied 

8 as if the reference to ‘July 1, 2021’ under such 

9 paragraph were a reference to the later of the 

10 6th full calendar quarter after the day on which 

11 the drug was first marketed or July 1, 2021. 

12 ‘‘(C) EXEMPTION FOR SHORTAGES.—The 

13 Secretary may reduce or waive the rebate under 

14 paragraph (1)(B) with respect to a part B 

15 rebatable drug that appears on the drug short16 age list in effect under section 506(e) of the 

17 Federal Food, Drug, and Cosmetic Act or in 

18 the case of other exigent circumstances, as de19 termined by the Secretary. 

20 ‘‘(D) SELECTED DRUGS.—In the case of a 

21 part B rebatable drug that is a selected drug 

22 (as defined in section 1192(c)), for each appli23 cable year beginning after the price applicability 

24 period (as defined in section 1191(b)(2) with 

25 respect to such drug, clause (i) of paragraph 


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1 (3)(C) shall be applied as if the term ‘payment 

2 amount benchmark quarter’ were defined under 

3 paragraph (3)(D) as the calendar quarter be4 ginning January 1 of the last year beginning 

5 during such price applicability period with re6 spect to such selected drug and clause (ii) of 

7 paragraph (3)(C) shall be applied as if the term 

8 ‘benchmark period CPI–U’ were defined under 

9 paragraph (3)(E) as if the reference to ‘July 

10 2015’ under such paragraph were a reference to 

11 the July of the year preceding such last year. 

12 ‘‘(5) APPLICATION TO BENEFICIARY COINSUR13 ANCE.—In the case of a part B rebatable drug for 

14 which a rebate is payable under this subsection— 

15 ‘‘(A) in computing the amount of any coin16 surance applicable under this title to an indi17 vidual with respect to such drug, the computa18 tion of such coinsurance shall be based on the 

19 inflation-adjusted payment amount determined 

20 under paragraph (3)(C) for such part B 

21 rebatable drug; and 

22 ‘‘(B) the amount of such coinsurance is 

23 equal to 20 percent of such inflation-adjusted 

24 payment amount so determined. 


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1 ‘‘(6) REBATE DEPOSITS.—Amounts paid as re2 bates under paragraph (1)(B) shall be deposited into 

3 the Federal Supplementary Medical Insurance Trust 

4 Fund established under section 1841. 

5 ‘‘(7) CIVIL MONEY PENALTY.—If a manufac6 turer of a part B rebatable drug has failed to com7 ply with the requirements under paragraph (1)(B) 

8 for such drug for a calendar quarter, the manufac9 turer shall be subject to, in accordance with a proc10 ess established by the Secretary pursuant to regula11 tions, a civil money penalty in an amount equal to 

12 at least 125 percent of the amount specified in para13 graph (3) for such drug for such calendar quarter. 

14 The provisions of section 1128A (other than sub15 sections (a) (with respect to amounts of penalties or 

16 additional assessments) and (b)) shall apply to a 

17 civil money penalty under this paragraph in the 

18 same manner as such provisions apply to a penalty 

19 or proceeding under section 1128A(a). 

20 ‘‘(8) STUDY AND REPORT.— 

21 ‘‘(A) STUDY.—The Secretary shall conduct 

22 a study of the feasibility of and operational 

23 issues involved with the following: 


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1 ‘‘(i) Including multiple source drugs 

2 (as defined in section 1847A(c)(6)(C)) in 

3 the rebate system under this subsection. 

4 ‘‘(ii) Including drugs and biologicals 

5 paid for under MA plans under part C in 

6 the rebate system under this subsection. 

7 ‘‘(iii) Including drugs excluded under 

8 paragraph (2)(A) and billing units of 

9 drugs excluded under paragraph (3)(B) in 

10 the rebate system under this subsection. 

11 ‘‘(B) REPORT.—Not later than 3 years 

12 after the date of the enactment of this sub13 section, the Secretary shall submit to Congress 

14 a report on the study conducted under subpara15 graph (A). 

16 ‘‘(9) APPLICATION TO MULTIPLE SOURCE

17 DRUGS.—The Secretary may, based on the report 

18 submitted under paragraph (8) and pursuant to 

19 rulemaking, apply the provisions of this subsection 

20 to multiple source drugs (as defined in section 

21 1847A(c)(6)(C)), including, for purposes of deter22 mining the rebate amount under paragraph (3), by 

23 calculating manufacturer-specific average sales 

24 prices for the benchmark period and the rebate pe25 riod.’’. 


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1 (b) AMOUNTS PAYABLE; COST-SHARING.—Section 

2 1833(a) of the Social Security Act is amended— 

3 (1) in paragraph (1)— 

4 (A) in subparagraph (S), by striking ‘‘with 

5 respect to’’ and inserting ‘‘subject to subpara6 graph (DD), with respect to’’; 

7 (B) by striking ‘‘and (CC)’’ and inserting 

8 ‘‘(CC)’’; and 

9 (C) by inserting before the semicolon at 

10 the end the following: ‘‘, and (DD) with respect 

11 to a part B rebatable drug (as defined in para12 graph (2) of section 1834(x)) for which a rebate 

13 is payable under such section, the amounts paid 

14 shall be the difference between (i) the payment 

15 amount under paragraph (3)(A)(ii)(I) of such 

16 section for such drug, and (ii) 20 percent of the 

17 inflation-adjusted payment amount under para18 graph (3)(A)(ii)(II) of such section for such 

19 drug’’; and 

20 (2) by adding at the end of the flush left matter 

21 following paragraph (9), the following: 

22 ‘‘For purposes of applying paragraph (1)(DD) and section 

23 1834(x)(5), the Secretary shall make such estimates and 

24 use such data as the Secretary determines appropriate.’’. 


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1 (c) CONFORMING AMENDMENT TO PART B ASP CAL2 CULATION.—Section 1847A(c)(3) of the Social Security 

3 Act (42 U.S.C. 1395w–3a(c)(3)) is amended by inserting 

4 ‘‘or section 1834(x)’’ after ‘‘section 1927’’. 

5 SEC. 202. MEDICARE PART D REBATE BY MANUFACTURERS. 

6 Part D of title XVIII of the Social Security Act is 

7 amended by inserting after section 1860D–14A (42 

8 U.S.C. 1395w–114a) the following new section: 

9 ‘‘SEC. 1860D–14B. MANUFACTURER REBATE FOR CERTAIN 

10 DRUGS WITH PRICES INCREASING FASTER 

11 THAN INFLATION. 

12 ‘‘(a) IN GENERAL.—Subject to the provisions of this 

13 section, in order for coverage to be available under this 

14 part for a part D rebatable drug of a manufacturer dis15 pensed during an applicable year, the manufacturer must 

16 have entered into and have in effect an agreement de17 scribed in subsection (b). For purposes of this section the 

18 term ‘applicable year’ means a year beginning with 2022. 

19 ‘‘(b) AGREEMENTS.— 

20 ‘‘(1) TERMS OF AGREEMENT.—An agreement 

21 described in this subsection, with respect to a manu22 facturer of a part D rebatable drug, is an agreement 

23 under which the following applies: 

24 ‘‘(A) SECRETARIAL PROVISION OF INFOR25 MATION.—Not later than 9 months after the 


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1 end of each applicable year with respect to 

2 which the agreement is in effect, the Secretary, 

3 for the part D rebatable drug of the manufac4 turer, reports to the manufacturer the following 

5 for such year: 

6 ‘‘(i) Information on the total units (as 

7 defined in subsection (g)(2)) dispensed for 

8 each dosage form and strength with re9 spect to such part D rebatable drug and 

10 year. 

11 ‘‘(ii) Information on the amount (if 

12 any) of the excess average manufacturer 

13 price increase described in subsection 

14 (c)(1)(B) for each dosage form and 

15 strength with respect to such drug and 

16 year. 

17 ‘‘(iii) The rebate amount specified 

18 under subsection (c) for each dosage form 

19 and strength with respect to such drug and 

20 year. 

21 ‘‘(B) MANUFACTURER REQUIREMENTS.— 

22 For each applicable year with respect to which 

23 the agreement is in effect, the manufacturer of 

24 the part D rebatable drug, for each dosage 

25 form and strength with respect to such drug, 


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1 not later than 30 days after the date of receipt 

2 from the Secretary of the information described 

3 in subparagraph (A) for such year, provides to 

4 the Secretary a rebate that is equal to the 

5 amount specified in subsection (c) for such dos6 age form and strength with respect to such 

7 drug for such year. 

8 ‘‘(2) LENGTH OF AGREEMENT.— 

9 ‘‘(A) IN GENERAL.—An agreement under 

10 this section, with respect to a part D rebatable 

11 drug, shall be effective for an initial period of 

12 not less than one year and shall be automati13 cally renewed for a period of not less than one 

14 year unless terminated under subparagraph 

15 (B). 

16 ‘‘(B) TERMINATION.— 

17 ‘‘(i) BY SECRETARY.—The Secretary 

18 may provide for termination of an agree19 ment under this section for violation of the 

20 requirements of the agreement or other 

21 good cause shown. Such termination shall 

22 not be effective earlier than 60 days after 

23 the date of notice of such termination. The 

24 Secretary shall provide, upon request, a 

25 manufacturer with a hearing concerning 


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1 such a termination, but such hearing shall 

2 not delay the effective date of the termi3 nation. 

4 ‘‘(ii) BY A MANUFACTURER.—A man5 ufacturer may terminate an agreement 

6 under this section for any reason. Any 

7 such termination shall not be effective 

8 until the year beginning at least 60 days 

9 after the date the manufacturer provides 

10 notice to the Secretary. 

11 ‘‘(C) EFFECTIVENESS OF TERMINATION.— 

12 Any termination under this paragraph shall not 

13 affect rebates due under the agreement under 

14 this section before the effective date of its ter15 mination. 

16 ‘‘(D) DELAY BEFORE REENTRY.—In the 

17 case of any agreement under this section with 

18 a manufacturer which is terminated in a plan 

19 year, another such agreement with the manu20 facturer (or a successor manufacturer) may not 

21 be entered into before the subsequent plan year, 

22 unless the Secretary finds good cause for an 

23 earlier reinstatement of such an agreement. 

24 ‘‘(3) INFORMATION.—For purposes of carrying 

25 out this section, the Secretary shall use information 


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1 submitted by manufacturers under section 

2 1927(b)(3). 

3 ‘‘(c) REBATE AMOUNT.— 

4 ‘‘(1) IN GENERAL.—For purposes of this sec5 tion, the amount specified in this subsection for a 

6 dosage form and strength with respect to a part D 

7 rebatable drug and applicable year is, subject to sub8 paragraphs (B) and (C) of paragraph (3), the 

9 amount equal to the product of— 

10 ‘‘(A) the total average number of units 

11 weighted by, and dispensed for, such dosage 

12 form and strength with respect to such part D 

13 rebatable drug and year; and 

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

15 ‘‘(i) the average manufacturer price 

16 (as defined in subsection (g)) paid for such 

17 dosage form and strength with respect to 

18 such part D rebatable drug during the 

19 year; exceeds 

20 ‘‘(ii) the inflation-adjusted payment 

21 amount determined under paragraph (2) 

22 for such dosage form and strength with re23 spect to such part D rebatable drug during 

24 the year. 


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1 ‘‘(2) DETERMINATION OF INFLATION-ADJUSTED

2 PAYMENT AMOUNT.—The inflation-adjusted payment 

3 amount determined under this paragraph for a dos4 age form and strength with respect to a part D 

5 rebatable drug for an applicable year, subject to sub6 paragraphs (A) and (D) of paragraph (3), is— 

7 ‘‘(A) the average manufacturer price paid 

8 for such dosage form and strength with respect 

9 to such drug in the payment amount bench10 mark year (as defined in subsection (g)(3)); in11 creased by 

12 ‘‘(B) the percentage by which the rebate 

13 period CPI–U (as defined in subsection (g)(5)) 

14 for the applicable year exceeds the benchmark 

15 period CPI–U (as defined in subsection (g)(4)). 

16 ‘‘(3) SPECIAL TREATMENT OF CERTAIN DRUGS

17 AND EXEMPTION.— 

18 ‘‘(A) SUBSEQUENTLY APPROVED DRUGS.— 

19 In the case of a part D rebatable drug first ap20 proved by the Food and Drug Administration 

21 after January 1, 2016, subparagraph (A) of 

22 paragraph (2) shall be applied as if the term 

23 ‘payment amount benchmark year’ were defined 

24 under subsection (g)(3) as the first year begin25 ning after the day on which the drug was first 


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1 marketed and subparagraph (B) of paragraph 

2 (2) shall be applied as if the term ‘benchmark 

3 period CPI–U’ were defined under subsection 

4 (g)(4) as if the reference to ‘January 2016’ 

5 under such subsection were a reference to ‘Jan6 uary of the first year beginning after the date 

7 on which the drug was first marketed by any 

8 manufacturer’. 

9 ‘‘(B) EXEMPTION FOR SHORTAGES.—The 

10 Secretary may reduce or waive the rebate under 

11 paragraph (1) with respect to a part D 

12 rebatable drug in the case of a shortage of such 

13 drug or other exigent circumstances, as deter14 mined by the Secretary. 

15 ‘‘(C) TREATMENT OF NEW FORMULA16 TIONS.— 

17 ‘‘(i) IN GENERAL.—In the case of a 

18 part D rebatable drug that is a line exten19 sion of a single source drug or an inno20 vator multiple source drug that is an oral 

21 solid dosage form, the Secretary shall es22 tablish a formula for determining the 

23 amount specified in this subsection with 

24 respect to such part D rebatable drug and 

25 an applicable year with consideration of 


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1 the single source drug or an innovator 

2 multiple source drug. 

3 ‘‘(ii) LINE EXTENSION DEFINED.—In 

4 this subparagraph, the term ‘line exten5 sion’ means, with respect to a part D 

6 rebatable drug, a new formulation of the 

7 drug (as determined by the Secretary), 

8 such as an extended release formulation, 

9 but does not include an abuse-deterrent 

10 formulation of the drug (as determined by 

11 the Secretary), regardless of whether such 

12 abuse-deterrent formulation is an extended 

13 release formulation. 

14 ‘‘(D) SELECTED DRUGS.—In the case of a 

15 part D rebatable drug that is a selected drug 

16 (as defined in section 1192(c)), for each appli17 cable year beginning after the price applicability 

18 period (as defined in section 1191(b)(2) with 

19 respect to such drug, subparagraph (A) of para20 graph (2) shall be applied as if the term ‘pay21 ment amount benchmark year’ were defined 

22 under subsection (g)(3) as the last year begin23 ning during such price applicability period with 

24 respect to such selected drug and subparagraph 

25 (B) of paragraph (2) shall be applied as if the 


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1 term ‘benchmark period CPI–U’ were defined 

2 under subsection (g)(4) as if the reference to 

3 ‘January 2016’ under such subsection were a 

4 reference to January of the last year beginning 

5 during such price applicability period with re6 spect to such drug. 

7 ‘‘(d) REBATE DEPOSITS.—Amounts paid as rebates 

8 under subsection (c) shall be deposited into the Medicare 

9 Prescription Drug Account in the Federal Supplementary 

10 Medical Insurance Trust Fund established under section 

11 1841. 

12 ‘‘(e) CIVIL MONEY PENALTY.—In the case of a man13 ufacturer of a part D rebatable drug with an agreement 

14 in effect under this section who has failed to comply with 

15 the terms of the agreement under subsection (b)(1)(B) 

16 with respect to such drug for an applicable year, the Sec17 retary may impose a civil money penalty on such manufac18 turer in an amount equal to 125 percent of the amount 

19 specified in subsection (c) for such drug for such year. 

20 The provisions of section 1128A (other than subsections 

21 (a) (with respect to amounts of penalties or additional as22 sessments) and (b)) shall apply to a civil money penalty 

23 under this subsection in the same manner as such provi24 sions apply to a penalty or proceeding under section 

25 1128A(a). 


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1 ‘‘(f) JUDICIAL REVIEW.—There shall be no judicial 

2 review of the following: 

3 ‘‘(1) The determination of units under this sec4 tion. 

5 ‘‘(2) The determination of whether a drug is a 

6 part D rebatable drug under this section. 

7 ‘‘(3) The calculation of the rebate amount 

8 under this section. 

9 ‘‘(g) DEFINITIONS.—In this section: 

10 ‘‘(1) PART D REBATABLE DRUG DEFINED.— 

11 ‘‘(A) IN GENERAL.—The term ‘part D 

12 rebatable drug’ means a drug or biological that 

13 would (without application of this section) be a 

14 covered part D drug, except such term shall, 

15 with respect to an applicable year, not include 

16 such a drug or biological if the average total 

17 cost under a prescription drug plan under this 

18 part or MA–PD plan under part C for such 

19 year per individual who uses such a drug or bi20 ological, as determined by the Secretary, are 

21 less than, subject to subparagraph (B), $100, 

22 as determined by the Secretary using the most 

23 recent data available or, if data is not available, 

24 as estimated by the Secretary. 


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1 ‘‘(B) INCREASE.—The dollar amount ap2 plied under subparagraph (A)— 

3 ‘‘(i) for 2023, shall be the dollar 

4 amount specified under such subparagraph 

5 for 2022, increased by the percentage in6 crease in the consumer price index for all 

7 urban consumers (United States city aver8 age) as of January of 2022; and 

9 ‘‘(ii) for a subsequent year, shall be 

10 the dollar amount specified in this sub11 paragraph (or subparagraph (A)) for the 

12 previous year, increased by the percentage 

13 increase in the consumer price index for all 

14 urban consumers (United States city aver15 age) as of January of the previous year. 

16 Any dollar amount specified under this sub17 paragraph that is not a multiple of $10 shall be 

18 rounded to the nearest multiple of $10. 

19 ‘‘(2) UNIT DEFINED.—The term ‘unit’ means, 

20 with respect to a part D rebatable drug, the lowest 

21 identifiable quantity (such as a capsule or tablet, 

22 milligram of molecules, or grams) of the part D 

23 rebatable drug that is dispensed to individuals en24 rolled under a prescription drug plan under this part 

25 or an MA–PD plan under part C. 


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1 ‘‘(3) PAYMENT AMOUNT BENCHMARK YEAR.— 

2 The term ‘payment amount benchmark year’ means 

3 the year beginning January 1, 2016. 

4 ‘‘(4) BENCHMARK PERIOD CPI–U.—The term 

5 ‘benchmark period CPI–U’ means the consumer 

6 price index for all urban consumers (United States 

7 city average) for January 2016. 

8 ‘‘(5) REBATE PERIOD CPI–U.—The term ‘rebate 

9 period CPI–U’ means, with respect to an applicable 

10 year, the consumer price index for all urban con11 sumers (United States city average) for January of 

12 such year. 

13 ‘‘(6) AVERAGE MANUFACTURER PRICE.—The 

14 term ‘average manufacturer price’ has the meaning, 

15 with respect to a part D rebatable drug of a manu16 facturer for an applicable year, given such term in 

17 section 1927(k)(1), with respect to a covered out18 patient drug of a manufacturer for a rebate period 

19 under section 1927. For purposes of applying the 

20 previous sentence, with respect to a part D rebatable 

21 drug of a manufacturer and an applicable year, the 

22 Secretary shall use the information with respect to 

23 the average manufacturer price for such drug re24 ported by the manufacturer under section 

25 1927(b)(3) with respect to each of the quarters in 


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1 the applicable year and calculate an annual average 

2 manufacturer price for such applicable year as the 

3 average of such average manufacturer prices for 

4 each such quarter, weighted by units of such drug 

5 sold or dispensed with respect to such applicable 

6 year.’’. 

7 TITLE III—PART D IMPROVE8 MENTS AND MAXIMUM OUT9 OF-POCKET CAP FOR MEDI10 CARE BENEFICIARIES 

11 SEC. 301. MEDICARE PART D BENEFIT REDESIGN. 

12 (a) BENEFIT STRUCTURE REDESIGN.—Section 

13 1860D–2(b) of the Social Security Act (42 U.S.C. 1395w– 

14 102(b)) is amended— 

15 (1) in paragraph (2)— 

16 (A) in subparagraph (A), in the matter 

17 preceding clause (i), by inserting ‘‘for a year 

18 preceding 2022 and for costs above the annual 

19 deductible specified in paragraph (1) and up to 

20 the annual out-of-pocket threshold specified in 

21 paragraph (4)(B) for 2022 and each subsequent 

22 year’’ after ‘‘paragraph (3)’’; 

23 (B) in subparagraph (C)— 

24 (i) in clause (i), in the matter pre25 ceding subclause (I), by inserting ‘‘for a 


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1 year preceding 2022,’’ after ‘‘paragraph 

2 (4),’’; and 

3 (ii) in clause (ii)(III), by striking 

4 ‘‘and each subsequent year’’ and inserting 

5 ‘‘and 2021’’; and 

6 (C) in subparagraph (D)— 

7 (i) in clause (i)— 

8 (I) in the matter preceding sub9 clause (I), by inserting ‘‘for a year 

10 preceding 2022,’’ after ‘‘paragraph 

11 (4),’’; and 

12 (II) in subclause (I)(bb), by 

13 striking ‘‘a year after 2018’’ and in14 serting ‘‘each of years 2018 through 

15 2021’’; and 

16 (ii) in clause (ii)(V), by striking 

17 ‘‘2019 and each subsequent year’’ and in18 serting ‘‘each of years 2019 through 

19 2021’’; 

20 (2) in paragraph (3)(A)— 

21 (A) in the matter preceding clause (i), by 

22 inserting ‘‘for a year preceding 2022,’’ after 

23 ‘‘and (4),’’; and 


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1 (B) in clause (ii), by striking ‘‘for a subse2 quent year’’ and inserting ‘‘for each of years 

3 2007 through 2021’’; and 

4 (3) in paragraph (4)— 

5 (A) in subparagraph (A)— 

6 (i) in clause (i)— 

7 (I) by redesignating subclauses 

8 (I) and (II) as items (aa) and (bb), 

9 respectively, and moving the margin 

10 of each such redesignated item 2 ems 

11 to the right; 

12 (II) in the matter preceding item 

13 (aa), as redesignated by subclause (I), 

14 by striking ‘‘is equal to the greater 

15 of—’’ and inserting ‘‘is equal to— 

16 ‘‘(I) for a year preceding 2022, 

17 the greater of—’’; 

18 (III) by striking the period at the 

19 end of item (bb), as redesignated by 

20 subclause (I), and inserting ‘‘; and’’; 

21 and 

22 (IV) by adding at the end the fol23 lowing: 

24 ‘‘(II) for 2022 and each suc25 ceeding year, $0.’’; and 


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1 (ii) in clause (ii)— 

2 (I) by striking ‘‘clause (i)(I)’’ and 

3 inserting ‘‘clause (i)(I)(aa)’’; and 

4 (II) by adding at the end the fol5 lowing new sentence: ‘‘The Secretary 

6 shall continue to calculate the dollar 

7 amounts specified in clause (i)(I)(aa), 

8 including with the adjustment under 

9 this clause, after 2021 for purposes of 

10 section 1860D–14(a)(1)(D)(iii).’’; 

11 (B) in subparagraph (B)— 

12 (i) in clause (i)— 

13 (I) in subclause (V), by striking 

14 ‘‘or’’ at the end; 

15 (II) in subclause (VI)— 

16 (aa) by striking ‘‘for a sub17 sequent year’’ and inserting ‘‘for 

18 2021’’; and 

19 (bb) by striking the period 

20 at the end and inserting a semi21 colon; and 

22 (III) by adding at the end the 

23 following new subclauses: 

24 ‘‘(VII) for 2022, is equal to 

25 $2,000; or 


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1 ‘‘(VIII) for a subsequent year, is 

2 equal to the amount specified in this 

3 subparagraph for the previous year, 

4 increased by the annual percentage in5 crease described in paragraph (6) for 

6 the year involved.’’; and 

7 (ii) in clause (ii), by striking ‘‘clause 

8 (i)(II)’’ and inserting ‘‘clause (i)’’; 

9 (C) in subparagraph (C)(i), by striking 

10 ‘‘and for amounts’’ and inserting ‘‘and, for a 

11 year preceding 2022, for amounts’’; and 

12 (D) in subparagraph (E), by striking ‘‘In 

13 applying’’ and inserting ‘‘For each of years 

14 2011 through 2021, in applying’’. 

15 (b) DECREASING REINSURANCE PAYMENT

16 AMOUNT.—Section 1860D–15(b)(1) of the Social Security 

17 Act (42 U.S.C. 1395w–115(b)(1)) is amended by inserting 

18 after ‘‘80 percent’’ the following: ‘‘(or, with respect to a 

19 coverage year after 2021, 20 percent)’’. 

20 (c) MANUFACTURER DISCOUNT PROGRAM.— 

21 (1) IN GENERAL.—Part D of title XVIII of the 

22 Social Security Act (42 U.S.C. 1395w–101 et seq.), 

23 as amended by section 202, is further amended by 

24 inserting after section 1860D–14B the following new 

25 section: 


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1 ‘‘SEC. 1860D–14C. MANUFACTURER DISCOUNT PROGRAM. 

2 ‘‘(a) ESTABLISHMENT.—The Secretary shall estab3 lish a manufacturer discount program (in this section re4 ferred to as the ‘program’). Under the program, the Sec5 retary shall enter into agreements described in subsection 

6 (b) with manufacturers and provide for the performance 

7 of the duties described in subsection (c). The Secretary 

8 shall establish a model agreement for use under the pro9 gram by not later than January 1, 2021, in consultation 

10 with manufacturers, and allow for comment on such model 

11 agreement. 

12 ‘‘(b) TERMS OF AGREEMENT.— 

13 ‘‘(1) IN GENERAL.— 

14 ‘‘(A) AGREEMENT.—An agreement under 

15 this section shall require the manufacturer to 

16 provide applicable beneficiaries access to dis17 counted prices for applicable drugs of the man18 ufacturer that are dispensed on or after Janu19 ary 1, 2022. 

20 ‘‘(B) PROVISION OF DISCOUNTED PRICES

21 AT THE POINT-OF-SALE.—The discounted prices 

22 described in subparagraph (A) shall be provided 

23 to the applicable beneficiary at the pharmacy or 

24 by the mail order service at the point-of-sale of 

25 an applicable drug. 

26 ‘‘(C) TIMING OF AGREEMENT.— 


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1 ‘‘(i) SPECIAL RULE FOR 2022.—In 

2 order for an agreement with a manufac3 turer to be in effect under this section with 

4 respect to the period beginning on January 

5 1, 2022, and ending on December 31, 

6 2022, the manufacturer shall enter into 

7 such agreement not later than 30 days 

8 after the date of the establishment of a 

9 model agreement under subsection (a). 

10 ‘‘(ii) 2023 AND SUBSEQUENT

11 YEARS.—In order for an agreement with a 

12 manufacturer to be in effect under this 

13 section with respect to plan year 2023 or 

14 a subsequent plan year, the manufacturer 

15 shall enter into such agreement (or such 

16 agreement shall be renewed under para17 graph (4)(A)) not later than January 30 of 

18 the preceding year. 

19 ‘‘(2) PROVISION OF APPROPRIATE DATA.—Each 

20 manufacturer with an agreement in effect under this 

21 section shall collect and have available appropriate 

22 data, as determined by the Secretary, to ensure that 

23 it can demonstrate to the Secretary compliance with 

24 the requirements under the program. 


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1 ‘‘(3) COMPLIANCE WITH REQUIREMENTS FOR

2 ADMINISTRATION OF PROGRAM.—Each manufac3 turer with an agreement in effect under this section 

4 shall comply with requirements imposed by the Sec5 retary or a third party with a contract under sub6 section (d)(3), as applicable, for purposes of admin7 istering the program, including any determination 

8 under subparagraph (A) of subsection (c)(1) or pro9 cedures established under such subsection (c)(1). 

10 ‘‘(4) LENGTH OF AGREEMENT.— 

11 ‘‘(A) IN GENERAL.—An agreement under 

12 this section shall be effective for an initial pe13 riod of not less than 12 months and shall be 

14 automatically renewed for a period of not less 

15 than 1 year unless terminated under subpara16 graph (B). 

17 ‘‘(B) TERMINATION.— 

18 ‘‘(i) BY THE SECRETARY.—The Sec19 retary may provide for termination of an 

20 agreement under this section for a knowing 

21 and willful violation of the requirements of 

22 the agreement or other good cause shown. 

23 Such termination shall not be effective ear24 lier than 30 days after the date of notice 

25 to the manufacturer of such termination. 


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1 The Secretary shall provide, upon request, 

2 a manufacturer with a hearing concerning 

3 such a termination, and such hearing shall 

4 take place prior to the effective date of the 

5 termination with sufficient time for such 

6 effective date to be repealed if the Sec7 retary determines appropriate. 

8 ‘‘(ii) BY A MANUFACTURER.—A man9 ufacturer may terminate an agreement 

10 under this section for any reason. Any 

11 such termination shall be effective, with re12 spect to a plan year— 

13 ‘‘(I) if the termination occurs be14 fore January 30 of a plan year, as of 

15 the day after the end of the plan year; 

16 and 

17 ‘‘(II) if the termination occurs on 

18 or after January 30 of a plan year, as 

19 of the day after the end of the suc20 ceeding plan year. 

21 ‘‘(iii) EFFECTIVENESS OF TERMI22 NATION.—Any termination under this sub23 paragraph shall not affect discounts for 

24 applicable drugs of the manufacturer that 


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1 are due under the agreement before the ef2 fective date of its termination. 

3 ‘‘(iv) NOTICE TO THIRD PARTY.—The 

4 Secretary shall provide notice of such ter5 mination to a third party with a contract 

6 under subsection (d)(3) within not less 

7 than 30 days before the effective date of 

8 such termination. 

9 ‘‘(c) DUTIES DESCRIBED.—The duties described in 

10 this subsection are the following: 

11 ‘‘(1) ADMINISTRATION OF PROGRAM.—Admin12 istering the program, including— 

13 ‘‘(A) the determination of the amount of 

14 the discounted price of an applicable drug of a 

15 manufacturer; 

16 ‘‘(B) the establishment of procedures 

17 under which discounted prices are provided to 

18 applicable beneficiaries at pharmacies or by 

19 mail order service at the point-of-sale of an ap20 plicable drug; 

21 ‘‘(C) the establishment of procedures to 

22 ensure that, not later than the applicable num23 ber of calendar days after the dispensing of an 

24 applicable drug by a pharmacy or mail order 

25 service, the pharmacy or mail order service is 


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1 reimbursed for an amount equal to the dif2 ference between— 

3 ‘‘(i) the negotiated price of the appli4 cable drug; and 

5 ‘‘(ii) the discounted price of the appli6 cable drug; 

7 ‘‘(D) the establishment of procedures to 

8 ensure that the discounted price for an applica9 ble drug under this section is applied before any 

10 coverage or financial assistance under other 

11 health benefit plans or programs that provide 

12 coverage or financial assistance for the pur13 chase or provision of prescription drug coverage 

14 on behalf of applicable beneficiaries as the Sec15 retary may specify; and 

16 ‘‘(E) providing a reasonable dispute resolu17 tion mechanism to resolve disagreements be18 tween manufacturers, applicable beneficiaries, 

19 and the third party with a contract under sub20 section (d)(3). 

21 ‘‘(2) MONITORING COMPLIANCE.— 

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

23 monitor compliance by a manufacturer with the 

24 terms of an agreement under this section. 


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1 ‘‘(B) NOTIFICATION.—If a third party 

2 with a contract under subsection (d)(3) deter3 mines that the manufacturer is not in compli4 ance with such agreement, the third party shall 

5 notify the Secretary of such noncompliance for 

6 appropriate enforcement under subsection (e). 

7 ‘‘(3) COLLECTION OF DATA FROM PRESCRIP8 TION DRUG PLANS AND MA–PD PLANS.—The Sec9 retary may collect appropriate data from prescrip10 tion drug plans and MA–PD plans in a timeframe 

11 that allows for discounted prices to be provided for 

12 applicable drugs under this section. 

13 ‘‘(d) ADMINISTRATION.— 

14 ‘‘(1) IN GENERAL.—Subject to paragraph (2), 

15 the Secretary shall provide for the implementation of 

16 this section, including the performance of the duties 

17 described in subsection (c). 

18 ‘‘(2) LIMITATION.—In providing for the imple19 mentation of this section, the Secretary shall not re20 ceive or distribute any funds of a manufacturer 

21 under the program. 

22 ‘‘(3) CONTRACT WITH THIRD PARTIES.—The 

23 Secretary shall enter into a contract with 1 or more 

24 third parties to administer the requirements estab25 lished by the Secretary in order to carry out this 


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1 section. At a minimum, the contract with a third 

2 party under the preceding sentence shall require 

3 that the third party— 

4 ‘‘(A) receive and transmit information be5 tween the Secretary, manufacturers, and other 

6 individuals or entities the Secretary determines 

7 appropriate; 

8 ‘‘(B) receive, distribute, or facilitate the 

9 distribution of funds of manufacturers to ap10 propriate individuals or entities in order to 

11 meet the obligations of manufacturers under 

12 agreements under this section; 

13 ‘‘(C) provide adequate and timely informa14 tion to manufacturers, consistent with the 

15 agreement with the manufacturer under this 

16 section, as necessary for the manufacturer to 

17 fulfill its obligations under this section; and 

18 ‘‘(D) permit manufacturers to conduct 

19 periodic audits, directly or through contracts, of 

20 the data and information used by the third 

21 party to determine discounts for applicable 

22 drugs of the manufacturer under the program. 

23 ‘‘(4) PERFORMANCE REQUIREMENTS.—The 

24 Secretary shall establish performance requirements 

25 for a third party with a contract under paragraph 


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1 (3) and safeguards to protect the independence and 

2 integrity of the activities carried out by the third 

3 party under the program under this section. 

4 ‘‘(5) IMPLEMENTATION.—The Secretary may 

5 implement the program under this section by pro6 gram instruction or otherwise. 

7 ‘‘(6) ADMINISTRATION.—Chapter 35 of title 44, 

8 United States Code, shall not apply to the program 

9 under this section. 

10 ‘‘(e) ENFORCEMENT.— 

11 ‘‘(1) AUDITS.—Each manufacturer with an 

12 agreement in effect under this section shall be sub13 ject to periodic audit by the Secretary. 

14 ‘‘(2) CIVIL MONEY PENALTY.— 

15 ‘‘(A) IN GENERAL.—The Secretary may 

16 impose a civil money penalty on a manufacturer 

17 that fails to provide applicable beneficiaries dis18 counts for applicable drugs of the manufacturer 

19 in accordance with such agreement for each 

20 such failure in an amount the Secretary deter21 mines is commensurate with the sum of— 

22 ‘‘(i) the amount that the manufac23 turer would have paid with respect to such 

24 discounts under the agreement, which will 

25 then be used to pay the discounts which 


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1 the manufacturer had failed to provide; 

2 and 

3 ‘‘(ii) 25 percent of such amount. 

4 ‘‘(B) APPLICATION.—The provisions of 

5 section 1128A (other than subsections (a) and 

6 (b)) shall apply to a civil money penalty under 

7 this paragraph in the same manner as such 

8 provisions apply to a penalty or proceeding 

9 under section 1128A(a). 

10 ‘‘(f) CLARIFICATION REGARDING AVAILABILITY OF

11 OTHER COVERED PART D DRUGS.—Nothing in this sec12 tion shall prevent an applicable beneficiary from pur13 chasing a covered part D drug that is not an applicable 

14 drug (including a generic drug or a drug that is not on 

15 the formulary of the prescription drug plan or MA–PD 

16 plan that the applicable beneficiary is enrolled in). 

17 ‘‘(g) DEFINITIONS.—In this section: 

18 ‘‘(1) APPLICABLE BENEFICIARY.—The term 

19 ‘applicable beneficiary’ means an individual who, on 

20 the date of dispensing a covered part D drug— 

21 ‘‘(A) is enrolled in a prescription drug plan 

22 or an MA–PD plan; 

23 ‘‘(B) is not enrolled in a qualified retiree 

24 prescription drug plan; and 


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1 ‘‘(C) has incurred costs for covered part D 

2 drugs in the year that are equal to or exceed 

3 the annual deductible specified in section 

4 1860D–2(b)(1) for such year. 

5 ‘‘(2) APPLICABLE DRUG.—The term ‘applicable 

6 drug’, with respect to an applicable beneficiary— 

7 ‘‘(A) means a covered part D drug— 

8 ‘‘(i) approved under a new drug appli9 cation under section 505(b) of the Federal 

10 Food, Drug, and Cosmetic Act or, in the 

11 case of a biologic product, licensed under 

12 section 351 of the Public Health Service 

13 Act; and 

14 ‘‘(ii)(I) if the PDP sponsor of the pre15 scription drug plan or the MA organization 

16 offering the MA–PD plan uses a for17 mulary, which is on the formulary of the 

18 prescription drug plan or MA–PD plan 

19 that the applicable beneficiary is enrolled 

20 in; 

21 ‘‘(II) if the PDP sponsor of the pre22 scription drug plan or the MA organization 

23 offering the MA–PD plan does not use a 

24 formulary, for which benefits are available 

25 under the prescription drug plan or MA– 


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1 PD plan that the applicable beneficiary is 

2 enrolled in; or 

3 ‘‘(III) is provided through an excep4 tion or appeal; and 

5 ‘‘(B) does not include a selected drug (as 

6 defined in section 1192(c)) during a price appli7 cability period (as defined in section 

8 1191(b)(2)) with respect to such drug. 

9 ‘‘(3) APPLICABLE NUMBER OF CALENDAR

10 DAYS.—The term ‘applicable number of calendar 

11 days’ means— 

12 ‘‘(A) with respect to claims for reimburse13 ment submitted electronically, 14 days; and 

14 ‘‘(B) with respect to claims for reimburse15 ment submitted otherwise, 30 days. 

16 ‘‘(4) DISCOUNTED PRICE.— 

17 ‘‘(A) IN GENERAL.—The term ‘discounted 

18 price’ means, with respect to an applicable drug 

19 of a manufacturer furnished during a year to 

20 an applicable beneficiary— 

21 ‘‘(i) who has not incurred costs for 

22 covered part D drugs in the year that are 

23 equal to or exceed the annual out-of-pocket 

24 threshold specified in section 1860D– 


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1 2(b)(4)(B)(i) for the year, 90 percent of 

2 the negotiated price of such drug; and 

3 ‘‘(ii) who has incurred such costs in 

4 the year that are equal to or exceed such 

5 threshold for the year, 70 percent of the 

6 negotiated price of such drug. 

7 ‘‘(B) CLARIFICATION.—Nothing in this 

8 section shall be construed as affecting the re9 sponsibility of an applicable beneficiary for pay10 ment of a dispensing fee for an applicable drug. 

11 ‘‘(C) SPECIAL CASE FOR CERTAIN

12 CLAIMS.— 

13 ‘‘(i) CLAIMS SPANNING DEDUCT14 IBLE.—In the case where the entire 

15 amount of the negotiated price of an indi16 vidual claim for an applicable drug with re17 spect to an applicable beneficiary does not 

18 fall at or above the annual deductible spec19 ified in section 1860D–2(b)(1) for the 

20 year, the manufacturer of the applicable 

21 drug shall provide the discounted price 

22 under this section on only the portion of 

23 the negotiated price of the applicable drug 

24 that falls at or above such annual deduct25 ible. 


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1 ‘‘(ii) CLAIMS SPANNING OUT-OF-POCK2 ET THRESHOLD.—In the case where the 

3 entire amount of the negotiated price of an 

4 individual claim for an applicable drug 

5 with respect to an applicable beneficiary 

6 does not fall entirely below or entirely 

7 above the annual out-of-pocket threshold 

8 specified in section 1860D–2(b)(4)(B)(i) 

9 for the year, the manufacturer of the ap10 plicable drug shall provide the discounted 

11 price— 

12 ‘‘(I) in accordance with subpara13 graph (A)(i) on the portion of the ne14 gotiated price of the applicable drug 

15 that falls below such threshold; and 

16 ‘‘(II) in accordance with subpara17 graph (A)(ii) on the portion of such 

18 price of such drug that falls at or 

19 above such threshold. 

20 ‘‘(5) MANUFACTURER.—The term ‘manufac21 turer’ means any entity which is engaged in the pro22 duction, preparation, propagation, compounding, 

23 conversion, or processing of prescription drug prod24 ucts, either directly or indirectly by extraction from 

25 substances of natural origin, or independently by 


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1 means of chemical synthesis, or by a combination of 

2 extraction and chemical synthesis. Such term does 

3 not include a wholesale distributor of drugs or a re4 tail pharmacy licensed under State law. 

5 ‘‘(6) NEGOTIATED PRICE.—The term ‘nego6 tiated price’ has the meaning given such term in sec7 tion 423.100 of title 42, Code of Federal Regula8 tions (as in effect on the date of enactment of sec9 tion 1860D–14A), except that such negotiated price 

10 shall not include any dispensing fee for the applica11 ble drug. 

12 ‘‘(7) QUALIFIED RETIREE PRESCRIPTION DRUG

13 PLAN.—The term ‘qualified retiree prescription drug 

14 plan’ has the meaning given such term in section 

15 1860D–22(a)(2).’’. 

16 (2) SUNSET OF MEDICARE COVERAGE GAP DIS17 COUNT PROGRAM.—Section 1860D–14A of the So18 cial Security Act (42 U.S.C. 1395–114a) is amend19 ed— 

20 (A) in subsection (a), in the first sentence, 

21 by striking ‘‘The Secretary’’ and inserting 

22 ‘‘Subject to subsection (h), the Secretary’’; and 

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

24 subsection: 

25 ‘‘(h) SUNSET OF PROGRAM.— 


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1 ‘‘(1) IN GENERAL.—The program shall not 

2 apply with respect to applicable drugs dispensed on 

3 or after January 1, 2022, and, subject to paragraph 

4 (2), agreements under this section shall be termi5 nated as of such date. 

6 ‘‘(2) CONTINUED APPLICATION FOR APPLICA7 BLE DRUGS DISPENSED PRIOR TO SUNSET.—The 

8 provisions of this section (including all responsibil9 ities and duties) shall continue to apply after Janu10 ary 1, 2022, with respect to applicable drugs dis11 pensed prior to such date.’’. 

12 (3) INCLUSION OF ACTUARIAL VALUE OF MANU13 FACTURER DISCOUNTS IN BIDS.—Section 1860D–11 

14 of the Social Security Act (42 U.S.C. 1395w–111) 

15 is amended— 

16 (A) in subsection (b)(2)(C)(iii)— 

17 (i) by striking ‘‘assumptions regarding 

18 the reinsurance’’ an inserting ‘‘assump19 tions regarding— 

20 ‘‘(I) the reinsurance’’; and 

21 (ii) by adding at the end the fol22 lowing: 

23 ‘‘(II) for 2022 and each subse24 quent year, the manufacturer dis25 counts provided under section 1860D– 


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1 14C subtracted from the actuarial 

2 value to produce such bid; and’’; and 

3 (B) in subsection (c)(1)(C)— 

4 (i) by striking ‘‘an actuarial valuation 

5 of the reinsurance’’ and inserting ‘‘an ac6 tuarial valuation of— 

7 ‘‘(i) the reinsurance’’; 

8 (ii) in clause (i), as inserted by clause 

9 (i) of this subparagraph, by adding ‘‘and’’ 

10 at the end; and 

11 (iii) by adding at the end the fol12 lowing: 

13 ‘‘(ii) for 2022 and each subsequent 

14 year, the manufacturer discounts provided 

15 under section 1860D–14C;’’. 

16 (d) CONFORMING AMENDMENTS.— 

17 (1) Section 1860D–2 of the Social Security Act 

18 (42 U.S.C. 1395w–102) is amended— 

19 (A) in subsection (a)(2)(A)(i)(I), by strik20 ing ‘‘, or an increase in the initial’’ and insert21 ing ‘‘or, for a year preceding 2022, an increase 

22 in the initial’’; 

23 (B) in subsection (c)(1)(C)— 


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1 (i) in the subparagraph heading, by 

2 striking ‘‘AT INITIAL COVERAGE LIMIT’’; 

3 and 

4 (ii) by inserting ‘‘for a year preceding 

5 2022 or the annual out-of-pocket threshold 

6 specified in subsection (b)(4)(B) for the 

7 year for 2022 and each subsequent year’’ 

8 after ‘‘subsection (b)(3) for the year’’ each 

9 place it appears; and 

10 (C) in subsection (d)(1)(A), by striking ‘‘or 

11 an initial’’ and inserting ‘‘or, for a year pre12 ceding 2022, an initial’’. 

13 (2) Section 1860D–4(a)(4)(B)(i) of the Social 

14 Security Act (42 U.S.C. 1395w–104(a)(4)(B)) is 

15 amended by striking ‘‘the initial’’ and inserting ‘‘for 

16 a year preceding 2022, the initial’’. 

17 (3) Section 1860D–14(a) of the Social Security 

18 Act (42 U.S.C. 1395w–114(a)) is amended— 

19 (A) in paragraph (1)— 

20 (i) in subparagraph (C), by striking 

21 ‘‘The continuation’’ and inserting ‘‘For a 

22 year preceding 2022, the continuation’’; 

23 (ii) in subparagraph (D)(iii), by strik24 ing ‘‘1860D–2(b)(4)(A)(i)(I)’’ and insert25 ing ‘‘1860D–2(b)(4)(A)(i)(I)(aa)’’; and 


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1 (iii) in subparagraph (E), by striking 

2 ‘‘The elimination’’ and inserting ‘‘For a 

3 year preceding 2022, the elimination’’; and 

4 (B) in paragraph (2)— 

5 (i) in subparagraph (C), by striking 

6 ‘‘The continuation’’ and inserting ‘‘For a 

7 year preceding 2022, the continuation’’; 

8 and 

9 (ii) in subparagraph (E)— 

10 (I) by inserting ‘‘for a year pre11 ceding 2022,’’ after ‘‘subsection (c)’’; 

12 and 

13 (II) by striking ‘‘1860D– 

14 2(b)(4)(A)(i)(I)’’ and inserting 

15 ‘‘1860D–2(b)(4)(A)(i)(I)(aa)’’. 

16 (4) Section 1860D–21(d)(7) of the Social Secu17 rity Act (42 U.S.C. 1395w–131(d)(7)) is amended 

18 by striking ‘‘section 1860D–2(b)(4)(B)(i)’’ and in19 serting ‘‘section 1860D–2(b)(4)(C)(i)’’. 

20 (5) Section 1860D–22(a)(2)(A) of the Social 

21 Security Act (42 U.S.C. 1395w–132(a)(2)(A)) is 

22 amended— 

23 (A) by striking ‘‘the value of any discount’’ 

24 and inserting the following: ‘‘the value of— 


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1 ‘‘(i) for years prior to 2022, any dis2 count’’. 

3 (B) in clause (i), as inserted by subpara4 graph (A) of this paragraph, by striking the pe5 riod at the end and inserting ‘‘; and’’; and 

6 (C) by adding at the end the following new 

7 clause: 

8 ‘‘(ii) for 2022 and each subsequent 

9 year, any discount provided pursuant to 

10 section 1860D–14C.’’. 

11 (6) Section 1860D–41(a)(6) of the Social Secu12 rity Act (42 U.S.C. 1395w–151(a)(6)) is amended— 

13 (A) by inserting ‘‘for a year before 2022’’ 

14 after ‘‘1860D–2(b)(3)’’; and 

15 (B) by inserting ‘‘for such year’’ before the 

16 period. 

17 (7) Paragraph (1) of section 1860D–43(a) of 

18 the Social Security Act (42 U.S.C. 1395w–153(a)) is 

19 amended to read as follows: 

20 ‘‘(1) participate in— 

21 ‘‘(A) for 2011 through 2021, the Medicare 

22 coverage gap discount program under section 

23 1860D–14A; and 


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1 ‘‘(B) for 2022 and each subsequent year, 

2 the manufacturer discount program under sec3 tion 1860D–14C;’’. 

4 (e) EFFECTIVE DATE.—The amendments made by 

5 this section shall apply with respect to plan year 2022 and 

6 subsequent plan years. 

Æ 


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