II 

108TH CONGRESS 

2D SESSION S. 2053

To reduce the costs of prescription drugs for medicare beneficiaries, and 

for other purposes. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 6, 2004

Ms. SNOWE (for herself, Mr. WYDEN, and Mrs. FEINSTEIN) introduced the 

following bill; which was read twice and referred to the Committee on Finance 

A BILL

To reduce the costs of prescription drugs for medicare 

beneficiaries, 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 ‘‘Medicare Enhance5 ments for Needed Drugs Act of 2004’’. 

6 SEC. 2. GAO STUDIES AND REPORTS ON PRICES OF PRE7 SCRIPTION DRUGS. 

8 (a) REVIEW AND REPORTS ON RETAIL PRICES OF

9 PRESCRIPTION DRUGS.—
2

•S 2053 IS 

1 (1) INITIAL REVIEW.—The Comptroller General 

2 of the United States shall conduct a review of the 

3 retail cost of prescription drugs in the United States 

4 during 2000 through 2003, with an emphasis on the 

5 prescription drugs most utilized for individuals age 

6 65 or older. 

7 (2) SUBSEQUENT REVIEW.—After conducting 

8 the review under paragraph (1), the Comptroller 

9 General shall continuously review the retail cost of 

10 such drugs through April 1, 2006, to determine the 

11 changes in such costs. 

12 (3) REPORTS.—

13 (A) INITIAL REVIEW.—Not later than Sep14 tember 1, 2004, the Comptroller General shall 

15 submit to Congress a report on the initial re16 view conducted under paragraph (1). 

17 (B) SUBSEQUENT REVIEW.—Not later 

18 than July 1, 2005, January 1, 2006, and July 

19 1, 2006, the Comptroller General shall submit 

20 to Congress a report on the subsequent review 

21 conducted under paragraph (2). 

22 (b) ANNUAL GAO STUDY AND REPORT ON RETAIL

23 AND ACQUISITION PRICES OF CERTAIN PRESCRIPTION

24 DRUGS.—
3

•S 2053 IS 

1 (1) ONGOING STUDY.—The Comptroller Gen2 eral of the United States shall conduct an ongoing 

3 study that compares the average retail cost in the 

4 United States for each of the 20 most utilized pre5 scription drugs for individuals age 65 or older 

6 with—

7 (A) the average price at which private 

8 health plans acquire each such drug; 

9 (B) the average price at which the Depart10 ment of Defense under the Defense Health Pro11 gram acquires each such drug; 

12 (C) the average price at which the Depart13 ment of Veterans Affairs under the laws admin14 istered by the Secretary of Veterans Affairs ac15 quires each such drug; and 

16 (D) the average negotiated price for each 

17 such drug that eligible beneficiaries enrolled in 

18 a prescription drug plan under part D of title 

19 XVIII of the Social Security Act, as added by 

20 section 101 of the Medicare Prescription Drug, 

21 Improvement, and Modernization Act of 2003 

22 (Public Law 108–173), that provides only basic 

23 prescription drug coverage have access to under 

24 such plans. 
4

•S 2053 IS 

1 (2) ANNUAL REPORT.—Not later than Decem2 ber 1, 2007, and annually thereafter, the Comp3 troller General shall submit to Congress a report on 

4 the study conducted under paragraph (1), together 

5 with such recommendations as the Comptroller Gen6 eral determines appropriate. 

7 SEC. 3. INCLUSION OF AVERAGE AGGREGATE BENEFICIARY 

8 COSTS AND SAVINGS IN COMPARATIVE IN9 FORMATION FOR BASIC MEDICARE PRE10 SCRIPTION DRUG PLANS. 

11 Section 1860D–1(c)(3) of the Social Security Act, as 

12 added by section 101 of the Medicare Prescription Drug, 

13 Improvement, and Modernization Act of 2003 (Public Law 

14 108–173), is amended—

15 (1) in subparagraph (A)—

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

17 striking ‘‘subparagraph (B)’’ and inserting 

18 ‘‘subparagraphs (B) and (C)’’; and 

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

20 clause: 

21 ‘‘(vi) AVERAGE AGGREGATE BENE22 FICIARY COSTS AND SAVINGS.—With re23 spect to plan years beginning on or after 

24 January 1, 2007, the average aggregate 

25 costs, including deductibles and other cost-
5

•S 2053 IS 

1 sharing, that a beneficiary will incur for 

2 covered part D drugs in the year under the 

3 plan compared to the average aggregate 

4 costs that an eligible beneficiary with no 

5 prescription drug coverage will incur for 

6 covered part D drugs in the year.’’; and 

7 (2) by adding at the end the following new sub8 paragraph: 

9 ‘‘(C) AVERAGE AGGREGATE BENEFICIARY

10 COSTS AND SAVINGS INFORMATION ONLY FOR

11 BASIC PRESCRIPTION DRUG PLANS.—The Sec12 retary shall not provide comparative informa13 tion under subparagraph (A)(vi) with respect 

14 to—

15 ‘‘(i) a prescription drug plan that pro16 vides supplemental prescription drug cov17 erage; or 

18 ‘‘(ii) a Medicare Advantage plan.’’. 

19 SEC. 4. NEGOTIATING FAIR PRICES FOR MEDICARE PRE20 SCRIPTION DRUGS. 

21 (a) IN GENERAL.—Section 1860D–11 of the Social 

22 Security Act, as added by section 101 of the Medicare Pre23 scription Drug, Improvement, and Modernization Act of 

24 2003 (Public Law 108–173), is amended by striking sub-
6

•S 2053 IS 

1 section (i) (relating to noninterference) and by inserting 

2 the following: 

3 ‘‘(i) AUTHORITY TO NEGOTIATE PRICES WITH MAN4 UFACTURERS.—In order to ensure that beneficiaries en5 rolled under prescription drug plans and MA–PD plans 

6 pay the lowest possible price, the Secretary shall have au7 thority similar to that of other Federal entities that pur8 chase prescription drugs in bulk to negotiate contracts 

9 with manufacturers of covered part D drugs, consistent 

10 with the requirements and in furtherance of the goals of 

11 providing quality care and containing costs under this 

12 part.’’. 

13 (b) EFFECTIVE DATE.—The amendment made by 

14 this section shall take effect as if included in the enact15 ment of section 101 of the Medicare Prescription Drug, 

16 Improvement, and Modernization Act of 2003 (Public Law 

17 108–173). 

18 SEC. 5. DISALLOWANCE OF DEDUCTION FOR ADVERTISING 

19 EXPENDITURES OF TAXPAYERS WHO DIS20 CRIMINATE AGAINST FOREIGN SELLERS OF 

21 PRESCRIPTION DRUGS TO DOMESTIC CON22 SUMERS. 

23 (a) GENERAL RULE.—Part IX of subchapter B of 

24 chapter 1 of the Internal Revenue Code of 1986 (relating 
7

•S 2053 IS 

1 to items not deductible) is amended by adding at the end 

2 the following new section:

3 ‘‘SEC. 280I. ADVERTISING EXPENDITURES OF TAXPAYERS 

4 WHO DISCRIMINATE AGAINST FOREIGN SELL5 ERS OF PRESCRIPTION DRUGS TO DOMESTIC 

6 CONSUMERS. 

7 ‘‘(a) IN GENERAL.—No deduction otherwise allow8 able under this chapter shall be allowed for any amount 

9 paid or incurred for advertising for the taxable year by 

10 any taxpayer who at any time during such taxable year 

11 discriminates against a qualified pharmacy or qualified 

12 wholesaler in the sale of prescription drugs. 

13 ‘‘(b) ADVERTISING.—For purposes of this section, 

14 the term ‘advertising’ includes direct to consumer adver15 tising and any activity designed to promote the use of a 

16 prescription drug directed to providers or others who may 

17 make decisions about the use of prescription drugs (other 

18 than the provision of free samples). 

19 ‘‘(c) QUALIFIED PHARMACY; QUALIFIED WHOLE20 SALER.—For purposes of this section—

21 ‘‘(1) QUALIFIED PHARMACY.—The term ‘quali22 fied pharmacy’ means any pharmacy located outside 

23 the United States which sells prescription drugs to 

24 consumers living in the United States. 
8

•S 2053 IS 

1 ‘‘(2) QUALIFIED WHOLESALER.—The term 

2 ‘qualified wholesaler’ means any wholesaler located 

3 outside the United States which sells prescription 

4 drugs to entities selling prescription drugs to con5 sumers living in the United States. 

6 ‘‘(d) DISCRIMINATION.—For purposes of subsection 

7 (a), a taxpayer shall be treated as discriminating against 

8 a qualified pharmacy or qualified wholesaler in the sale 

9 of prescription drugs if such taxpayer publicly, privately 

10 or otherwise refuses to do business with a person or entity 

11 on the basis that the person or entity will pass along dis12 counts offered to the person or entity to consumers living 

13 in the United States.’’. 

14 (b) CLERICAL AMENDMENT.—The table of sections 

15 for part IX of subchapter B of chapter 1 of such Code 

16 is amended by adding at the end thereof the following new 

17 item:

‘‘Sec. 280I. Advertising expenditures of taxpayers who discriminate against foreign sellers of prescription drugs to 

domestic consumers.’’.

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

19 this section shall apply to taxable years beginning after 

20 the date of the enactment of this Act. 

21 SEC. 6. COST CONTAINMENT INCENTIVES. 

22 (a) IN GENERAL.—Section 1860D–42 of the Social 

23 Security Act, as added by section 101 of the Medicare Pre24 scription Drug, Improvement, and Modernization Act of 
9

•S 2053 IS 

1 2003 (Public Law 108–173), is amended by adding at the 

2 end the following new subsection: 

3 ‘‘(c) INCENTIVES TO PDP SPONSORS TO NEGOTIATE

4 LOWER PRICES.—

5 ‘‘(1) AUTHORITY.—The Secretary is authorized 

6 to provide incentive payments to PDP sponsors of7 fering prescription drug plans that provide enrollees 

8 with access to negotiated prices used for payment of 

9 covered part D drugs under the plans that on aver10 age are not more than 10 percent greater than the 

11 lesser of—

12 ‘‘(A) the average price at which the De13 partment of Defense under the Defense Health 

14 Program acquires such drugs; or 

15 ‘‘(B) the average price at which the De16 partment of Veterans Affairs under the laws 

17 administered by the Secretary of Veterans Af18 fairs acquires such drugs. 

19 ‘‘(2) INFORMATION FROM VA AND DOD.—Upon 

20 request of the Secretary of Health and Human Serv21 ices, the Secretary of Defense and the Secretary of 

22 Veterans Affairs shall make available to the Sec23 retary of Health and Human Services such informa24 tion regarding acquisition prices of prescription 

25 drugs as the Secretary of Health and Human Serv-
10

•S 2053 IS 

1 ices determines is necessary to conduct the incentive 

2 payment program under this subsection. 

3 ‘‘(3) APPLICATION.—No incentive payments 

4 may be made under this subsection except pursuant 

5 to an application that is submitted and approved in 

6 a time, manner, and form specified by the Secretary. 

7 ‘‘(4) FUNDING.—There shall be available to the 

8 Secretary from the MA Regional Plan Stabilization 

9 Fund under section 1858(e) during the period begin10 ning on January 1, 2007, and ending on December 

11 31, 2013, a total of $500,000,000 for making incen12 tive payments under this subsection. 

13 ‘‘(5) ANNUAL REPORTS.—For each year in 

14 which an incentive payment is awarded under this 

15 subsection, the Secretary shall submit a report to 

16 Congress containing a description of the operation of 

17 the incentive payment program.’’. 

18 (b) STABILIZATION FUND AMENDMENTS.—Section 

19 1858(e)(1) of the Social Security Act, as added by section 

20 221(c) of the Medicare Prescription Drug, Improvement, 

21 and Modernization Act of 2003 (Public Law 108–173), 

22 is amended—

23 (1) in the matter preceding subparagraph (A), 

24 by striking ‘‘2’’ and inserting ‘‘3’’; and 
11

•S 2053 IS 

1 (2) by adding at the end the following new sub2 paragraph: 

3 ‘‘(C) PDP INCENTIVE PAYMENTS.—To 

4 provide incentive payments to PDP sponsors 

5 pursuant to section 1860D–42(c).’’. 

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

7 this section shall take effect as if included in the enact8 ment of the Medicare Prescription Drug, Improvement, 

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

10 SEC. 7. NAIC REVIEW AND REPORT ON CHANGES IN 

11 MEDIGAP POLICIES THAT PROVIDE COV12 ERAGE OF PRESCRIPTION DRUGS CON13 TAINED IN THE MEDICARE PRESCRIPTION 

14 DRUG, IMPROVEMENT, AND MODERNIZATION 

15 ACT OF 2003. 

16 (a) IN GENERAL.—The Secretary shall request the 

17 National Association of Insurance Commissioners to con18 duct a review of the changes to the rules relating to medi19 care supplemental policies that provide prescription drug 

20 coverage contained in subsection (v) of section 1882 of the 

21 Social Security Act (42 U.S.C. 1395ss), as added by sec22 tion 104(a) of the Medicare Prescription Drug, Improve23 ment, and Modernization Act of 2003 (Public Law 108–

24 173). 
12

•S 2053 IS 

1 (b) IMPACT ON MEDICARE BENEFICIARIES.—The re2 view conducted pursuant to subsection (a) should focus 

3 on the impact the changes described in such subsection 

4 will have on medicare beneficiaries. 

5 (c) REPORT.—The Secretary shall request the Na6 tional Association of Insurance Commissioners to submit 

7 to Congress, by not later than January 1, 2006, a report 

8 on the review conducted pursuant to subsection (a), to9 gether with such recommendations as the National Asso10 ciation of Insurance Commissioners determines appro11 priate.

Æ