I

104TH CONGRESS

1ST SESSION H. R. 507

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

of expanded nursing facility and in-home services for dependent individuals under the medicare program, to provide for coverage of outpatient

prescription drugs under part B of such program, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 13, 1995

Mr. ENGEL introduced the following bill; which was referred to the Committee

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

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

for consideration of such provisions as fall within the jurisdiction of the

committee concerned

A BILL

To amend title XVIII of the Social Security Act to provide

for coverage of expanded nursing facility and in-home

services for dependent individuals under the medicare

program, to provide for coverage of outpatient prescription drugs under part B of such program, 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.

4 This Act may be cited as the ‘‘Comprehensive Long5 Term Care Act of 1995’’.
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1 SEC. 2. EXPANDED LONG-TERM CARE SERVICES UNDER

2 MEDICARE PROGRAM FOR DEPENDENT INDI3 VIDUALS.

4 (a) IN GENERAL.—

5 (1) PART A.—Section 1812 of the Social Secu6 rity Act (42 U.S.C. 1395d) is amended—

7 (A) in subsection (a)—

8 (i) in paragraph (2)(B), by striking

9 ‘‘subsection (f),’’ and inserting ‘‘subsection

10 (f) and section 1890,’’,

11 (ii) by striking ‘‘and’’ at the end of

12 paragraph (3),

13 (iii) by striking the period at the end

14 of paragraph (4) and inserting ‘‘; and’’,

15 and

16 (iv) by adding at the end the following

17 new paragraph:

18 ‘‘(5) long-term care services consisting of ex19 tended care services (in accordance with section

20 1890).’’; and

21 (B) in subsection (b)(2), by striking ‘‘post22 hospital’’ and inserting ‘‘except as provided in

23 section 1890, post-hospital’’.

24 (2) PART B.—Section 1861(s)(2) of such Act

25 (42 U.S.C. 1395x(s)(2)), as amended by section
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1 147(f)(6)(B)(iii) of the Social Security Act Amend2 ments of 1994, is amended—

3 (A) in subparagraph (N), by striking

4 ‘‘and’’ at the end;

5 (B) in subparagraph (O), by striking

6 ‘‘and’’ at the end; and

7 (C) by inserting after subparagraph (O)

8 the following new subparagraph:

9 ‘‘(P) long-term care services consisting of in10 home care (in accordance with section 1890); and’’.

11 (b) DESCRIPTION OF SERVICES; ELIGIBILITY.—Title

12 XVIII of the Social Security Act is amended by inserting

13 after section 1889 the following new section:

14 ‘‘LONG-TERM CARE SERVICES FOR DEPENDENT

15 INDIVIDUALS

16 ‘‘SEC. 1890. (a) IN GENERAL.—An individual enti17 tled to benefits under this part shall be entitled to have

18 payments made on the individual’s behalf for long-term

19 care services if—

20 ‘‘(1) the individual is a dependent individual;

21 and

22 ‘‘(2) such services are provided in accordance

23 with a case management plan developed by a case

24 management agency.

25 ‘‘(b) SERVICES PROVIDED.—In this section, the term

26 ‘long-term care services’ means—
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1 ‘‘(1) in-home care (as defined in subsection (e));

2 and

3 ‘‘(2) extended care services (as defined in sec4 tion 1861(h)), but only with respect to a chronically

5 dependent individual.

6 ‘‘(c) PAYMENT FOR SERVICES.—

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

8 the amount payable for long-term care services

9 under this section shall be determined in accordance

10 with a fee schedule for such services established by

11 the Secretary.

12 ‘‘(2) IMPOSITION OF DEDUCTIBLE.—The

13 amount otherwise payable for long-term care services

14 under this section furnished during a calendar year

15 shall be reduced by a deduction equal to the deduct16 ible imposed for inpatient hospital services for the

17 year under section 1813(a)(1).

18 ‘‘(d) DEPENDENT INDIVIDUAL DEFINED.—

19 ‘‘(1) IN GENERAL.—In this section, the term

20 ‘dependent individual’ means an individual who—

21 ‘‘(A) is unable to perform (without sub22 stantial assistance from another individual) be23 cause of physical or cognitive impairment at

24 least 2 of the following activities of daily living:
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1 bathing, dressing, toileting, transferring, and

2 eating; or

3 ‘‘(B) has a similar level of disability due to

4 cognitive impairment that requires substantial

5 direction, instruction, or supervision of another

6 individual in order—

7 ‘‘(i) to perform 2 or more of the ac8 tivities of daily living described in subpara9 graph (A), or

10 ‘‘(ii) to remain in the community

11 without causing harm to self or others be12 cause of inappropriate behavioral patterns.

13 ‘‘(2) CHRONICALLY DEPENDENT INDIVIDUAL.—

14 In this section, the term ‘chronically dependent indi15 vidual’ means an individual described in paragraph

16 (1) who—

17 ‘‘(A) for purposes of subparagraph (A) of

18 such paragraph, is unable to perform at least 3

19 of the activities of daily living described in such

20 subparagraph; or

21 ‘‘(B) for purposes of subparagraph (B)(i)

22 of such paragraph, has a level of disability that

23 requires direction, instruction, or supervision of

24 another individual to perform 3 or more of such

25 activities of daily living.
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1 ‘‘(3) ACTIVITIES OF DAILY LIVING DEFINED.—

2 The ‘activities of daily living’ referred to in this sub3 section are as follows:

4 ‘‘(A) Eating.

5 ‘‘(B) Bathing.

6 ‘‘(C) Dressing.

7 ‘‘(D) Toileting.

8 ‘‘(E) Transferring in and out of a bed or

9 in and out of a chair.

10 ‘‘(e) IN-HOME CARE.—

11 ‘‘(1) IN GENERAL.—For purposes of this sec12 tion, the term ‘in-home care’ means the items and

13 services described in paragraph (2) furnished to an

14 individual by a home care agency (as defined in sec15 tion 1861(oo)) or by others under arrangements

16 with them made by the agency provided in a place

17 of residence used as such individual’s home (other

18 than services described in paragraph (2)(H)).

19 ‘‘(2) SERVICES DESCRIBED.—The items and

20 services described in this paragraph are as follows:

21 ‘‘(A) Nursing care provided by or under

22 the supervision of a registered professional

23 nurse.

24 ‘‘(B) Services of a homemaker/home health

25 aide who has successfully completed a training
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1 and competency evaluation program approved

2 by the Secretary.

3 ‘‘(C) Personal care services.

4 ‘‘(D) Medical social services.

5 ‘‘(E) Physical, occupational, or respiratory

6 therapy or speech-language pathology.

7 ‘‘(F) Medical supplies (other than drugs

8 and biologicals) and durable medical equipment,

9 while under such a plan.

10 ‘‘(G) Patient and caregiver (including fam11 ily caregiver) education and training to develop

12 skills necessary to permit the individual to re13 main in the home setting.

14 ‘‘(H) Community care services furnished

15 outside of the place of residence.

16 ‘‘(I) Such other home-based items and

17 services (other than room and board) as the

18 Secretary may approve.

19 ‘‘(f) CASE MANAGEMENT REQUIREMENTS.—

20 ‘‘(1) REQUESTS FOR ASSESSMENT.—Each indi21 vidual entitled to benefits under this title (or an22 other person on such individual’s behalf) may re23 quest a case management agency to conduct an as24 sessment under this section to determine whether
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1 the individual is a dependent individual or a chron2 ically dependent individual.

3 ‘‘(2) DESCRIPTION OF PLANS.—For purposes of

4 this section, a ‘case management plan’ means, with

5 respect to an individual, a written plan of care

6 which—

7 ‘‘(A) is established and periodically re8 viewed and revised by a case management agen9 cy; and

10 ‘‘(B) reflects the individual’s needs identi11 fied in the assessment under paragraph (1).

12 ‘‘(3) CASE MANAGEMENT AGENCY DEFINED.—

13 In this section, the term ‘case management agency’

14 means a nonprofit or public agency or organization

15 (or a nonprofit or public subdivision of such an

16 agency or organization) certified by the Secretary to

17 conduct assessments and establish case management

18 plans under this subsection which—

19 ‘‘(A) is experienced in conducting assess20 ments, in establishing and periodically reviewing

21 and revising case management plans for nurs22 ing facility services and in-home care, and in

23 coordinating and reviewing the quality of the

24 provision of such services and care;
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1 ‘‘(B) is capable of efficiently and effectively

2 performing directly or through contracts under

3 paragraph (4) such duties; and

4 ‘‘(C) does not provide nursing facility serv5 ices or in-home care and does not have a direct

6 or indirect ownership or control interest in, or

7 direct or indirect affiliation or relationship with,

8 an entity that provides, such services or care.

9 ‘‘(4) CONTRACTING OUT CERTAIN FUNC10 TIONS.—The Secretary shall permit a case manage11 ment agency, to the extent necessary to carry out

12 functions under this section, to provide for assess13 ments and case management plans through con14 tracts with nonprofit or public organizations which

15 do not provide nursing facility services or in-home

16 care and do not have a direct or indirect ownership

17 or control interest in, or direct or indirect affiliation

18 or relationship with, an entity that provides, such

19 services or care.’’.

20 (c) CONFORMING AMENDMENTS.—(1) Section

21 1833(a)(1) of such Act (42 U.S.C. 1395l(a)(1)) is amend22 ed—

23 (A) by striking ‘‘and (P)’’ and inserting ‘‘(P)’’;

24 and
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1 (B) by striking the semicolon at the end and in2 serting the following: ‘‘, and (Q) with respect to ex3 penses incurred for services described in section

4 1861(s)(2)(P), the amounts paid shall be the

5 amounts determined under section 1890(c);’’.

6 (2) Section 1861 of such Act (42 U.S.C. 1395x) is

7 amended by adding at the end the following new sub8 section:

9 ‘‘HOME CARE AGENCY

10 ‘‘(oo) The term ‘home care agency’ means a public

11 agency or private organization, or a subdivision of such

12 an agency or organization, which is a home health agency

13 (as defined in subsection (m)) or—

14 ‘‘(1) is primarily engaged in providing services

15 of homemaker/home health aides and personal care

16 aides;

17 ‘‘(2) maintains clinical records on all patients;

18 ‘‘(3) in the case of an agency or organization in

19 any State in which State or applicable local law pro20 vides for the licensing of agencies or organizations of

21 this nature, (A) is licensed pursuant to such law, or

22 (B) is approved, by the agency of such State or lo23 cality, responsible for licensing agencies or organiza24 tions of this nature, as meeting the standards estab25 lished for such licensing; and
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1 ‘‘(4) meets such other requirements as the Sec2 retary may find necessary in the interest of the

3 health and safety of individuals who are furnished

4 services by such agency or organization and for the

5 effective and efficient operation of the program.’’.

6 (d) EFFECTIVE DATE.—The amendments made by

7 this section shall apply to items and services furnished on

8 or after January 1, 1996.

9 SEC. 3. MEDICARE COVERAGE OF OUTPATIENT PRESCRIP10 TION DRUGS.

11 (a) DESCRIPTION OF COVERED OUTPATIENT

12 DRUGS.—

13 (1) COVERAGE.—Section 1861(s)(2)(J) of the

14 Social Security Act (42 U.S.C. 1395x(s)(2)(J)) is

15 amended to read as follows:

16 ‘‘(J) covered outpatient drugs;’’.

17 (2) DRUGS DESCRIBED.—Section 1861(t) of

18 such Act (42 U.S.C. 1395x(t)) is amended—

19 (1) in the heading, by adding at the end the fol20 lowing: ‘‘; Covered Outpatient Drugs’’;

21 (2) in paragraph (1)—

22 (A) by striking ‘‘paragraph (2)’’ and in23 serting ‘‘the succeeding paragraphs of this sub24 section’’, and
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1 (B) by striking the period at the end and

2 inserting ‘‘, but only if used for a medically ac3 cepted indication (as described in paragraph

4 (4)).’’; and

5 (3) by striking paragraph (2) and inserting the

6 following:

7 ‘‘(2) Subject to paragraph (3), the term ‘covered out8 patient drug’ means—

9 ‘‘(A) a drug which may be dispensed only upon

10 prescription and—

11 ‘‘(i) which is approved for safety and effec12 tiveness as a prescription drug under section

13 505 or 507 of the Federal Food, Drug, and

14 Cosmetic Act or which is approved under sec15 tion 505(j) of such Act;

16 ‘‘(ii)(I) which was commercially used or

17 sold in the United States before the date of the

18 enactment of the Drug Amendments of 1962 or

19 which is identical, similar, or related (within the

20 meaning of section 310.6(b)(1) of title 21 of the

21 Code of Federal Regulations) to such a drug,

22 and (II) which has not been the subject of a

23 final determination by the Secretary that it is

24 a ‘new drug’ (within the meaning of section

25 201(p) of the Federal Food, Drug, and Cos-
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1 metic Act) or an action brought by the Sec2 retary under section 301, 302(a), or 304(a) of

3 such Act to enforce section 502(f) or 505(a) of

4 such Act; or

5 ‘‘(iii)(I) which is described in section

6 107(c)(3) of the Drug Amendments of 1962

7 and for which the Secretary has determined

8 there is a compelling justification for its medi9 cal need, or is identical, similar, or related

10 (within the meaning of section 310.6(b)(1) of

11 title 21 of the Code of Federal Regulations) to

12 such a drug, and (II) for which the Secretary

13 has not issued a notice of an opportunity for a

14 hearing under section 505(e) of the Federal

15 Food, Drug, and Cosmetic Act on a proposed

16 order of the Secretary to withdraw approval of

17 an application for such drug under such section

18 because the Secretary has determined that the

19 drug is less than effective for all conditions of

20 use prescribed, recommended, or suggested in

21 its labeling;

22 ‘‘(B) a biological product which—

23 ‘‘(i) may only be dispensed upon prescrip24 tion,
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1 ‘‘(ii) is licensed under section 351 of the

2 Public Health Service Act, and

3 ‘‘(iii) is produced at an establishment li4 censed under such section to produce such

5 product; and

6 ‘‘(C) insulin certified under section 506 of the

7 Federal Food, Drug, and Cosmetic Act.

8 ‘‘(3)(A) The term ‘covered outpatient drug’ does not

9 include any drug, biological product, or insulin provided

10 as, as part of, or as incident to, any of the following (and

11 for which payment may be included under this title):

12 ‘‘(i) Inpatient hospital services (described in

13 subsection (b)(2)).

14 ‘‘(ii) Extended care services (described in sub15 section (h)(5)).

16 ‘‘(iii) Physicians’ services under subparagraph

17 (A) or (B) of subsection (s)(2).

18 ‘‘(iv) Dialysis supplies under subsection

19 (s)(2)(F).

20 ‘‘(v) Antigens under subsection (s)(2)(G).

21 ‘‘(vi) Blood clotting factors for hemophiliacs

22 under subsection (s)(2)(I).

23 ‘‘(vii) Services of a physician assistant, nurse

24 practitioner, or clinical nurse specialist under sub25 section (s)(2)(K).
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1 ‘‘(viii) Pneumococcal, hepatitis B, or influenza

2 vaccines under subsection (s)(10).

3 ‘‘(ix) Rural health clinic services (under sub4 section (aa)(1)).

5 ‘‘(x) Comprehensive outpatient rehabilitation fa6 cility services (under subsection (cc)(1)).

7 ‘‘(xi) Hospice care (as defined in subsection

8 (dd)(1)).

9 ‘‘(xii) Certified nurse-midwife services (as de10 fined in subsection (gg)(1)).

11 ‘‘(xiii) Inpatient or outpatient rural primary

12 care hospital services (as defined in subsection

13 (mm)).

14 ‘‘(xiv) A covered surgical procedure in an ambu15 latory surgical center (under section

16 1832(a)(2)(F)(i)).

17 ‘‘(B) The term ‘covered outpatient drug’ does not in18 clude any drug that is intravenously administered in a

19 home setting.

20 ‘‘(4) For purposes of paragraph (2), the term ‘medi21 cally accepted indication’, with respect to the use of an

22 outpatient drug, includes—

23 ‘‘(A) any use which has been approved by the

24 Food and Drug Administration for the drug, and
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1 ‘‘(B) any other use of the drug, unless the Sec2 retary determines that such use is not medically ap3 propriate.’’.

4 (b) DEDUCTIBLE AND PAYMENT AMOUNTS.—(1)

5 Section 1833(a)(1) of such Act (42 U.S.C. 1395l(a)(1)),

6 as amended by section 2(c)(1), is amended—

7 (A) by striking ‘‘and (Q)’’ and inserting ‘‘(Q)’’;

8 and

9 (B) by striking the semicolon at the end and in10 serting the following ‘‘, and (R) with respect to ex11 penses incurred for covered outpatient drugs, the

12 amounts paid shall be the amounts determined

13 under section 1834(d)(2);’’.

14 (2) Section 1833(a)(2) of such Act (42 U.S.C.

15 1395l(a)(2)) is amended by inserting ‘‘(other than covered

16 outpatient drugs)’’ after ‘‘(2) in the case of services’’.

17 (3) Section 1833(b) of such Act (42 U.S.C. 1395l(b))

18 is amended—

19 (A) in clause (1), by inserting ‘‘or for covered

20 outpatient drugs’’ after ‘‘1861(s)(10)(A)’’, and

21 (B) in clause (2), by inserting ‘‘or with respect

22 to covered outpatient drugs’’ after ‘‘1861(kk)))’’.

23 (4) Section 1834 of such Act (42 U.S.C. 1395m) is

24 amended by inserting after subsection (c) the following

25 new subsection:
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1 ‘‘(d) PAYMENT FOR COVERED OUTPATIENT

2 DRUGS.—

3 ‘‘(1) DEDUCTIBLE.—

4 ‘‘(A) APPLICATION.—

5 ‘‘(i) IN GENERAL.—Except as pro6 vided in clauses (ii) and (iii), payment

7 shall be made under paragraph (2) only

8 with respect to expenses incurred by an in9 dividual for covered outpatient drugs dur10 ing a calendar year on or after such date

11 in the year as the Secretary determines

12 that the individual has incurred expenses

13 in the year for covered outpatient drugs

14 (during a period in which the individual is

15 entitled to benefits under this part) equal

16 to the amount of the prescription drug de17 ductible specified in subparagraph (C) for

18 that year.

19 ‘‘(ii) DEDUCTIBLE NOT APPLIED TO

20 1ST YEAR IMMUNOSUPPRESSIVES.—The

21 prescription drug deductible established

22 under this paragraph shall not apply to

23 drugs described in section 1861(t)(2)(A)

24 used in immunosuppressive therapy and

25 furnished, to an individual who receives an
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1 organ transplant for which payment is

2 made under this title, within 1 year after

3 the date of the transplant.

4 ‘‘(B) RESPONSE TO APPLICATION.—If the

5 system described in section 1842(o)(4) has not

6 been established and an individual applies to

7 the Secretary to establish that the individual

8 has met the requirement of subparagraph (A),

9 the Secretary shall promptly notify the individ10 ual (and, if the application was submitted by or

11 through a participating pharmacy, the phar12 macy) as to the date (if any) as of which the

13 individual has met such requirement.

14 ‘‘(C) PRESCRIPTION DRUG DEDUCTIBLE

15 AMOUNT.—The prescription drug deductible

16 specified in this subparagraph for—

17 ‘‘(i) 1997 is $250, and

18 ‘‘(ii) any succeeding year, is the pre19 scription drug deductible for the preceding

20 year, increased by the percentage by which

21 the monthly premium under section 1839

22 for months during the year exceeds the

23 monthly premium under such section for

24 months during the preceding year.

25 ‘‘(2) PAYMENT AMOUNT.—
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1 ‘‘(A) IN GENERAL.—Subject to the pre2 scription drug deductible established under

3 paragraph (1)(A) and except as provided in

4 subparagraph (B), the amounts payable under

5 this part with respect to a covered outpatient

6 drug is equal to 80 percent of the lesser of—

7 ‘‘(i) the actual charge for the drug, or

8 ‘‘(ii) the applicable payment limit es9 tablished under paragraph (3).

10 ‘‘(B) TREATMENT OF CERTAIN COST11 BASED PREPAID ORGANIZATIONS.—In applying

12 subparagraph (A) in the case of an organization

13 under a reasonable cost reimbursement contract

14 under section 1876 and in the case of an orga15 nization receiving payment under section

16 1833(a)(1)(A) and providing coverage of cov17 ered outpatient drugs, the Secretary shall pro18 vide for an appropriate adjustment in the pay19 ment amounts otherwise made to reflect the ag20 gregate increase in payments that would other21 wise be made with respect to enrollees in such

22 an organization if payments were made other

23 than under such clause or such a contract on

24 an individual-by-individual basis.

25 ‘‘(3) PAYMENT LIMITS.—
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1 ‘‘(A) PAYMENT LIMIT FOR NON-MULTIPLE

2 SOURCE DRUGS AND MULTIPLE-SOURCE DRUGS

3 WITH RESTRICTIVE PRESCRIPTIONS.—In the

4 case of a drug that either is not a multiple

5 source drug (as defined in paragraph (9)(A)) or

6 is a multiple source drug and has a restrictive

7 prescription (as defined in paragraph (9)(B)),

8 the payment limit for the drug under this para9 graph for a payment calculation period is equal

10 to the lesser of—

11 ‘‘(i) the 90th percentile of the actual

12 charges (computed on a statewide basis,

13 carrier-wide basis, or other appropriate ge14 ographic area basis, as specified by the

15 Secretary) for the drug for the second pre16 vious payment calculation period, adjusted

17 (as the Secretary determines to be appro18 priate) to reflect the number of tablets (or

19 other dosage units) dispensed; or

20 ‘‘(ii) the amount of the administrative

21 allowance (established under paragraph

22 (4)) plus the product of—

23 ‘‘(I) the number of tablets (or

24 other dosage units) dispensed, and
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1 ‘‘(II) the per tablet or unit aver2 age wholesale price for such drug (as

3 determined under subparagraph (C)

4 for the period for purposes of this

5 subparagraph).

6 ‘‘(B) PAYMENT LIMIT FOR MULTIPLE

7 SOURCE DRUGS WITHOUT RESTRICTIVE PRE8 SCRIPTIONS.—In the case of a drug that is a

9 multiple source drug but does not have a re10 strictive prescription, the payment limit for the

11 drug under this paragraph for a payment cal12 culation period is equal to the amount of the

13 administrative allowance (established under

14 paragraph (4)) plus the product of—

15 ‘‘(i) the number of tablets (or other

16 dosage units) dispensed, and

17 ‘‘(ii) the unweighted median of the

18 per tablet or unit average wholesale prices

19 (determined under subparagraph (C) for

20 purposes of this subparagraph) for such

21 drug for the period.

22 ‘‘(C) DETERMINATION OF UNIT PRICE.—

23 ‘‘(i) IN GENERAL.—For purposes of

24 this paragraph, the Secretary shall deter25 mine, with respect to the dispensing of a
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1 covered outpatient drug in a payment cal2 culation period (beginning on or after Jan3 uary 1, 1997), the per tablet or unit aver4 age wholesale price for the drug.

5 ‘‘(ii) BASIS FOR DETERMINATIONS.—

6 ‘‘(I) DETERMINATION FOR NON7 MULTIPLE-SOURCE DRUGS.—For pur8 poses of subparagraph (A), such de9 termination shall be based on a bian10 nual survey conducted by the Sec11 retary of a representative sample of

12 direct sellers, wholesalers, or phar13 macies (as appropriate) of wholesale

14 (or comparable direct) prices (exclud15 ing discounts to pharmacies); except

16 that if, because of low volume of sales

17 for the drug or other appropriate rea18 sons or in the case of covered out19 patient drugs during 1997, the Sec20 retary determines that such a survey

21 is not appropriate with respect to a

22 specific drug, such determination shall

23 be based on published average whole24 sale (or comparable direct) prices for

25 the drug.
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1 ‘‘(II) DETERMINATION FOR MUL2 TIPLE-SOURCE DRUGS.—For purposes

3 of subparagraph (B), the Secretary

4 may base the determination under

5 this subparagraph on the published

6 average wholesale (or comparable di7 rect) prices for the drug or on a bian8 nual survey conducted by the Sec9 retary of a representative sample of

10 direct sellers, wholesalers, or phar11 macists (as appropriate) of wholesale

12 (or comparable direct) prices (exclud13 ing discounts to pharmacies).

14 ‘‘(III) COMPLIANCE WITH SUR15 VEY REQUIRED.—If a wholesaler or

16 direct seller of a covered outpatient

17 drug refuses, after being requested by

18 the Secretary, to provide the informa19 tion required in a survey under this

20 clause, or deliberately provides infor21 mation that is false, the Secretary

22 may impose a civil money penalty of

23 not to exceed $10,000 for each such

24 refusal or provision of false informa25 tion. The provisions of section 1128A
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1 (other than subsections (a) and (b))

2 shall apply to civil money penalties

3 under the previous sentence in the

4 same manner as such provisions apply

5 to a penalty or proceeding under sec6 tion 1128A(a). Information gathered

7 pursuant to the survey shall not be

8 disclosed except as the Secretary de9 termines to be necessary to carry out

10 the purposes of this part.

11 ‘‘(iii) QUANTITY AND TIMING.—Such

12 determination shall be based on the price

13 or prices for purchases in reasonable quan14 tities and shall be made for a payment cal15 culation period based on prices for the first

16 day of the first month of the previous pay17 ment calculation period.

18 ‘‘(iv) GEOGRAPHIC BASIS.—The Sec19 retary shall make such determination, and

20 calculate the payment limits under this

21 paragraph, on a national basis; except that

22 the Secretary may make such determina23 tion, and calculate such payment limits, on

24 a regional basis to take account of limita25 tions on the availability of drug products
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1 and variations among regions in the aver2 age wholesale prices for a drug product.

3 ‘‘(4) ADMINISTRATIVE ALLOWANCE FOR PUR4 POSES OF PAYMENT LIMITS.—

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

6 subparagraph (B), for drugs dispensed in—

7 ‘‘(i) 1997, the administrative allow8 ance under this paragraph is—

9 ‘‘(I) $5.00 for drugs dispensed by

10 a participating pharmacy, or

11 ‘‘(II) $3.00 for drugs dispensed

12 by another pharmacy; or

13 ‘‘(ii) a subsequent year, the adminis14 trative allowance under this paragraph is

15 the administrative allowance under this

16 paragraph for the preceding year increased

17 by the percentage increase (if any) in the

18 implicit price deflator for gross national

19 product (as published by the Department

20 of Commerce in its ‘Survey of Current

21 Business’) over the 12-month period end22 ing with August of such preceding year.

23 Any allowance determined under the clause (ii)

24 which is not a multiple of 1 cent shall be round25 ed to the nearest multiple of 1 cent.
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1 ‘‘(B) ADJUSTMENT IN ALLOWANCE FOR

2 MAIL SERVICE PHARMACIES.—The Secretary

3 may, by regulation and after consultation with

4 pharmacists, elderly groups, and private insur5 ers, reduce the administrative allowances estab6 lished under subparagraph (A) for any drug

7 dispensed by a mail service pharmacy (as de8 fined by the Secretary) based on differences be9 tween such pharmacies and other pharmacies

10 with respect to operating costs and other econo11 mies.

12 ‘‘(5) ASSURING APPROPRIATE PRESCRIBING

13 AND DISPENSING PRACTICES.—

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

15 establish a program to identify (and to educate

16 physicians and pharmacists concerning)—

17 ‘‘(i) instances or patterns of unneces18 sary or inappropriate prescribing or dis19 pensing practices for covered outpatient

20 drugs;

21 ‘‘(ii) instances or patterns of sub22 standard care with respect to such drugs;

23 and

24 ‘‘(iii) potential adverse reactions.
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1 ‘‘(B) STANDARDS.—In carrying out the

2 program under subparagraph (A), the Secretary

3 shall establish for each covered outpatient drug

4 standards for the prescribing of the drug which

5 are based on accepted medical practice. In es6 tablishing such standards, the Secretary shall

7 incorporate standards from such current au8 thoritative compendia as the Secretary may se9 lect; except that the Secretary may modify such

10 a standard by regulation on the basis of sci11 entific and medical information that such

12 standard is not consistent with the safe and ef13 fective use of the drug.

14 ‘‘(C) PROHIBITION OF FORMULARY.—

15 Nothing in this title (other than section

16 1862(c)) shall be construed as authorizing the

17 Secretary to exclude from coverage or to deny

18 payment—

19 ‘‘(i) for any specific covered out20 patient drug, or specific class of covered

21 outpatient drug; or

22 ‘‘(ii) for any specific use of such a

23 drug for a specific indication unless such

24 exclusion is pursuant to section 1862(a)(1)
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1 based on a finding by the Secretary that

2 such use is not safe or is not effective.

3 ‘‘(6) TREATMENT OF CERTAIN PREPAID ORGA4 NIZATIONS.—

5 ‘‘(A) GENERAL RULE COUNTING PREPAID

6 PLAN EXPENSES TOWARDS THE PRESCRIPTION

7 DRUG DEDUCTIBLE.—Except as provided in

8 subparagraph (B), expenses incurred by (or on

9 behalf of) a medicare beneficiary for covered

10 outpatient drugs shall be counted (consistent

11 with subparagraph (C)) toward the prescription

12 drug deductible established under paragraph

13 (1) whether or not, at the time the expenses

14 were incurred, the beneficiary was enrolled in a

15 plan under section 1833(a)(1)(A) or under sec16 tion 1876.

17 ‘‘(B) TREATMENT OF DRUG BUY-OUT PLAN

18 EXPENSES.—In the case of a medicare bene19 ficiary enrolled in a month in a drug buy-out

20 plan (as defined in subparagraph (D))—

21 ‘‘(i) expenses incurred by the bene22 ficiary for covered outpatient drugs reim23 bursed under the plan shall not be counted

24 towards the prescription drug deductible,

25 but
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1 ‘‘(ii) if the individual disenrolls from

2 the plan during the year, the beneficiary is

3 deemed to have incurred, for each month

4 of such enrollment, expenses for covered

5 outpatient drugs in an amount equal to the

6 actuarial value (with respect to such

7 month) of the deductible for covered out8 patient drugs (as computed by the Sec9 retary for purposes of section 1876(e)(1))

10 applicable on the average to individuals in

11 the United States.

12 ‘‘(C) TREATMENT OF EXPENSES FOR COV13 ERED OUTPATIENT DRUGS INCURRED WHILE

14 ENROLLED IN A PREPAID PLAN OTHER THAN A

15 DRUG BUY-OUT PLAN.—The Secretary may not

16 enter into a contract with an organization

17 under section 1876, or provide for payment

18 under section 1833(a)(1)(A) with respect to an

19 organization which provides reimbursement for

20 covered outpatient drugs, with respect to a plan

21 that is not a drug buy-out plan, unless the or22 ganization provides assurances, satisfactory to

23 the Secretary, that—

24 ‘‘(i) the organization will maintain

25 and make available, for its enrollees and in
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1 coordination with the appropriate carriers

2 under this part, an accounting of expenses

3 incurred by (or on behalf of) enrollees

4 under the plan for covered outpatient

5 drugs; and

6 ‘‘(ii) the organization will take into

7 account, in any deductibles established

8 under the plan in a year with respect to

9 covered outpatient drugs under this part,

10 the amounts of expenses for covered out11 patient drugs incurred in the year by (or

12 on behalf of) the beneficiary and otherwise

13 counted towards the prescription drug de14 ductible in the year.

15 ‘‘(D) DRUG BUY-OUT PLAN DEFINED.—In

16 this paragraph, the term ‘drug buy-out plan’

17 means a plan under section 1833(a)(1)(A) or

18 offered by an organization under section 1876

19 and with respect to which—

20 ‘‘(i) the amount of any deductible

21 under the plan with respect to covered out22 patient drugs under this title,

23 is less than 50 percent of—

24 ‘‘(ii) the prescription drug deductible

25 specified in paragraph (1)(C).
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1 ‘‘(E) MEDICARE BENEFICIARY DEFINED.—

2 In this subsection, the term ‘medicare bene3 ficiary’ means, with respect to a month, an in4 dividual covered for benefits under this part for

5 the month.

6 ‘‘(F) TREATMENT OF PLAN CHARGES.—In

7 the case of covered outpatient drugs furnished

8 by an eligible organization under section

9 1876(b) or an organization described in section

10 1833(a)(1)(A) which does not impose charges

11 on covered outpatient drugs dispensed to its

12 members, for purposes of this subsection the

13 actual charges of the organization shall be the

14 organization’s standard charges to members,

15 and other individuals, not entitled to benefits

16 with respect to such drugs.

17 ‘‘(7) PHYSICIAN GUIDE.—

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

19 develop, and update annually, an information

20 guide for physicians concerning the comparative

21 average wholesale prices of at least 500 of the

22 most commonly prescribed covered outpatient

23 drugs. Such guide shall, to the extent prac24 ticable, group covered outpatient drugs (includ25 ing multiple source drugs) in a manner useful
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•HR 507 IH

1 to physicians by therapeutic category or with

2 respect to the conditions for which they are pre3 scribed. Such guide shall specify the average

4 wholesale prices on the basis of the amount of

5 the drug required for a typical daily therapeutic

6 regimen.

7 ‘‘(B) MAILING GUIDE.—The Secretary

8 shall provide for mailing, in January of each

9 year (beginning with 1997), a copy of the guide

10 developed and updated under subparagraph

11 (A)—

12 ‘‘(i) to each hospital with an agree13 ment in effect under section 1866;

14 ‘‘(ii) to each physician (as defined in

15 section 1861(r)(1)) who routinely provides

16 services under this part; and

17 ‘‘(iii) to Social Security offices, senior

18 citizen centers, and other appropriate

19 places.

20 ‘‘(8) REPORTS ON UTILIZATION AND EFFECTS

21 ON PRICES.—

22 ‘‘(A) COMPILATION OF INFORMATION.—

23 The Secretary shall compile information on—
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•HR 507 IH

1 ‘‘(i) manufacturers’ prices for covered

2 outpatient drugs, and on charges of phar3 macists for covered outpatient drugs, and

4 ‘‘(ii) the use of covered outpatient

5 drugs by individuals entitled to benefits

6 under this part.

7 The information compiled under clause (i) shall

8 include a comparison of the increases in prices

9 and charges for covered outpatient drugs dur10 ing each 6 month period (beginning with Janu11 ary 1995) with the semiannual average increase

12 in such prices and charges during the 5 years

13 beginning with 1989.

14 ‘‘(B) REPORTS.—The Secretary shall sub15 mit to the Committees on Ways and Means and

16 Commerce of the House of Representatives and

17 the Committee on Finance of the Senate a re18 port, in May and November of 1996 and 1997

19 and in May of each succeeding year, providing

20 the information compiled under subparagraph

21 (A). For each such report submitted after

22 1998, the report shall include an explanation of

23 the extent to which the increases in outlays for

24 covered outpatient drugs under this part are
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1 due to the factors described in subparagraphs

2 (A)(i) and (A)(ii).

3 ‘‘(9) DEFINITIONS.—In this subsection:

4 ‘‘(A) MULTIPLE SOURCE DRUG.—

5 ‘‘(i) IN GENERAL.—The term ‘mul6 tiple source drug’ means, with respect to a

7 payment calculation period, a covered out8 patient drug for which there are 2 or more

9 drug products which—

10 ‘‘(I) are rated as therapeutically

11 equivalent (under the Food and Drug

12 Administration’s most recent publica13 tion of ‘Approved Drug Products with

14 Therapeutic Equivalence Evalua15 tions’);

16 ‘‘(II) except as provided in clause

17 (ii), are pharmaceutically equivalent

18 and bioequivalent, as defined in clause

19 (iii) and as determined by the Food

20 and Drug Administration; and

21 ‘‘(III) are sold or marketed dur22 ing the period.

23 ‘‘(ii) EXCEPTION.—Subclause (II) of

24 clause (i) shall not apply if the Food and

25 Drug Administration changes by regulation
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1 (after an opportunity for public comment

2 of 90 days) the requirement that, for pur3 poses of the publication described in clause

4 (i)(I), in order for drug products to be

5 rated as therapeutically equivalent, they

6 must be pharmaceutically equivalent and

7 bioequivalent, as defined in clause (iii).

8 ‘‘(iii) DEFINITIONS.—For purposes of

9 this subparagraph:

10 ‘‘(I) PHARMACEUTICALLY EQUIV11 ALENT.—Drug products are pharma12 ceutically equivalent if the products

13 contain identical amounts of the same

14 active drug ingredient in the same

15 dosage form and meet compendial or

16 other applicable standards of strength,

17 quality, purity, and identity.

18 ‘‘(II) BIOEQUIVALENT.—Drugs

19 are bioequivalent if they do not

20 present a known or potential

21 bioequivalence problem or, if they do

22 present such a problem, are shown to

23 meet an appropriate standard of

24 bioequivalence.
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1 ‘‘(III) SOLD OR MARKETED.—A

2 drug is considered to be sold or mar3 keted during a period if it is listed in

4 the publications referred to in clause

5 (i)(I), unless the Secretary determines

6 that such sale or marketing is not ac7 tually taking place.

8 ‘‘(B) RESTRICTIVE PRESCRIPTION.—A

9 drug has a ‘restrictive prescription’ only if—

10 ‘‘(i) in the case of a written prescrip11 tion, the prescription for the drug indi12 cates, in the handwriting of the physician

13 or other person prescribing the drug and

14 with an appropriate phrase (such as ‘brand

15 medically necessary’) recognized by the

16 Secretary, that the particular drug must be

17 dispensed; or

18 ‘‘(ii) in the case of a prescription is19 sued by telephone—

20 ‘‘(I) the physician or other per21 son prescribing the drug (through use

22 of such an appropriate phrase) states

23 that the particular drug must be dis24 pensed, and
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•HR 507 IH

1 ‘‘(II) the physician or other per2 son submits to the pharmacy involved,

3 within 30 days after the date of the

4 telephone prescription, a written con5 firmation which is in the handwriting

6 of the physician or other person pre7 scribing the drug and which indicates

8 with such appropriate phrase that the

9 particular drug was required to have

10 been dispensed.

11 ‘‘(C) PAYMENT CALCULATION PERIOD.—

12 The term ‘payment calculation period’ means

13 the 6-month period beginning with January of

14 each year and the 6-month period beginning

15 with July of each year.’’.

16 (c) PARTICIPATING PHARMACIES; CIVIL MONEY

17 PENALTIES.—

18 (1) PARTICIPATING PHARMACIES.—Section

19 1842 of such Act (42 U.S.C. 1395t) is amended—

20 (A) in subsection (h)(1), by inserting be21 fore the period at the end of the second sen22 tence the following: ‘‘, except that, with respect

23 to a supplier of covered outpatient drugs, the

24 term ‘participating supplier’ means a participat-
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•HR 507 IH

1 ing pharmacy (as defined in subsection

2 (o)(1))’’;

3 (B) in subsection (h)(4), is amended by

4 adding at the end the following: ‘‘In publishing

5 directories under this paragraph, the Secretary

6 shall provide for separate directories (wherever

7 appropriate) for participating pharmacies.’’;

8 and

9 (C) by inserting after subsection (n) the

10 following new subsection:

11 ‘‘(o)(1) For purposes of this section, the term ‘par12 ticipating pharmacy’ means, with respect to covered out13 patient drugs dispensed on or after January 1, 1997, an

14 entity which is authorized under a State law to dispense

15 covered outpatient drugs and which has entered into an

16 agreement with the Secretary, providing at least the fol17 lowing:

18 ‘‘(A) The entity agrees to accept payment under

19 this part on an assignment-related basis for all cov20 ered outpatient drugs dispensed to an individual en21 titled to benefits under this part (in this subsection

22 referred to as a ‘medicare beneficiary’) during a year

23 after—
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1 ‘‘(i) the Secretary has notified the entity,

2 through the electronic system described in para3 graph (4); or

4 ‘‘(ii) in the absence of such a system, the

5 entity is otherwise notified that the Secretary

6 has determined,

7 that the individual has met the prescription drug de8 ductible with respect to such drugs under section

9 1834(d)(1) for the year.

10 ‘‘(B) The entity agrees—

11 ‘‘(i) not to refuse to dispense covered out12 patient drugs stocked by the entity to any medi13 care beneficiary; and

14 ‘‘(ii) not to charge medicare beneficiaries

15 (regardless of whether or not the beneficiaries

16 are enrolled under a prepaid health plan or with

17 eligible organization under section 1876) more

18 for such drugs than the amount it charges to

19 the general public (as determined by the Sec20 retary in regulations).

21 ‘‘(C) The entity agrees to keep patient records

22 (including records on expenses) for all covered out23 patient drugs dispensed to all medicare beneficiaries.

24 ‘‘(D) The entity agrees to submit information

25 (in a manner specified by the Secretary to be nec-
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•HR 507 IH

1 essary to administer this title) on all purchases of

2 covered outpatient drugs dispensed to medicare

3 beneficiaries.

4 ‘‘(E) The entity agrees—

5 ‘‘(i) to offer to counsel, or to offer to pro6 vide information (consistent with State law re7 specting the provision of such information) to,

8 each medicare beneficiary on the appropriate

9 use of a drug to be dispensed and whether there

10 are potential interactions between the drug and

11 other drugs dispensed to the beneficiary; and

12 ‘‘(ii) to advise the beneficiary on the avail13 ability (consistent with State laws respecting

14 substitution of drugs) of therapeutically equiva15 lent covered outpatient drugs.

16 ‘‘(F) The entity agrees to provide the informa17 tion requested by the Secretary in surveys under sec18 tion 1834(d)(3)(C)(ii).

19 Nothing in this paragraph shall be construed as requiring

20 a pharmacy operated by an eligible organization (described

21 in section 1876(b)) or an organization described in section

22 1833(a)(1)(A) for the exclusive benefit of its members to

23 dispense covered outpatient drugs to individuals who are

24 not members of the organization.
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1 ‘‘(2) The Secretary shall provide to each participating

2 pharmacy—

3 ‘‘(A) a distinctive emblem (suitable for display

4 to the public) indicating that the pharmacy is a par5 ticipating pharmacy; and

6 ‘‘(B) upon request, such electronic equipment

7 and technical assistance (other than the costs of ob8 taining, maintaining, or expanding telephone service)

9 as the Secretary determines may be necessary for

10 the pharmacy to submit claims using the electronic

11 system established under paragraph (4).

12 ‘‘(3) The Secretary shall provide for periodic audits

13 of participating pharmacies to assure—

14 ‘‘(A) compliance with the requirements for par15 ticipation under this title; and

16 ‘‘(B) the accuracy of information submitted by

17 the pharmacies under this title.

18 ‘‘(4) The Secretary shall establish, by not later than

19 January 1, 1997, a point-of-sale electronic system for use

20 by carriers and participating pharmacies in the submission

21 of information respecting covered outpatient drugs dis22 pensed to medicare beneficiaries under this part.

23 ‘‘(5) Notwithstanding subsection (b)(3)(B), payment

24 for covered outpatient drugs may be made on the basis
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1 of an assignment described in clause (ii) of that subsection

2 only to a participating pharmacy.’’.

3 (2) CIVIL MONEY PENALTIES FOR VIOLATION

4 OF PARTICIPATION AGREEMENT, FOR EXCESSIVE

5 CHARGES FOR NONPARTICIPATING PHARMACIES AND

6 FOR FAILURE TO PROVIDE SURVEY INFORMATION.—

7 Section 1128A(a) of such Act (42 U.S.C. 1320a–

8 7a(a)) is amended—

9 (A) by striking ‘‘or’’ at the end of para10 graph (1);

11 (B) in paragraph (2)(C), by inserting ‘‘or

12 to be a participating pharmacy under section

13 1842(o)’’ after ‘‘1842(h)(1)’’;

14 (C) by striking ‘‘, or’’ at the end of para15 graph (2) and inserting a semicolon;

16 (D) by adding ‘‘or’’ at the end of para17 graph (3); and

18 (E) by inserting after paragraph (3) the

19 following new paragraph:

20 ‘‘(4) in the case of a participating or

21 nonparticipating pharmacy (as defined for purposes

22 of part B of title XVIII)—

23 ‘‘(A) presents or causes to be presented to

24 any person a request for payment for covered

25 outpatient drugs dispensed to an individual en-
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1 titled to benefits under part B of title XVIII

2 and for which the amount charged by the phar3 macy is greater than the amount the pharmacy

4 charges the general public (as determined by

5 the Secretary in regulations), or

6 ‘‘(B) fails to provide the information re7 quested by the Secretary in a survey under sec8 tion 1834(d)(3)(C)(ii);’’.

9 (d) LIMITATION ON LENGTH OF PRESCRIPTION.—

10 Section 1862(c) of such Act (42 U.S.C. 1395y(c)) is

11 amended—

12 (1) by redesignating subparagraphs (A) through

13 (D) of paragraph (1) as clauses (i) through (iv);

14 (2) in paragraph (2)(A), by striking ‘‘paragraph

15 (1)’’ and inserting ‘‘subparagraph (A)’’;

16 (3) by redesignating subparagraphs (A) and

17 (B) of paragraph (2) as clauses (i) and (ii);

18 (4) by redesignating paragraphs (1) and (2) as

19 subparagraphs (A) and (B);

20 (5) by inserting ‘‘(1)’’ after ‘‘(c)’’; and

21 (6) by adding at the end the following new

22 paragraph:

23 ‘‘(2) No payment may be made under part B for any

24 expense incurred for a covered outpatient drug if the drug

25 is dispensed in a quantity exceeding a supply of 30 days
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1 or such longer period of time (not to exceed 90 days, ex2 cept in exceptional circumstances) as the Secretary may

3 authorize.’’.

4 (e) USE OF CARRIERS, FISCAL INTERMEDIARIES,

5 AND OTHER ENTITIES IN ADMINISTRATION.—

6 (1) AUTHORIZING USE OF OTHER ENTITIES IN

7 ELECTRONIC CLAIMS SYSTEM.—Section 1842(f) of

8 such Act (42 U.S.C. 1395u(f)) is amended—

9 (A) by striking ‘‘and’’ at the end of para10 graph (1);

11 (B) by striking the period at the end of

12 paragraph (2) and inserting ‘‘; and’’; and

13 (C) by adding at the end the following new

14 paragraph:

15 ‘‘(3) with respect to implementation and oper16 ation (and related functions) of the electronic system

17 established under subsection (o)(4), a voluntary as18 sociation, corporation, partnership, or other non19 governmental organization, which the Secretary de20 termines to be qualified to conduct such activities.’’.

21 (2) ADDITIONAL FUNCTIONS OF CARRIERS.—

22 Section 1842(b)(3) of such Act (42 U.S.C.

23 1395u(b)(3)), as amended by section

24 151(b)(1)(B)(iii) of the Social Security Act Amend25 ments of 1994, is amended—
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1 (A) by striking ‘‘and’’ at the end of sub2 paragraph (I);

3 (B) by adding ‘‘and’’ at the end of sub4 paragraph (L);

5 (C) by redesignating subparagraph (L) as

6 subparagraph (J); and

7 (D) by inserting after subparagraph (J)

8 (as so redesignated) the following new subpara9 graphs:

10 ‘‘(K) if it makes determinations or payments

11 with respect to covered outpatient drugs, will—

12 ‘‘(i) receive information transmitted under

13 the electronic system established under sub14 section (o)(4), and

15 ‘‘(ii) respond to requests by participating

16 pharmacies (and individuals entitled to benefits

17 under this part) as to whether or not such an

18 individual has met the prescription drug de19 ductible established under section

20 1834(d)(1)(A) for a year; and

21 ‘‘(L) will enter into such contracts with organi22 zations described in subsection (f)(3) as the Sec23 retary determines may be necessary to implement

24 and operate (and for related functions with respect

25 to) the electronic system established under sub-
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1 section (o)(4) for covered outpatient drugs under

2 this part;’’.

3 (3) SPECIAL CONTRACT PROVISIONS FOR ELEC4 TRONIC CLAIMS SYSTEM.—

5 (A) PAYMENT ON OTHER THAN A COST

6 BASIS.—Section 1842(c)(1) of such Act (42

7 U.S.C. 1395u(c)(1)), as amended by section

8 126(h)(2) of the Social Security Act Amend9 ments of 1994, is amended—

10 (i) by inserting ‘‘(A)’’ after ‘‘(c)(1)’’;

11 (ii) in the first sentence, by inserting

12 ‘‘, except as provided in subparagraph

13 (B),’’ after ‘‘under this part, and’’; and

14 (iii) by adding at the end the follow15 ing new subparagraph:

16 ‘‘(B) To the extent that a contract under this section

17 provides for implementation and operation (and related

18 functions) of the electronic system established under sub19 section (o)(4) for covered outpatient drugs, the Secretary

20 may provide for payment for such activities based on any

21 method of payment determined by the Secretary to be ap22 propriate.’’.

23 (B) APPLICATION OF DIFFERENT PER24 FORMANCE STANDARDS.—The Secretary of

25 Health and Human Services, before entering
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1 into contracts under section 1842 of the Social

2 Security Act with respect to the implementation

3 and operation (and related functions) of the

4 electronic system for covered outpatient drugs,

5 shall establish standards with respect to per6 formance with respect to such activities. The

7 provisions of section 1153(e)(2) and paragraphs

8 (1) and (2) of section 1153(h) of such Act shall

9 apply to such activities in the same manner as

10 they apply to contracts with peer review organi11 zations, instead of the requirements of the sec12 ond and third sentences of section

13 1842(b)(2)(A) of such Act.

14 (C) USE OF REGIONAL CARRIERS.—Section

15 1842(b)(2)(A) of such Act (42 U.S.C.

16 1395u(b)(2)(A)) is amended by adding at the

17 end the following new sentence: ‘‘With respect

18 to activities relating to implementation and op19 eration (and related functions) of the electronic

20 system established under subsection (o)(4), the

21 Secretary may enter into contracts with carriers

22 under this section to perform such activities on

23 a regional basis.’’.

24 (4) DELAY IN APPLICATION OF COORDINATED

25 BENEFITS WITH MEDIGAP.—The provisions of sub-
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1 paragraph (B) of section 1842(h)(3) of the Social

2 Security Act shall not apply to covered outpatient

3 drugs (other than drugs described in section

4 1861(s)(2)(J) of such Act as of the date of the en5 actment of this Act) dispensed before January 1,

6 1998.

7 (5) BATCH PROMPT PROCESSING OF CLAIMS.—

8 Section 1842(c) of such Act (42 U.S.C. 1395u(c)),

9 as amended by sections 125(a) and 135(b)(2) of the

10 Social Security Act Amendments of 1994, is

11 amended—

12 (A) in paragraphs (2)(A) and (3)(A), by

13 striking ‘‘Each’’ and inserting ‘‘Except as pro14 vided in paragraph (6), each’’;

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

16 paragraph:

17 ‘‘(6)(A) Each contract under this section which pro18 vides for the disbursement of funds, as described in sub19 section (a)(1)(B), with respect to claims for payment for

20 covered outpatient drugs shall provide for a payment cycle

21 under which each carrier will, on a monthly basis, make

22 a payment with respect to all claims which were received

23 and approved for payment in the period since the most

24 recent date on which such a payment was made with re-
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1 spect to the participating pharmacy or individual submit2 ting the claim.

3 ‘‘(B) If payment is not issued, mailed, or otherwise

4 transmitted within 5 days of when such a payment is re5 quired to be made under subparagraph (A), interest shall

6 be paid at the rate used for purposes of section 3902(a)

7 of title 31, United States Code (relating to interest pen8 alties for failure to make prompt payments) for the period

9 beginning on the day after such 5-day period and ending

10 on the date on which payment is made.’’.

11 (f) MODIFICATION OF HMO/CMP CONTRACTS.—

12 (1) SEPARATE ACTUARIAL DETERMINATION

13 FOR COVERED OUTPATIENT DRUG BENEFIT.—Sec14 tion 1876(e)(1) of such Act (42 U.S.C.

15 1395mm(e)(1)) is amended by adding at the end

16 thereof the following new sentence: ‘‘The preceding

17 sentence shall be applied separately with respect to

18 covered outpatient drugs.’’.

19 (2) ADDITIONAL OPTIONAL BENEFITS.—Section

20 1876(g)(3)(A) of such Act (42 U.S.C.

21 1395mm(g)(3)(A)) is amended by striking ‘‘rate’’

22 and inserting ‘‘rates’’.

23 (g) CONFORMING AMENDMENTS.—

24 (1) The first sentence of section 1866(a)(2)(A)

25 (42 U.S.C. 1395cc(a)(2)(A)) is amended—
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1 (A) by inserting ‘‘1834(d),’’ after

2 ‘‘1833(b),’’; and

3 (B) by inserting ‘‘and in the case of cov4 ered outpatient drugs, applicable coinsurance

5 percent (specified in section 1834(d)(2)(C)) of

6 the lesser of the actual charges for the drugs or

7 the payment limit (established under section

8 1834(d)(3))’’ after ‘‘established by the Sec9 retary’’.

10 (2) Section 1903(i)(5) (42 U.S.C. 1396b(i)(5))

11 is amended by striking ‘‘section 1862(c)’’ and insert12 ing ‘‘section 1862(c)(1)’’.

13 (h) PRESCRIPTION DRUG PAYMENT REVIEW COM14 MISSION.—Part B is amended by inserting after section

15 1846 the following new section:

16 ‘‘PRESCRIPTION DRUG PAYMENT REVIEW COMMISSION

17 ‘‘SEC. 1847. (a)(1) The Director of the Congressional

18 Office of Technology Assessment (in this section referred

19 to as the ‘Director’ and the ‘Office’, respectively) shall

20 provide for the appointment of a Prescription Drug Pay21 ment Review Commission (in this section referred to as

22 the ‘Commission’), to be composed of individuals with ex23 pertise in the provision and financing of covered out24 patient drugs appointed by the Director (without regard

25 to the provisions of title 5, United States Code, governing

26 appointments in the competitive service).
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1 ‘‘(2) The Commission shall consist of 11 individuals.

2 Members of the Commission shall first be appointed by

3 no later than January 1, 1996, for a term of 3 years, ex4 cept that the Director may provide initially for such short5 er terms as will insure that (on a continuing basis) the

6 terms of no more than 4 members expire in any one year.

7 ‘‘(3) The membership of the Commission shall in8 clude recognized experts in the fields of health care eco9 nomics, medicine, pharmacology, pharmacy, and prescrip10 tion drug reimbursement, as well as at least one individual

11 who is a medicare beneficiary.

12 ‘‘(b)(1) The Commission shall submit to Congress an

13 annual report no later than May 1 of each year, beginning

14 with 1997, concerning methods of determining payment

15 for covered outpatient drugs under this part.

16 ‘‘(2) Such report, in 1998 and thereafter, shall in17 clude, with respect to the previous year, information on—

18 ‘‘(A) increases in manufacturers’ prices for cov19 ered outpatient drugs and in charges of pharmacists

20 for covered outpatient drugs,

21 ‘‘(B) the level of utilization of covered out22 patient drugs by medicare beneficiaries, and

23 ‘‘(C) administrative costs relating to covered

24 outpatient drugs.
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1 ‘‘(c) Section 1845(c)(1) shall apply to the Commis2 sion in the same manner as it applies to the Physician

3 Payment Review Commission.

4 ‘‘(d) There are authorized to be appropriated such

5 sums as may be necessary to carry out the provisions of

6 this section. Such sums shall be payable from the Federal

7 Supplementary Medical Insurance Trust Fund.’’.

8 (i) DEVELOPMENT OF STANDARD MEDICARE CLAIMS

9 FORM.—

10 (1) The Secretary shall develop, in consultation

11 with representatives of pharmacies and other inter12 ested individuals, a standard claims form (and a

13 standard electronic claims format) to be used in re14 quests for payment for covered outpatient drugs

15 under the medicare program and other third-party

16 payors.

17 (2) Not later than October 1, 1996, the Sec18 retary shall distribute official sample copies of the

19 format developed under paragraph (1) to pharmacies

20 and other interested parties and by not later than

21 October 1, 1996, shall distribute official sample cop22 ies of the form developed under paragraph (1) to

23 pharmacies and other interested parties.

24 (j) EFFECTIVE DATES.—
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1 (1) IN GENERAL.—Except as otherwise pro2 vided in this subsection, the amendments made by

3 this section shall apply to items dispensed on or

4 after January 1, 1997.

5 (2) CARRIERS.—The amendments made by sub6 section (e) shall take effect on the date of the enact7 ment of this Act; except that the amendments made

8 by subsection (e)(5) shall take effect on January 1,

9 1998, but shall not be construed as requiring pay10 ment before February 1, 1998.

11 (3) HMO/CMP ENROLLMENTS.—The amend12 ment made by subsection (f) shall apply to enroll13 ments effected on or after January 1, 1997.

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