I

107TH CONGRESS

1ST SESSION H. R. 1512

To amend title XVIII of the Social Security Act to provide a prescription

benefit program for all Medicare beneficiaries.

IN THE HOUSE OF REPRESENTATIVES

APRIL 4, 2001

Mr. SANDERS (for himself, Mr. KUCINICH, Mr. BONIOR, Mr. CONYERS, Mr.

HILLIARD, Ms. LEE, Mr. DEFAZIO, Mr. ABERCROMBIE, Mr. NADLER,

Ms. KAPTUR, Mr. HINCHEY, Mr. OLVER, Mr. SERRANO, Mr. THOMPSON

of Mississippi, Mr. CLAY, Ms. CARSON of Indiana, Ms. WOOLSEY, Mr.

PAYNE, Ms. MCKINNEY, Mr. PASTOR, Ms. NORTON, Mr. OWENS, Mr.

MCGOVERN, and Mr. FILNER) introduced the following bill; which was

referred to the Committee on Energy and Commerce, and in addition to

the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions

as fall within the jurisdiction of the committee concerned

A BILL

To amend title XVIII of the Social Security Act to provide

a prescription benefit program for all Medicare beneficiaries.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Medicare Extension of Drugs to Seniors (MEDS) Act of

6 2001’’.
2

•HR 1512 IH

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

2 this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Findings.

Sec. 3. Prescription medicine benefit program.

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

DISABLED

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

the aged and disabled.

‘‘Sec. 1860A. Scope of benefits.

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

‘‘Sec. 1860C. Eligibility and enrollment.

‘‘Sec. 1860D. Premiums.

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

‘‘Sec. 1860F. Prescription Medicine Insurance Account.

‘‘Sec. 1860G. Administration of benefits.

‘‘Sec. 1860H. Employer incentive program for employment-based retiree

medicine coverage.

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

medicines while providing program cost containment.

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

‘‘Sec. 1860K. Prescription medicine defined.

Sec. 4. Substantial reductions in the price of prescription drugs for medicare

beneficiaries.

Sec. 5. Amendments to program for importation of certain prescription drugs

by pharmacists and wholesalers.

Sec. 6. Reasonable price agreement for federally funded research.

Sec. 7. GAO ongoing studies and reports on program; miscellaneous reports.

Sec. 8. Medigap transition provisions.

Sec. 9. Offset for catastrophic prescription medicine benefit.

3 SEC. 2. FINDINGS.

4 Congress makes the following findings:

5 (1) Prescription medicine coverage was not a

6 standard part of health insurance when the medicare

7 program under title XVIII of the Social Security Act

8 was enacted in 1965. Since 1965, however, medicine

9 coverage has become a key component of most pri10 vate and public health insurance coverage, except for

11 the medicare program.
3

•HR 1512 IH

(2) At least 2 1 ⁄3 of medicare beneficiaries have

2 unreliable, inadequate, or no medicine coverage at

3 all.

4 (3) Seniors who do not have medicine coverage

5 typically pay, at a minimum, 15 percent more than

6 people with coverage.

7 (4) Medicare beneficiaries at all income levels

8 lack prescription medicine coverage, with more than

1 9 ⁄2 of such beneficiaries having incomes greater than

10 150 percent of the poverty line.

11 (5) The number of private firms offering retiree

12 health coverage is declining.

13 (6) Medigap premiums for medicines are too ex14 pensive for most beneficiaries and are highest for

15 older senior citizens, who need prescription medicine

16 coverage the most and typically have the lowest in17 comes.

18 (7) All medicare beneficiaries should have ac19 cess to a voluntary, reliable, affordable, and defined

20 outpatient medicine benefit as part of the medicare

21 program that assists with the high cost of prescrip22 tion medicines and protects them against excessive

23 out-of-pocket costs.
4

•HR 1512 IH

1 SEC. 3. PRESCRIPTION MEDICINE BENEFIT PROGRAM.

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

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

4 (1) by redesignating part D as part E; and

5 (2) by inserting after part C the following new

6 part:

7 ‘‘PART D—PRESCRIPTION MEDICINE BENEFIT FOR THE

8 AGED AND DISABLED

9 ‘‘ESTABLISHMENT OF PRESCRIPTION MEDICINE BENEFIT

10 PROGRAM FOR THE AGED AND DISABLED

11 ‘‘SEC. 1860. There is established a voluntary insur12 ance program to provide prescription medicine benefits,

13 including pharmacy services, in accordance with the provi14 sions of this part for individuals who are aged or disabled

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

16 under such program, to be financed from premium pay17 ments by enrollees together with contributions from funds

18 appropriated by the Federal Government.

19 ‘‘SCOPE OF BENEFITS

20 ‘‘SEC. 1860A. (a) IN GENERAL.—The benefits pro21 vided to an individual enrolled in the insurance program

22 under this part shall consist of—

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

24 provisions of this part, for covered prescription

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

26 by any pharmacy participating in the program under
5

•HR 1512 IH

1 this part (and, in circumstances designated by the

2 Secretary, by a nonparticipating pharmacy), includ3 ing any specifically named medicine prescribed for

4 the individual by a qualified health care professional

5 regardless of whether the medicine is included in any

6 formulary established under this part if such medi7 cine is certified as medically necessary by such

8 health care professional (except that the Secretary

9 shall encourage to the maximum extent possible the

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

11 the benefit limits specified in section 1860B; and

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

13 price—

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

15 without regard to such benefit limit; and

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

17 or classes of drugs described in subparagraphs

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

19 that are available to individuals receiving bene20 fits under this title.

21 ‘‘(b) COVERED PRESCRIPTION MEDICINES.—

22 ‘‘(1) IN GENERAL.—Covered prescription medi23 cines, for purposes of this part, include all prescrip24 tion medicines (as defined in section 1860K(1)), in-
6

•HR 1512 IH

1 cluding smoking cessation agents, except as other2 wise provided in this subsection.

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

4 prescription medicines shall not include drugs or

5 classes of drugs described in subparagraphs (A)

6 through (D) and (F) through (H) of section

7 1927(d)(2) unless—

8 ‘‘(A) specifically provided otherwise by the

9 Secretary with respect to a drug in any of such

10 classes; or

11 ‘‘(B) a drug in any of such classes is cer12 tified to be medically necessary by a health care

13 professional.

14 ‘‘(3) EXCLUSION OF PRESCRIPTION MEDICINES

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

16 A medicine prescribed for an individual that would

17 otherwise be a covered prescription medicine under

18 this part shall not be so considered to the extent

19 that payment for such medicine is available under

20 part A or B, including all injectable drugs and

21 biologicals for which payment was made or should

22 have been made by a carrier under section

23 1861(s)(2) (A) or (B) as of the date of enactment

24 of the Medicare Extension of Drugs to Seniors

25 (MEDS) Act of 2001. Medicines otherwise covered
7

•HR 1512 IH

1 under part A or B shall be covered under this part

2 to the extent that benefits under part A or B are ex3 hausted.

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

5 THERAPY SERVICES.—Not later than one year after

6 the date of the enactment of the Medicare Extension

7 of Drugs to Seniors (MEDS) Act of 2001, the Sec8 retary shall submit to Congress a legislative proposal

9 for the delivery of home infusion therapy services

10 under this title and for a system of payment for

11 such a benefit that coordinates items and services

12 furnished under part B and under this part.

13 ‘‘PAYMENT OF BENEFITS; BENEFIT LIMITS

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

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

16 the Prescription Medicine Insurance Account within

17 the Supplementary Medical Insurance Trust Fund,

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

19 insurance program under this part and who pur20 chases covered prescription medicines in a calendar

21 year—

22 ‘‘(A) with respect to costs incurred for cov23 ered prescription medicine furnished during a

24 year, before the individual has incurred out-of25 pocket expenses under this subsection equal to

26 the catastrophic out-of-pocket limit specified in
8

•HR 1512 IH

1 subsection (b), an amount equal to the applica2 ble percentage (specified in paragraph (2)) of

3 the negotiated price for each such covered pre4 scription medicine or such higher percentage as

5 is proposed under section 1860G(b)(7); and

6 ‘‘(B) with respect to costs incurred for cov7 ered prescription medicine furnished during a

8 year, after the individual has incurred out-of9 pocket expenses under this subsection equal to

10 the catastrophic out-of-pocket limit specified in

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

12 of the negotiated price for each such covered

13 prescription medicine.

14 ‘‘(2) APPLICABLE PERCENTAGE.—The applica15 ble percentage specified in this paragraph is 80 per16 cent or such higher percentage as is proposed under

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

18 higher percentage will not increase aggregate costs

19 to the Prescription Medicine Insurance Account.

20 ‘‘(b) CATASTROPHIC LIMIT ON OUT-OF-POCKET EX21 PENSES.—

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

23 out-of-pocket expenses specified in this subsection

24 for—
9

•HR 1512 IH

1 ‘‘(A) for each of calendar years 2003 and

2 2004, $2,000; and

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

4 year 2005 and each subsequent calendar year is

5 equal the limit for the preceding year under this

6 paragraph adjusted by the sustainable growth

7 rate percentage (determined under section

8 1861I(b)) for the year involved.

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

10 under paragraph (1)(E) that is not a multiple of

11 $10 shall be rounded to the nearest multiple of $10.

12 ‘‘ELIGIBILITY AND ENROLLMENT

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

14 who, in or after 2003, is entitled to hospital insurance ben15 efits under part A or enrolled in the medical insurance

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

17 with the provisions of this section, in the insurance pro18 gram under this part, during an enrollment period pre19 scribed in or under this section, in such manner and form

20 as may be prescribed by regulations.

21 ‘‘(b) ENROLLMENT.—

22 ‘‘(1) IN GENERAL.—Each individual who satis23 fies subsection (a) shall be enrolled (or eligible to en24 roll) in the program under this part in accordance

25 with the provisions of section 1837, as if that section
10

•HR 1512 IH

1 applied to this part, except as otherwise explicitly

2 provided in this part.

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

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

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

6 explicitly provided, no individual shall be entitled to

7 enroll in the program under this part at any time

8 after the initial enrollment period without penalty,

9 and in the case of all other late enrollments, the Sec10 retary shall develop a late enrollment penalty for the

11 individual that fully recovers the additional actuarial

12 risk involved providing coverage for the individual.

13 ‘‘(3) SPECIAL ENROLLMENT PERIOD FOR

14 2003.—

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

16 first satisfies subsection (a) in 2003 may, at

17 any time on or before December 31, 2003—

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

19 part; and

20 ‘‘(ii) enroll or reenroll in such pro21 gram after having previously declined or

22 terminated enrollment in such program.

23 ‘‘(B) EFFECTIVE DATE OF COVERAGE.—

24 An individual who enrolls under the program

25 under this part pursuant to subparagraph (A)
11

•HR 1512 IH

1 shall be entitled to benefits under this part be2 ginning on the first day of the month following

3 the month in which such enrollment occurs.

4 ‘‘(c) PERIOD OF COVERAGE.—

5 ‘‘(1) IN GENERAL.—Except as otherwise pro6 vided in this part, an individual’s coverage under the

7 program under this part shall be effective for the pe8 riod provided in section 1838, as if that section ap9 plied to the program under this part.

10 ‘‘(2) PART D COVERAGE TERMINATED BY TER11 MINATION OF COVERAGE UNDER PARTS A AND B.—

12 In addition to the causes of termination specified in

13 section 1838, an individual’s coverage under this

14 part shall be terminated when the individual retains

15 coverage under neither the program under part A

16 nor the program under part B, effective on the effec17 tive date of termination of coverage under part A or

18 (if later) under part B.

19 ‘‘PREMIUMS

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

21 MONTHLY PREMIUM RATES.—

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

23 September of 2002 and of each succeeding year, de24 termine and promulgate a monthly premium rate for

25 the succeeding year in accordance with the provi26 sions of this subsection.
12

•HR 1512 IH

1 ‘‘(2) INITIAL PREMIUMS.—For months in 2003,

2 the monthly premium rate under this subsection

3 shall be—

4 ‘‘(A) $24, in the case of premiums paid by

5 an individual enrolled in the program under this

6 part; and

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

8 such an individual by a former employer (as de9 fined in section 1860H(f)(2)).

10 ‘‘(3) SUBSEQUENT YEARS.—

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

12 after 2003, the monthly premium under this

13 subsection shall be (subject to subparagraph

14 (B)) the monthly premium (computed under

15 this subsection without regard to subparagraph

16 (B)) for the previous year increased by the an17 nual percentage increase in average per capita

18 aggregate expenditures for covered outpatient

19 medicines in the United States for medicare

20 beneficiaries, as estimated and published by the

21 Secretary in September before the year and for

22 the year involved.

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

24 determined under subparagraph (A) shall be
13

•HR 1512 IH

1 rounded to the nearest multiple of 10 cents if

2 it is not a multiple of 10 cents.

3 ‘‘(C) PUBLICATION OF ASSUMPTIONS.—

4 The Secretary shall publish, together with the

5 promulgation of the monthly premium rates

6 under this paragraph, a statement setting forth

7 the actuarial assumptions and bases employed

8 in arriving at the monthly premium under sub9 paragraph (A).

10 ‘‘(b) PAYMENT OF PREMIUMS.—

11 ‘‘(1) PAYMENTS BY DEDUCTION FROM SOCIAL

12 SECURITY, RAILROAD RETIREMENT BENEFITS, OR

13 BENEFITS ADMINISTERED BY OPM.—

14 ‘‘(A) DEDUCTION FROM BENEFITS.—In

15 the case of an individual who is entitled to or

16 receiving benefits as described in subsection (a),

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

18 under this part shall be collected by deduction

19 from such benefits at the same time and in the

20 same manner as premiums payable under part

21 B are collected pursuant to section 1840.

22 ‘‘(B) TRANSFERS TO PRESCRIPTION MEDI23 CINE INSURANCE ACCOUNT.—The Secretary of

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

25 less often than quarterly, transfer premiums
14

•HR 1512 IH

1 collected pursuant to subparagraph (A) to the

2 Prescription Medicine Insurance Account from

3 the appropriate funds and accounts described in

4 subsections (a)(2), (b)(2), and (d)(2) of section

5 1840, on the basis of the certifications de6 scribed in such subsections. The amounts of

7 such transfers shall be appropriately adjusted

8 to the extent that prior transfers were too great

9 or too small.

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

11 ‘‘(A) ADDITIONAL PAYMENT BY EN12 ROLLEE.—An individual to whom paragraph

13 (1) applies (other than an individual receiving

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

15 who estimates that the amount that will be

16 available for deduction under such paragraph

17 for any premium payment period will be less

18 than the amount of the monthly premiums for

19 such period may (under regulations) pay to the

20 Secretary the estimated balance, or such great21 er portion of the monthly premium as the indi22 vidual chooses.

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

24 An individual enrolled in the insurance program

25 under this part with respect to whom none of
15

•HR 1512 IH

1 the preceding provisions of this subsection ap2 plies (or to whom section 1840(c) applies) shall

3 pay premiums to the Secretary at such times

4 and in such manner as the Secretary shall by

5 regulations prescribe.

6 ‘‘(C) DEPOSIT OF PREMIUMS.—Amounts

7 paid to the Secretary under this paragraph

8 shall be deposited in the Treasury to the credit

9 of the Prescription Medicine Insurance Account

10 in the Supplementary Medical Insurance Trust

11 Fund.

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

13 rules concerning premiums for certain low-income individ14 uals, see section 1860E.

15 ‘‘SPECIAL ELIGIBILITY, ENROLLMENT, AND COPAYMENT

16 RULES FOR LOW-INCOME INDIVIDUALS

17 ‘‘SEC. 1860E. (a) STATE AGREEMENTS FOR COV18 ERAGE.—

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

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

21 State under which all individuals described in para22 graph (2) are enrolled in the program under this

23 part, without regard to whether any such individual

24 has previously declined the opportunity to enroll in

25 such program.
16

•HR 1512 IH

1 ‘‘(2) ELIGIBILITY GROUPS.—The individuals de2 scribed in this paragraph, for purposes of paragraph

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

4 and who are—

5 ‘‘(A)(i) eligible individuals within the

6 meaning of section 1843; and

7 ‘‘(ii) in a coverage group or groups per8 mitted under section 1843 (as selected by the

9 State and specified in the agreement); or

10 ‘‘(B) qualified medicare medicine bene11 ficiaries (as defined in subsection (e)(1)).

12 ‘‘(3) COVERAGE PERIOD.—The period of cov13 erage under this part of an individual enrolled under

14 an agreement under this subsection shall be as fol15 lows:

16 ‘‘(A) INDIVIDUALS ELIGIBLE (AT STATE

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

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

19 the coverage period shall be the same period

20 that applies (or would apply) pursuant to sec21 tion 1843(d).

22 ‘‘(B) QUALIFIED MEDICARE MEDICINE

23 BENEFICIARIES.—In the case of an individual

24 described in subsection (a)(2)(B)—
17

•HR 1512 IH

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

2 the latest of—

3 ‘‘(I) January 1, 2003;

4 ‘‘(II) the first day of the third

5 month following the month in which

6 the State agreement is entered into;

7 or

8 ‘‘(III) the first day of the first

9 month following the month in which

10 the individual satisfies section

11 1860C(a); and

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

13 the last day of the month in which the in14 dividual is determined by the State to have

15 become ineligible for medicare medicine

16 cost-sharing.

17 ‘‘(4) ALTERNATIVE ENROLLMENT METHODS.—

18 In the process of enrolling low-income individuals

19 under this part, the Secretary shall use the system

20 provided under section 154 of the Social Security

21 Act Amendments of 1994 for newly eligible medicare

22 beneficiaries and shall apply a similar system for

23 other medicare beneficiaries. Such system shall use

24 existing Federal government databases to identify

25 eligibility. Such system shall not require that bene-
18

•HR 1512 IH

1 ficiaries apply for, or enroll through, State medicaid

2 systems in order to obtain low-income assistance de3 scribed in this section.

4 ‘‘(b) SPECIAL PART D ENROLLMENT OPPORTUNITY

5 FOR INDIVIDUALS LOSING MEDICAID ELIGIBILITY.—In

6 the case of an individual who—

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

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

9 plan under title XIX after having been enrolled

10 under such plan or having been determined eligible

11 for such benefits;

12 the Secretary shall provide an opportunity for enrollment

13 under the program under this part during the period that

14 begins on the date that such individual loses such eligi15 bility and ends on the date specified by the Secretary.

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

17 INDIVIDUALS.—

18 ‘‘(1) COVERAGE OF PREMIUMS AS MEDICAL AS19 SISTANCE.—For purposes of applying the second

20 sentence of section 1905(a), any reference to pre21 miums under part B shall be considered to include

22 a reference to premiums under this part.

23 ‘‘(2) STATE COMMITMENT TO CONTINUE PAR24 TICIPATION IN PART D AFTER BENEFIT LIMIT

25 REACHED.—As a condition of additional funding to
19

•HR 1512 IH

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

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

3 of any individual whose eligibility for medical assist4 ance under title XIX is not limited to medicare cost5 sharing and for whom the State elects to pay pre6 miums under this part pursuant to this section, the

7 State will purchase all prescription medicines for

8 such individual in accordance with the provisions of

9 this part without regard to whether the benefit limit

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

11 reached.

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

13 QUALIFIED MEDICARE BENEFICIARIES.—In applying

14 title XIX, the term ‘medicare cost-sharing’ (as de15 fined in section 1905(p)(3)) is deemed to include—

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

17 ‘‘(B) the difference between the amount

18 that is paid under section 1860B and the

19 amount that would be paid under such section

20 if any reference to ‘80 percent’ in subsection

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

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

23 a higher percentage under such section, if such

24 percentage were deemed to be 100 percent).
20

•HR 1512 IH

1 ‘‘(d) PAYMENT TO STATES FOR COVERAGE OF CER2 TAIN MEDICARE COST-SHARING.—

3 ‘‘(1) IN GENERAL.—The Secretary shall provide

4 for payment under this subsection to each State that

5 provides for—

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

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

8 would be qualified medicare beneficiaries de9 scribed in section 1905(p)(1) but for the fact

10 that their income exceeds the income level es11 tablished by the State under section 1905(p)(2)

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

13 percent, of the official poverty line (referred to

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

15 and who are not otherwise eligible for medical

16 assistance under the State plan; and

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

18 defined in subsection (e)(2)) for qualified medi19 care medicine beneficiaries described in sub20 section (e)(1).

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

22 payment under paragraph (1) shall equal 100 per23 cent of the cost-sharing described in such paragraph,

24 except that, in the case of an individual whose eligi25 bility for medical assistance under title XIX is not
21

•HR 1512 IH

1 limited to medicare cost-sharing or medicare medi2 cine cost-sharing, the amount of payment under

3 paragraph (1)(B) shall be equal to the Federal med4 ical assistance percentage described in section

5 1905(b)) of amounts as expended for such cost-shar6 ing.

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

8 OTHER PAYMENTS.—Amounts shall be paid to

9 States under this subsection in a manner similar to

10 that provided under section 1903(d). Payments

11 under this subsection shall be made in lieu of any

12 payments that otherwise may be made for medical

13 assistance provided under section

14 1902(a)(10)(E)(iv).

15 ‘‘(4) TREATMENT OF TERRITORIES.—

16 ‘‘(A) IN GENERAL.—Subject to subpara17 graph (B), this subsection shall not apply to

18 States other than the 50 States and the Dis19 trict of Columbia.

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

21 (other than the 50 States and the District of

22 Columbia) that develops and implements a plan

23 of assistance for pharmaceuticals provided to

24 low-income medicare beneficiaries, the Secretary

25 shall provide for payment to the State in an
22

•HR 1512 IH

1 amount that is reasonable in relation to the

2 payment levels provided to other States under

3 paragraph (2).

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

5 of this section:

6 ‘‘(1) QUALIFIED MEDICARE MEDICINE BENE7 FICIARY.—The term ‘qualified medicare medicine

8 beneficiary’ means an individual—

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

10 benefits under part A (including an individual

11 entitled to such benefits pursuant to an enroll12 ment under section 1818, but not including an

13 individual entitled to such benefits only pursu14 ant to an enrollment under section 1818A);

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

16 section 1612 for purposes of the supplemental

17 security income program, except as provided in

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

19 but below 150 percent of the official poverty

20 line (as defined by the Office of Management

21 and Budget, and revised annually in accordance

22 with section 673(2) of the Omnibus Budget

23 Reconciliation Act of 1981) applicable to a fam24 ily of the size involved; and
23

•HR 1512 IH

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

2 section 1613 for purposes of the supplemental

3 security income program) do not exceed twice

4 the maximum amount of resources that an indi5 vidual may have and obtain benefits under that

6 program.

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

8 The term ‘medicare medicine cost-sharing’ means

9 the following costs incurred with respect to a quali10 fied medicare medicine beneficiary, without regard to

11 whether the costs incurred were for items and serv12 ices for which medical assistance is otherwise avail13 able under a State plan under title XIX:

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

15 medicine beneficiary whose income (as deter16 mined under paragraph (1)) is less than 135

17 percent of the official poverty line—

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

19 and

20 ‘‘(ii) the difference between the

21 amount that is paid under section 1860B

22 and the amount that would be paid under

23 such section if any reference to ‘50 per24 cent’ therein were deemed a reference to

25 ‘100 percent’ (or, if the Secretary approves
24

•HR 1512 IH

1 a higher percentage under such section, if

2 such percentage were deemed to be 100

3 percent).

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

5 medicine beneficiary whose income (as deter6 mined under paragraph (1)) is at least 135 per7 cent but less than 150 percent of the official

8 poverty line, a percentage of premiums under

9 section 1860D, determined on a linear sliding

10 scale ranging from 100 percent for individuals

11 with incomes at 135 percent of such line to 0

12 percent for individuals with incomes at 150 per13 cent of such line.

14 ‘‘(3) STATE.—The term ‘State’ has the mean15 ing given such term under section 1101(a) for pur16 poses of title XIX.

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

18 provisions of section 1927 shall not apply to pre19 scription drugs purchased under this part pursuant

20 to an agreement with the Secretary under this sec21 tion (including any drugs so purchased after the

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

23 ‘‘PRESCRIPTION MEDICINE INSURANCE ACCOUNT

24 ‘‘SEC. 1860F. (a) ESTABLISHMENT.—There is cre25 ated within the Federal Supplemental Medical Insurance

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

•HR 1512 IH

1 known as the ‘Prescription Medicine Insurance Account’

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

3 ‘‘(b) AMOUNTS IN ACCOUNT.—

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

5 of—

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

7 or appropriated to, such fund as provided in

8 this part; and

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

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

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

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

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

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

17 amounts as the Secretary certifies are necessary to make

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

19 with respect to administrative expenses in accordance with

20 section 201(g).

21 ‘‘ADMINISTRATION OF BENEFITS

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

23 shall provide for administration of the benefits under this

24 part through the Health Care Financing Administration

25 in accordance with the provisions of this section. The Ad26 ministrator of such Administration may enter into con-
26

•HR 1512 IH

1 tracts with carriers to administer this part in the same

2 manner as the Administrator enters into such contracts

3 to administer part B. Any such contract shall be separate

4 from any contract under section 1842.

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

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

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

10 ‘‘(1) PARTICIPATION AGREEMENTS, PRICES,

11 AND FEES.—

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

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

15 of prices for covered prescription medicines.

16 ‘‘(B) AGREEMENTS WITH PHARMACIES.—

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

19 that—

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

22 convenient access (including adequate

23 emergency access);

24 ‘‘(ii) permit the participation of any

25 pharmacy in the service area that meets
27

•HR 1512 IH

1 the participation requirements described in

2 subsection (c); and

3 ‘‘(iii) allow for reasonable dispensing

4 and consultation fees for pharmacies.

5 ‘‘(C) LISTS OF PRICES AND PARTICIPATING

6 PHARMACIES.—Ensure that the negotiated

7 prices established under subparagraph (A) and

8 the list of pharmacies with agreements under

9 subsection (c) are regularly updated and readily

10 available to health care professionals authorized

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

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

15 enrolled individuals (other than individuals enrolled

16 in a plan under part C).

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

19 ‘‘(A) PAYMENT.—

20 ‘‘(i) Administer claims for payment of

21 benefits under this part and encourage, to

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

24 ‘‘(ii) Determine amounts of benefit

25 payments to be made.
28

•HR 1512 IH

1 ‘‘(iii) Receive, disburse, and account

2 for funds used in making such payments,

3 including through the activities specified in

4 the provisions of this paragraph.

5 ‘‘(B) COORDINATION.—Coordinate with

6 other private benefit providers, pharmacies, and

7 other relevant entities as necessary to ensure

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

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

14 area, and under such other circumstances as

15 the Secretary may specify.

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

18 benefits in accordance with section 1806(a),

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

21 medicine benefits are provided under this part

22 (except that such notice need not be provided

23 more often than monthly).

24 ‘‘(4) RULES RELATING TO PROVISION OF BENE25 FITS.—
29

•HR 1512 IH

1 ‘‘(A) IN GENERAL.—In providing benefits

2 under this part, the Secretary (directly or

3 through contracts) shall employ mechanisms to

4 provide benefits economically, including the use

5 of—

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

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

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

15 ‘‘(iii) tiered copayments (which may

16 include copayments at a rate lower than 20

17 percent) to encourage the use of the lowest

18 cost, on-formulary product in cases where

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

21 ‘‘(iv) therapeutic interchange.

22 ‘‘(B) REQUIREMENTS WITH RESPECT TO

23 FORMULARIES.—If a formulary is used to con24 tain costs under this part—
30

•HR 1512 IH

1 ‘‘(i) use an advisory committee (or a

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

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

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

7 1 medicine from each therapeutic class

8 and, if available, a generic equivalent

9 thereof; and

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

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

14 regarding the medicines included in the

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

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

18 subsection shall be construed to prevent the

19 Secretary (directly or through contracts) from

20 using incentives (including a lower beneficiary

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

23 as—

24 ‘‘(i) such incentives are designed not

25 to result in any increase in the aggregate
31

•HR 1512 IH

1 expenditures under the Federal Medicare

2 Prescription Medicine Trust Fund;

3 ‘‘(ii) the average coinsurance charged

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

6 approximate (but in no case exceed) 20

7 percent for on-formulary medicines;

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

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

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

13 restrictive prescription in no case shall be

14 more than the lowest reimbursement for a

15 formulary medicine in the therapeutic class

16 of the prescribed medicine.

17 ‘‘(D) RESTRICTIVE PRESCRIPTION.—For

18 purposes of this section:

19 ‘‘(i) WRITTEN PRESCRIPTIONS.—In

20 the case of a written prescription for a

21 medicine, it is a restrictive prescription

22 only if the prescription indicates, in the

23 writing of the physician or other qualified

24 person prescribing the medicine and with

25 an appropriate phrase (such as ‘brand
32

•HR 1512 IH

1 medically necessary’) recognized by the

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

4 by the physician or person prescribing the

5 medicine that the particular medicine will

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

8 the medicine is prescribed or would have

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

11 ‘‘(ii) TELEPHONE PRESCRIPTIONS.—

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

14 prescription only if the prescription cannot

15 be longer than 30 days and the physician

16 or other qualified person prescribing the

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

19 medicine product must be dispensed, and

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

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

24 physician or other qualified person pre25 scribing the medicine and which indicates
33

•HR 1512 IH

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

3 have been dispensed based upon a belief by

4 the physician or person prescribing the

5 medicine that the particular medicine will

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

8 the medicine is prescribed or would have

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

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

16 decide to review a restrictive prescription

17 and, if so, it may approve or disapprove

18 such restrictive prescription. It may not

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

23 particular medicine provides even margin24 ally superior therapeutic benefits to the in25 dividual for whom the medicine is pre-
34

•HR 1512 IH

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

4 the prescribing physician or the enrollee,

5 the committee must provide for a review by

6 an independent contractor of such decision

7 within 48 hours of the time of submission

8 of the prescription, to determine whether

9 the prescription is an eligible benefit under

10 this part. The Secretary shall ensure that

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

13 advisory committee.

14 ‘‘(5) COST AND UTILIZATION MANAGEMENT;

15 QUALITY ASSURANCE.—Have in place effective cost

16 and utilization management, drug utilization review,

17 quality assurance measures, and systems to reduce

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

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

22 utilization review program conforming to the

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

24 such modifications as the Administrator finds

25 appropriate).
35

•HR 1512 IH

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

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

7 ‘‘(i) IN GENERAL.—A program of

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

11 appropriately used to achieve therapeutic

12 goals and reduce the risk of adverse

13 events, including adverse drug interactions.

14 ‘‘(ii) ELEMENTS.—Such program may

15 include—

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

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

20 and

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

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

25 appropriate means.
36

•HR 1512 IH

1 ‘‘(iii) DEVELOPMENT OF PROGRAM IN

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

4 in cooperation with licensed pharmacists

5 and physicians.

6 ‘‘(iv) CONSIDERATIONS IN PHARMACY

7 FEES.—There shall be taken into account,

8 in establishing fees for pharmacists and

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

12 program.

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

15 educational and informational materials to enrolled

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

20 under the program.

21 ‘‘(7) BENEFICIARY PROTECTIONS.—

22 ‘‘(A) CONFIDENTIALITY OF HEALTH IN23 FORMATION.—Have in effect systems to safe24 guard the confidentiality of health care infor25 mation on enrolled individuals, which comply
37

•HR 1512 IH

1 with section 1106 and with section 552a of title

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

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

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

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

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

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

15 ‘‘(A) RECORDS AND AUDITS.—Maintain

16 adequate records, and afford the Administrator

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

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

20 submissions of financial and utilization data as

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

23 ‘‘(9) PROPOSAL FOR ALTERNATIVE COINSUR24 ANCE AMOUNT.—
38

•HR 1512 IH

1 ‘‘(A) SUBMISSION.—The Administrator

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

6 pharmacies.

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

8 under subparagraph (A) shall contain evidence

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

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

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

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

17 other requirements as the Secretary may specify.

18 The Administrator shall negotiate a schedule of prices

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

22 covered prescription medicines.

23 ‘‘(c) PHARMACY PARTICIPATION AGREEMENTS.—

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

25 requirements of this subsection shall be eligible to
39

•HR 1512 IH

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

3 services to enrolled individuals.

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

5 under this subsection shall include the following

6 terms and requirements:

7 ‘‘(A) LICENSING.—The pharmacy and

8 pharmacists shall meet (and throughout the

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

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

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

16 whether such individual has attained the benefit

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

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

21 ‘‘(C) PERFORMANCE STANDARDS.—The

22 pharmacy and the pharmacist shall comply with

23 performance standards relating to—

24 ‘‘(i) measures for quality assurance,

25 reduction of medical errors, and participa-
40

•HR 1512 IH

1 tion in the drug utilization review program

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

3 ‘‘(ii) systems to ensure compliance

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

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

9 ‘‘(D) DISCLOSURE OF PRICE OF GENERIC

10 MEDICINE.—A pharmacy participating under

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

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

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

17 that all beneficiaries have access to the full range of

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

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

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

24 may include bonus payments to retail pharmacists in

25 rural areas and any other actions the Secretary de-
41

•HR 1512 IH

1 termines are necessary to ensure full access to rural

2 and hard-to-serve beneficiaries.

3 ‘‘(3) GAO REPORT.—Not later than 2 years

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

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

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

11 Secretary may need to take to ensure the access of

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

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

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

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

21 administrative efficiency;

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

23 any benefit savings achieved;

24 ‘‘(3) risk-sharing arrangements related to ini25 tiatives to encourage savings in benefit payments;
42

•HR 1512 IH

1 ‘‘(4) financial incentives under which savings

2 derived from the substitution of generic medicines in

3 lieu of non-generic medicines are made available to

4 carriers, pharmacies, and the Prescription Medicine

5 Insurance Account; and

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

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

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

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

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

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

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

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

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

25 ‘‘(1) ASSURANCES.—The sponsor shall—
43

•HR 1512 IH

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

3 coverage offered by the sponsor is a qualified

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

7 section; and

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

9 the Secretary and covered retirees—

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

12 ‘‘(ii) immediately upon determining

13 that the actuarial value of the prescription

14 medicine benefit under the plan falls below

15 the actuarial value of the insurance benefit

16 under this part.

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

18 shall provide such information, and comply with

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

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

23 ‘‘(c) INCENTIVE PAYMENT.—

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

25 requirements of subsection (b) with respect to a
44

•HR 1512 IH

1 quarter in a calendar year shall have payment made

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

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

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

7 spouse) who—

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

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

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

12 in the insurance program under this part.

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

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

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

17 the Prescription Medicine Insurance Account for an

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

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

21 this section with respect to a calendar quarter shall

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

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

25 plan, or other entity that the Secretary determines has,
45

•HR 1512 IH

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

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

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

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

6 an amount not to exceed 3 times the total incentive

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

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

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

11 HEALTH COVERAGE PLANS.—

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

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

15 paragraph (2) if—

16 ‘‘(A) the individual declined enrollment in

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

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

22 paid under this section; and

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

24 offer such plan; or
46

•HR 1512 IH

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

3 value of the coverage provided at the time the

4 individual first became eligible to participate in

5 the program under this part.

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

8 enroll in the program under this part during the 6-

9 month period beginning on the first day of the

10 month in which—

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

12 coverage under such plan has terminated (in

13 the circumstance described in paragraph

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

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

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

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

20 ‘‘(1) EMPLOYMENT-BASED RETIREE HEALTH

21 COVERAGE.—The term ‘employment-based retiree

22 health coverage’ means health insurance or other

23 coverage of health care costs for retired individuals

24 (or for such individuals and their spouses and de-
47

•HR 1512 IH

1 pendents) based on their status as former employees

2 or labor union members.

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

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

5 Employee Retirement Income Security Act of 1974

6 (except that such term shall include only employers

7 of 2 or more employees).

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

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

12 that—

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

15 each retired beneficiary equals or exceeds the

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

18 part; and

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

20 coverage or provision of prescription medicine

21 benefits for retired individuals based on age or

22 any health status-related factor described in

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

24 Act.
48

•HR 1512 IH

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

2 meaning given the term ‘plan sponsor’ by section

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

5 ‘‘PROMOTION OF PHARMACEUTICAL RESEARCH ON

6 BREAK-THROUGH MEDICINES WHILE PROVIDING

7 PROGRAM COST CONTAINMENT

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

9 The Secretary shall monitor expenditures under this part.

10 On October 1, 2003, Secretary shall estimate total expend11 itures under this part for 2003.

12 ‘‘(b) ESTABLISHMENT OF SUSTAINABLE GROWTH

13 RATE.—

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

16 target system for expenditures under this part for

17 each year after 2003.

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

19 equal the amount of total expenditures estimated for

20 2003 adjusted by the Secretary’s estimate of a sus21 tainable growth rate (in this section referred to as

22 an ‘SGR’) percentage between 2003 and 2004. Such

23 SGR shall be estimated based on the following:

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

25 production or price of covered pharmaceuticals,

26 but in no event more than the rate of increase
49

•HR 1512 IH

1 in the consumer price index for all urban con2 sumers for the period involved.

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

4 in numbers and in average age and severity of

5 chronic and acute illnesses.

6 ‘‘(C) Appropriate changes in utilization of

7 pharmaceuticals, as determined by the Drug

8 Review Board (established under subsection

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

11 advertising or promotions to providers.

12 ‘‘(D) Productivity index of manufacturers

13 and distributors.

14 ‘‘(E) Percentage of products with patent

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

17 the availability of generic substitutes.

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

19 may determine are appropriate.

20 In no event may the sustainable growth rate exceed

21 120 percent of the estimated per capita growth in

22 total spending under this title.

23 ‘‘(3) COMPUTATION FOR SUBSEQUENT

24 YEARS.—In October of 2004 and each year there25 after, for purposes of setting the SGRs for the suc-
50

•HR 1512 IH

1 ceeding year, the Secretary shall adjust each current

2 year’s estimated expenditures by the estimated SGR

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

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

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

8 expenditures under this part for the previous

9 year.

10 ‘‘(B) COSTS.—An adjustment (up or

11 down) for corrections in the cost of production

12 of prescriptions covered under this part between

13 the current calendar year and the previous year.

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

15 amount (over or under) that expenditures in the

16 current year under this part are estimated to

17 differ from the target amount set for the year.

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

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

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

24 the Secretary shall notify all pharma25 ceutical manufacturers with sales of phar-
51

•HR 1512 IH

1 maceutical prescription medicine products

2 to medicare beneficiaries under this part,

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

5 in the Federal Medicare Prescription Medi6 cine Trust Fund.

7 ‘‘(D) REBATE DETERMINATION.—The

8 amount of the rebate described in subparagraph

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

10 shall be based on the manufacturer’s estimated

11 contribution to the expenditure above the target

12 amount, taking into consideration such factors

13 as—

14 ‘‘(i) above average increases in the

15 cost of the manufacturer’s product;

16 ‘‘(ii) increases in utilization due to

17 promotion activities of the manufacturer,

18 wholesaler, or retailer;

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

20 the same or higher prices as similar drugs

21 already in the marketplace (so-called ‘me

22 too’ or ‘copy-cat’ drugs);

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

24 delaying the entry of generic products into

25 the market; and
52

•HR 1512 IH

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

3 has contributed to the failure to meet the

4 SGR target.

5 The rebates shall be established under such

6 subparagraph so that the total amount of the

7 rebates is estimated to ensure that the amount

8 the target for the current year is estimated to

9 be exceeded is recovered in lower spending in

10 the subsequent year; except that, no rebate

11 shall be made in any manufacturer’s product

12 which the Food and Drug Administration has

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

15 medicine.

16 ‘‘(c) BREAKTHROUGH MEDICINES.—

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

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

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

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

22 significant and major improvement by reducing

23 physical or mental illness, reducing mortality,

24 or reducing disability; and
53

•HR 1512 IH

1 ‘‘(B) that no other product is available to

2 beneficiaries that achieves similar results for

3 the same condition at a lower cost.

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

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

6 shall continue as long as the medicine is certified as

7 a breakthrough medicine but shall be limited to 7

8 calendar years from 2003 or 7 calendar years from

9 the date of the initial determination under para10 graph (1), whichever is later.

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

12 Board under this paragraph shall consist of the

13 Commissioner of Food and Drugs, the Directors of

14 the National Institutes of Health, the Director of

15 the National Science Foundation, and 10 experts in

16 pharmaceuticals, medical research, and clinical care,

17 selected by the Commissioner of Food and Drugs

18 from the faculty of academic medical centers, except

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

20 family member that has) any conflict of interest with

21 any pharmaceutical manufacturer shall serve on the

22 Board.

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

24 the rebate amounts under this section, and the Drug Re-
54

•HR 1512 IH

1 view Board’s determination of what is a breakthrough

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

3 ‘‘APPROPRIATIONS TO COVER GOVERNMENT

4 CONTRIBUTIONS

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

8 Prescription Medicine Insurance Account, a Government

9 contribution equal to—

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

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

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

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

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

19 ‘‘(b) APPROPRIATIONS TO COVER INCENTIVES FOR

20 EMPLOYMENT-BASED RETIREE MEDICINE COVERAGE.—

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

23 of any moneys in the Treasury not otherwise appropriated

24 such sums as may be necessary for payment of incentive

25 payments under section 1860H(c).
55

•HR 1512 IH

1 ‘‘PRESCRIPTION MEDICINE DEFINED

2 ‘‘SEC. 1860K. As used in this part, the term ‘pre3 scription medicine’ means—

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

5 a prescription, and that is described in subpara6 graph (A)(i), (A)(ii), or (B) of section 1927(k)(2);

7 and

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

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

10 syringes, and disposable pumps for the administra11 tion of such insulin.’’.

12 (b) CONFORMING AMENDMENTS.—

13 (1) AMENDMENTS TO FEDERAL SUPPLE14 MENTARY HEALTH INSURANCE TRUST FUND.—Sec15 tion 1841 of the Social Security Act (42 U.S.C.

16 1395t) is amended—

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

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

19 201(i)(1)’’; and

20 (ii) by inserting before the period the

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

22 deposited in, or appropriated to, the Pre23 scription Medicine Insurance Account es24 tablished by section 1860F’’;
56

•HR 1512 IH

1 (B) in subsection (g), by inserting after

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

3 provided for under part D (in which case the

4 payments shall come from the Prescription

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

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

8 by inserting before the period the following:

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

10 payments shall come from the Prescription

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

13 (D) in the first sentence of subsection

14 (i)—

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

16 1840(b)(1)’’; and

17 (ii) by inserting before the period the

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

19 case the payments shall come from the

20 Prescription Medicine Insurance Account

21 in the Supplementary Medical Insurance

22 Trust Fund)’’.

23 (2) PRESCRIPTION MEDICINE OPTION UNDER

24 MEDICARE+CHOICE PLANS.—
57

•HR 1512 IH

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

3 (42 U.S.C. 1395w–21) is amended—

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

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

6 and D’’; and

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

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

9 B, and D’’.

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

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

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

14 under part D to individuals also enrolled under

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

16 (C) ACCESS TO SERVICES.—Section

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

18 22(d)(1)) is amended—

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

20 ‘‘and’’ at the end;

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

22 the period at the end and inserting ‘‘;

23 and’’; and

24 (iii) by adding at the end the fol25 lowing new subparagraph:
58

•HR 1512 IH

1 ‘‘(F) the plan for prescription medicine

2 benefits under part D guarantees coverage of

3 any specifically named covered prescription

4 medicine for an enrollee, when prescribed by a

5 physician in accordance with the provisions of

6 such part, regardless of whether such medicine

7 would otherwise be covered under an applicable

8 formulary or discount arrangement.’’.

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

11 1395w–23(a)(1)(A)) is amended—

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

14 and under part D (for individuals enrolled

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

16 under subsection (c)’’;

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

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

19 area. In the case of payment for benefits

20 under parts A and B, such payment shall

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

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

24 payments for benefits under part D, such

25 payment shall initially be adjusted for the
59

•HR 1512 IH

1 risk factors of each enrollee as the Sec2 retary determines to be feasible and appro3 priate. By 2006, the adjustments would be

4 for the same risk factors applicable for

5 benefits under parts A and B.’’.

6 (E) CALCULATION OF ANNUAL MEDICARE

7 +CHOICE CAPITATION RATES.—Section 1853(c)

8 of such Act (42 U.S.C. 1395w–23(c)) is

9 amended—

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

11 preceding subparagraph (A), by inserting

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

13 ‘‘capitation rate’’;

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

15 ‘‘rate of growth in expenditures under this

16 title’’ and inserting ‘‘rate of growth in ex17 penditures for benefits available under

18 parts A and B’’; and

19 (iii) by adding at the end the fol20 lowing new paragraph:

21 ‘‘(8) PAYMENT FOR PRESCRIPTION MEDI22 CINES.—The Secretary shall determine a capitation

23 rate for prescription medicines—

24 ‘‘(A) dispensed in 2003, which is based on

25 the projected national per capita costs for pre-
60

•HR 1512 IH

1 scription medicine benefits under part D and

2 associated claims processing costs for bene3 ficiaries under the original medicare fee-for4 service program; and

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

6 which shall be equal to the rate for the previous

7 year updated by the Secretary’s estimate of the

8 projected per capita rate of growth in expendi9 tures under this title for an individual enrolled

10 under part D.’’.

11 (F) LIMITATION ON ENROLLEE LIABIL12 ITY.—Section 1854(e) of such Act (42 U.S.C.

13 1395w–24(e)) is amended by adding at the end

14 the following new paragraph:

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

16 BENEFITS.—In no event may a Medicare+Choice or17 ganization include as part of a plan for prescription

18 medicine benefits under part D a requirement that

19 an enrollee pay a deductible, or a coinsurance per20 centage that exceeds 20 percent.’’.

21 (G) REQUIREMENT FOR ADDITIONAL BEN22 EFITS.—Section 1854(f)(1) of such Act (42

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

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

25 determination shall be made separately for ben-
61

•HR 1512 IH

1 efits under parts A and B and for prescription

2 medicine benefits under part D.’’.

3 (3) EXCLUSIONS FROM COVERAGE.—

4 (A) APPLICATION TO PART D.—Section

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

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

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

8 and inserting ‘‘part A, B, or D’’.

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

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

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

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

14 ‘‘and’’ at the end;

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

16 the semicolon at the end and inserting ‘‘,

17 and’’; and

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

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

21 covered under part D, which are not prescribed

22 in accordance with such part;’’.
62

•HR 1512 IH

1 SEC. 4. SUBSTANTIAL REDUCTIONS IN THE PRICE OF PRE2 SCRIPTION DRUGS FOR MEDICARE BENE3 FICIARIES.

4 (a) PARTICIPATING MANUFACTURERS.—

5 (1) IN GENERAL.—Each participating manufac6 turer of a covered outpatient drug shall make avail7 able for purchase by each pharmacy such covered

8 outpatient drug in the amount described in para9 graph (2) at the price described in paragraph (3).

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

11 amount of a covered outpatient drug that a partici12 pating manufacturer shall make available for pur13 chase by a pharmacy is an amount equal to the ag14 gregate amount of the covered outpatient drug sold

15 or distributed by the pharmacy to Medicare bene16 ficiaries.

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

18 which a participating manufacturer shall make a

19 covered outpatient drug available for purchase by a

20 pharmacy is the price equal to the lowest of the fol21 lowing:

22 (A) The lowest price paid for the covered

23 outpatient drug by any agency or department of

24 the United States.

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

26 covered outpatient drug, as defined in section
63

•HR 1512 IH

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

2 U.S.C. 1396r–8(c)(1)(C)).

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

4 available (as determined by the Secretary)

5 through importation consistent with the provi6 sions of section 804 of the Federal Food, Drug,

7 and Cosmetic Act.

8 (b) SPECIAL PROVISION WITH RESPECT TO HOSPICE

9 PROGRAMS.—For purposes of determining the amount of

10 a covered outpatient drug that a participating manufac11 turer shall make available for purchase by a pharmacy

12 under subsection (a), there shall be included in the cal13 culation of such amount the amount of the covered out14 patient drug sold or distributed by a pharmacy to a hos15 pice program. In calculating such amount, only amounts

16 of the covered outpatient drug furnished to a Medicare

17 beneficiary enrolled in the hospice program shall be in18 cluded.

19 (c) ADMINISTRATION.—The Secretary shall issue

20 such regulations as may be necessary to implement this

21 section.

22 (d) REPORTS TO CONGRESS REGARDING EFFECTIVE23 NESS OF SECTION.—

24 (1) IN GENERAL.—Not later than 2 years after

25 the date of the enactment of this Act, and annually
64

•HR 1512 IH

1 thereafter, the Secretary shall report to the Con2 gress regarding the effectiveness of this section in—

3 (A) protecting Medicare beneficiaries from

4 discriminatory pricing by drug manufacturers;

5 and

6 (B) making prescription drugs available to

7 Medicare beneficiaries at substantially reduced

8 prices.

9 (2) CONSULTATION.—In preparing such re10 ports, the Secretary shall consult with public health

11 experts, affected industries, organizations rep12 resenting consumers and older Americans, and other

13 interested persons.

14 (3) RECOMMENDATIONS.—The Secretary shall

15 include in such reports any recommendations they

16 consider appropriate for changes in this section to

17 further reduce the cost of covered outpatient drugs

18 to Medicare beneficiaries.

19 (f) DEFINITIONS.—For purposes of this section:

20 (1) PARTICIPATING MANUFACTURER.—The

21 term ‘‘participating manufacturer’’ means any man22 ufacturer of drugs or biologicals that, on or after the

23 date of the enactment of this Act, enters into a con24 tract or agreement with the United States for the
65

•HR 1512 IH

1 sale or distribution of covered outpatient drugs to

2 the United States.

3 (2) COVERED OUTPATIENT DRUG.—The term

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

5 that term in section 1927(k)(2) of the Social Secu6 rity Act (42 U.S.C. 1396r–8(k)(2)).

7 (3) MEDICARE BENEFICIARY.—The term

8 ‘‘Medicare beneficiary’’ means an individual entitled

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

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

11 or both.

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

13 program’’ has the meaning given that term under

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

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

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

17 the Secretary of Health and Human Services.

18 (f) EFFECTIVE DATE.—The Secretary shall imple19 ment this section as expeditiously as practicable and in

20 a manner consistent with the obligations of the United

21 States.
66

•HR 1512 IH

1 SEC. 5. AMENDMENTS TO PROGRAM FOR IMPORTATION OF

2 CERTAIN PRESCRIPTION DRUGS BY PHAR3 MACISTS AND WHOLESALERS.

4 Section 804 of the Federal Food, Drug, and Cosmetic

5 Act (as added by section 745(c)(2) of Public Law 106–

6 387) is amended—

7 (1) by striking subsections (e) and (f) and in8 serting the following subsections:

9 ‘‘(e) TESTING; APPROVED LABELING.—

10 ‘‘(1) TESTING.—Regulations under subsection

11 (a)—

12 ‘‘(A) shall require that testing referred to

13 in paragraphs (6) through (8) of subsection (d)

14 be conducted by the importer of the covered

15 product pursuant to subsection (a), or the man16 ufacturer of the product;

17 ‘‘(B) shall require that, if such tests are

18 conducted by the importer, information needed

19 to authenticate the product being tested be sup20 plied by the manufacturer of such product to

21 the importer; and

22 ‘‘(C) shall provide for the protection of any

23 information supplied by the manufacturer

24 under subparagraph (B) that is a trade secret

25 or commercial or financial information that is

26 privileged or confidential.
67

•HR 1512 IH

1 ‘‘(2) APPROVED LABELING.—For purposes of

2 importing a covered product pursuant to subsection

3 (a), the importer involved may use the labeling ap4 proved for the product under section 505, notwith5 standing any other provision of law.

6 ‘‘(f) DISCRETION OF SECRETARY REGARDING TEST7 ING.—The Secretary may waive or modify testing require8 ments described in subsection (d) if, with respect to spe9 cific countries or specific distribution chains, the Secretary

10 has entered into agreements or otherwise approved ar11 rangements that the Secretary determines ensure that the

12 covered products involved are not adulterated or in viola13 tion of section 505.’’;

14 (2) by striking subsections (h) and (i) and in15 serting the following subsections:

16 ‘‘(h) PROHIBITED AGREEMENTS; NONDISCRIMINA17 TION.—

18 ‘‘(1) PROHIBITED AGREEMENTS.—No manufac19 turer of a covered product may enter into a contract

20 or agreement that includes a provision to prevent

21 the sale or distribution of covered products imported

22 pursuant to subsection (a).

23 ‘‘(2) NONDISCRIMINATION.—No manufacturer

24 of a covered product may take actions that discrimi25 nate against, or cause other persons to discriminate
68

•HR 1512 IH

1 against, United States pharmacists, wholesalers, or

2 consumers regarding the sale or distribution of cov3 ered products.

4 ‘‘(i) STUDY AND REPORT.—

5 ‘‘(1) STUDY.—The Comptroller General of the

6 United States shall conduct a study on the imports

7 permitted under this section, taking into consider8 ation the information received under subsection (a).

9 In conducting such study, the Comptroller General

10 shall—

11 ‘‘(A) evaluate importers’ compliance with

12 regulations, determine the number of ship13 ments, if any, permitted under this section that

14 have been determined to be counterfeit, mis15 branded, or adulterated; and

16 ‘‘(B) consult with the United States Trade

17 Representative and United States Patent and

18 Trademark Office to evaluate the effect of im19 portations permitted under this section on trade

20 and patent rights under Federal law.

21 ‘‘(2) REPORT.—Not later than 5 years after the

22 effective date of final regulations issued pursuant to

23 this section, the Comptroller General of the United

24 States shall prepare and submit to Congress a re-
69

•HR 1512 IH

1 port containing the study described in paragraph

2 (1).’’;

3 (3) in subsection (k)(2)—

4 (A) by redesignating subparagraphs (A)

5 through (E) as subparagraphs (B) through (F),

6 respectively; and

7 (B) by inserting before subparagraph (B)

8 (as so redesignated) the following subpara9 graph:

10 ‘‘(A) The term ‘discrimination’ includes a

11 contract provision, a limitation on supply, or

12 other measure which has the effect of providing

13 United States pharmacists, wholesalers, or con14 sumers access to covered products on terms or

15 conditions that are less favorable than the

16 terms or conditions provided to any foreign pur17 chaser of such products.’’;

18 (4) by striking subsection (m); and

19 (5) by inserting after subsection (l) the fol20 lowing subsection:

21 ‘‘(m) FUNDING.—For the purpose of carrying out

22 this section, there are authorized to be appropriated such

23 sums as may be necessary for fiscal year 2002 and each

24 subsequent fiscal year.’’.
70

•HR 1512 IH

1 SEC. 6. REASONABLE PRICE AGREEMENT FOR FEDERALLY

2 FUNDED RESEARCH.

3 (a) IN GENERAL.—If any Federal agency or any non4 profit entity undertakes federally funded health care re5 search and development and is to convey or provide a pat6 ent or other exclusive right to use such research and devel7 opment for a drug or other health care technology, such

8 agency or entity shall not make such conveyance or pro9 vide such patent or other right until the person who will

10 receive such conveyance or patent or other right first

11 agrees to a reasonable pricing agreement with the Sec12 retary of Health and Human Services or the Secretary

13 makes a determination that the public interest is served

14 by a waiver of the reasonable pricing agreement provided

15 in accordance with subsection (c).

16 (b) CONSIDERATION OF COMPETITIVE BIDDING.—In

17 cases where the Federal Government conveys or licenses

18 exclusive rights to federally funded research under sub19 section (a), consideration shall be given to mechanisms for

20 determining reasonable prices which are based upon a

21 competitive bidding process. When appropriate, the mech22 anisms should be considered where—

23 (1) qualified bidders compete on the basis of

24 the lowest prices that will be charged to consumers;

25 (2) qualified bidders compete on the basis of

26 the least sales revenues before prices are adjusted in
71

•HR 1512 IH

1 accordance with a cost based reasonable pricing for2 mula;

3 (3) qualified bidders compete on the basis of

4 the least period of time before prices are adjusted in

5 accordance with a cost based reasonable pricing for6 mula;

7 (4) qualified bidders compete on the basis of

8 the shortest period of exclusivity; or

9 (5) qualified bidders compete under other com10 petitive bidding systems.

11 Such competitive bidding process may incorporate require12 ments for minimum levels of expenditures on research,

13 marketing, maximum price, or other factors.

14 (c) WAIVER.—No waiver shall take effect under sub15 section (a) before the public is given notice of the proposed

16 waiver and provided a reasonable opportunity to comment

17 on the proposed waiver. A decision to grant a waiver shall

18 set out the Secretary’s finding that such a waiver is in

19 the public interest.

20 SEC. 7. GAO ONGOING STUDIES AND REPORTS ON PRO21 GRAM; MISCELLANEOUS REPORTS.

22 (a) ONGOING STUDY.—The Comptroller General of

23 the United States shall conduct an ongoing study and

24 analysis of the prescription medicine benefit program

25 under part D of the Medicare program under title XVIII
72

•HR 1512 IH

1 of the Social Security Act (as added by section 3 of this

2 Act), including an analysis of each of the following:

3 (1) The extent to which the administering enti4 ties have achieved volume-based discounts similar to

5 the favored price paid by other large purchasers.

6 (2) Whether access to the benefits under such

7 program are in fact available to all beneficiaries,

8 with special attention given to access for bene9 ficiaries living in rural and hard-to-serve areas.

10 (3) The success of such program in reducing

11 medication error and adverse medicine reactions and

12 improving quality of care, and whether it is probable

13 that the program has resulted in savings through re14 duced hospitalizations and morbidity due to medica15 tion errors and adverse medicine reactions.

16 (4) Whether patient medical record confiden17 tiality is being maintained and safe-guarded.

18 (5) Such other issues as the Comptroller Gen19 eral may consider.

20 (b) REPORTS.—The Comptroller General shall issue

21 such reports on the results of the ongoing study described

22 in (a) as the Comptroller General shall deem appropriate

23 and shall notify Congress on a timely basis of significant

24 problems in the operation of the part D prescription medi-
73

•HR 1512 IH

1 cine program and the need for legislative adjustments and

2 improvements.

3 (c) MISCELLANEOUS STUDIES AND REPORTS.—

4 (1) STUDY ON METHODS TO ENCOURAGE ADDI5 TIONAL RESEARCH ON BREAKTHROUGH PHARMA6 CEUTICALS.—

7 (A) IN GENERAL.—The Secretary of

8 Health and Human Services shall seek the ad9 vice of the Secretary of the Treasury on pos10 sible tax and trade law changes to encourage

11 increased original research on new pharma12 ceutical breakthrough products designed to ad13 dress disease and illness.

14 (B) REPORT.—Not later than January 1,

15 2003, the Secretary shall submit to Congress a

16 report on such study. The report shall include

17 recommended methods to encourage the phar18 maceutical industry to devote more resources to

19 research and development of new covered prod20 ucts than it devotes to overhead expenses.

21 (2) STUDY ON PHARMACEUTICAL SALES PRAC22 TICES AND IMPACT ON COSTS AND QUALITY OF

23 CARE.—

24 (A) IN GENERAL.—The Secretary of

25 Health and Human Services shall conduct a
74

•HR 1512 IH

1 study on the methods used by the pharma2 ceutical industry to advertise and sell to con3 sumers and educate and sell to providers.

4 (B) REPORT.—Not later than January 1,

5 2003, the Secretary shall submit to Congress a

6 report on such study. The report shall include

7 the estimated direct and indirect costs of the

8 sales methods used, the quality of the informa9 tion conveyed, and whether such sales efforts

10 leads (or could lead) to inappropriate pre11 scribing. Such report may include legislative

12 and regulatory recommendations to encourage

13 more appropriate education and prescribing

14 practices.

15 (3) STUDY ON COST OF PHARMACEUTICAL RE16 SEARCH.—

17 (A) IN GENERAL.—The Secretary of

18 Health and Human Services shall conduct a

19 study on the costs of, and needs for, the phar20 maceutical research and the role that the tax21 payer provides in encouraging such research.

22 (B) REPORT.—Not later than January 1,

23 2003, the Secretary shall submit to Congress a

24 report on such study. The report shall include

25 a description of the full-range of taxpayer-as-
75

•HR 1512 IH

1 sisted programs impacting pharmaceutical re2 search, including tax, trade, government re3 search, and regulatory assistance. The report

4 may also include legislative and regulatory rec5 ommendations that are designed to ensure that

6 the taxpayer’s investment in pharmaceutical re7 search results in the availability of pharma8 ceuticals at reasonable prices.

9 (4) REPORT ON PHARMACEUTICAL PRICES IN

10 MAJOR FOREIGN NATIONS.—Not later than January

11 1, 2003, the Secretary of Health and Human Serv12 ices shall submit to Congress a report on the retail

13 price of major pharmaceutical products in various

14 developed nations, compared to prices for the same

15 or similar products in the United States. The report

16 shall include a description of the principal reasons

17 for any price differences that may exist.

18 SEC. 8. MEDIGAP TRANSITION PROVISIONS.

19 (a) IN GENERAL.—Notwithstanding any other provi20 sion of law, no new medicare supplemental policy that pro21 vides coverage of expenses for prescription drugs may be

22 issued under section 1882 of the Social Security Act on

23 or after January 1, 2003, to an individual unless it re24 places a medicare supplemental policy that was issued to
76

•HR 1512 IH

1 that individual and that provided some coverage of ex2 penses for prescription drugs.

3 (b) ISSUANCE OF SUBSTITUTE POLICIES IF OBTAIN

4 PRESCRIPTION DRUG COVERAGE THROUGH MEDICARE.—

5 (1) IN GENERAL.—The issuer of a medicare

6 supplemental policy—

7 (A) may not deny or condition the issuance

8 or effectiveness of a medicare supplemental pol9 icy that has a benefit package classified as ‘‘A’’,

10 ‘‘B’’, ‘‘C’’, ‘‘D’’, ‘‘E’’, ‘‘F’’, or ‘‘G’’ (under the

11 standards established under subsection (p)(2) of

12 section 1882 of the Social Security Act, 42

13 U.S.C. 1395ss) and that is offered and is avail14 able for issuance to new enrollees by such

15 issuer;

16 (B) may not discriminate in the pricing of

17 such policy, because of health status, claims ex18 perience, receipt of health care, or medical con19 dition; and

20 (C) may not impose an exclusion of bene21 fits based on a pre-existing condition under

22 such policy,

23 in the case of an individual described in paragraph

24 (2) who seeks to enroll under the policy not later

25 than 63 days after the date of the termination of en-
77

•HR 1512 IH

1 rollment described in such paragraph and who sub2 mits evidence of the date of termination or

3 disenrollment along with the application for such

4 medicare supplemental policy.

5 (2) INDIVIDUAL COVERED.—An individual de6 scribed in this paragraph is an individual who—

7 (A) enrolls in a prescription drug plan

8 under part D of title XVIII of the Social Secu9 rity Act; and

10 (B) at the time of such enrollment was en11 rolled and terminates enrollment in a medicare

12 supplemental policy which has a benefit pack13 age classified as ‘‘H’’, ‘‘I’’, or ‘‘J’’ under the

14 standards referred to in paragraph (1)(A) or

15 terminates enrollment in a policy to which such

16 standards do not apply but which provides ben17 efits for prescription drugs.

18 (3) ENFORCEMENT.—The provisions of para19 graph (1) shall be enforced as though they were in20 cluded in section 1882(s) of the Social Security Act

21 (42 U.S.C. 1395ss(s)).

22 (4) DEFINITIONS.—For purposes of this sub23 section, the term ‘‘medicare supplemental policy’’

24 has the meaning given such term in section 1882(g)

25 of the Social Security Act (42 U.S.C. 1395ss(g)).
78

•HR 1512 IH

1 SEC. 9. OFFSET FOR CATASTROPHIC PRESCRIPTION MEDI2 CINE BENEFIT.

3 If the mid-summer 2000 budget estimate prepared by

4 the Director of the Congressional Budget Office results

5 in a higher level of projected on-budget surplus over the

6 ten-fiscal-year period beginning with fiscal year 2001 than

7 projected on-budget surplus in the estimate prepared by

8 the Director in March, 2000, there shall be transferred

9 out of any moneys in the Treasury not otherwise appro10 priated in a fiscal year (beginning with fiscal year 2003)

11 to the Prescription Medicine Insurance Account (created

12 in the Federal Supplemental Medical Insurance Trust

13 Fund established by section 1841 of the Social Security

14 Act (42 U.S.C. 1395t)) such sums as are necessary to off15 set the costs attributable to the operation of section

16 1860B(a)(1)(B) of the Social Security Act (as added by

17 section 3) (relating to catastrophic benefit payment

18 amounts) in that fiscal year.

Æ