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[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4753 Introduced in House (IH)]

105th CONGRESS
  2d Session
                                H. R. 4753

To amend title XVIII of the Social Security Act to provide for coverage 
 of outpatient prescription drugs and home infusion drug therapy under 
                         the Medicare Program.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                            October 8, 1998

  Mr. Stark introduced the following bill; which was referred to the 
   Committee on Ways and Means, and in addition to the Committee on 
Commerce, for a period to be subsequently determined by the Speaker, in 
   each case for consideration of such provisions as fall within the 
                jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL

 
To amend title XVIII of the Social Security Act to provide for coverage 
 of outpatient prescription drugs and home infusion drug therapy under 
                         the Medicare Program.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Medicare 
Prescription Drug Coverage Act of 1998''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Coverage of outpatient prescription drugs.
Sec. 3. Payment rules and related requirements for covered outpatient 
                            drugs.
Sec. 4. Medicare rebates for covered outpatient drugs.
Sec. 5. Expansion of Medicare payment advisory commission.
Sec. 6. Coverage of home infusion drug therapy services.
Sec. 7. No mark-up for drugs, biologicals, or parenteral nutrients.
Sec. 8. Treatment of part B premium increases resulting from enactment.
Sec. 9. Effective date.

SEC. 2. COVERAGE OF OUTPATIENT PRESCRIPTION DRUGS.

    (a) Covered Outpatient Drugs as Medical and Other Health 
Services.--Section 1861(s)(2)(J) of the Social Security Act (42 U.S.C. 
1395x(s)(2)(J)) is amended to read as follows:
            ``(J) covered outpatient drugs;''.
    (b) Definition of Covered Outpatient Drug.--Section 1861(t) of such 
Act (42 U.S.C. 1395x(t)) is amended--
            (1) in the heading, by adding at the end the following: ``; 
        Covered Outpatient Drugs'';
            (2) in paragraph (1)--
                    (A) by striking ``paragraph (2)'' and inserting 
                ``the succeeding paragraphs of this subsection'', and
                    (B) by striking the period at the end and inserting 
                ``, but only if used for a medically accepted 
                indication (as described in paragraph (4)).''; and
            (3) by striking paragraph (2) and inserting the following:
    ``(2) Except as otherwise provided in paragraph (3), the term 
`covered outpatient drug' means any of the following products used for 
a medically accepted indication (as described in paragraph (4)):
            ``(A) A drug which may be dispensed only upon prescription 
        and--
                    ``(i) which is approved for safety and 
                effectiveness as a prescription drug under section 505 
                or 507 of the Federal Food, Drug, and Cosmetic Act or 
                which is approved under section 505(j) of such Act;
                    ``(ii)(I) which was commercially used or sold in 
                the United States before the date of the enactment of 
                the Drug Amendments of 1962 or which is identical, 
                similar, or related (within the meaning of section 
                310.6(b)(1) of title 21 of the Code of Federal 
                Regulations) to such a drug, and (II) which has not 
                been the subject of a final determination by the 
                Secretary that it is a `new drug' (within the meaning 
                of section 201(p) of the Federal Food, Drug, and 
                Cosmetic Act) or an action brought by the Secretary 
                under section 301, 302(a), or 304(a) of such Act to 
                enforce section 502(f) or 505(a) of such Act; or
                    ``(iii)(I) which is described in section 107(c)(3) 
                of the Drug Amendments of 1962 and for which the 
                Secretary has determined there is a compelling 
                justification for its medical need, or is identical, 
                similar, or related (within the meaning of section 
                310.6(b)(1) of title 21 of the Code of Federal 
                Regulations) to such a drug, and (II) for which the 
                Secretary has not issued a notice of an opportunity for 
                a hearing under section 505(e) of the Federal Food, 
                Drug, and Cosmetic Act on a proposed order of the 
                Secretary to withdraw approval of an application for 
                such drug under such section because the Secretary has 
                determined that the drug is less than effective for all 
                conditions of use prescribed, recommended, or suggested 
                in its labeling.
            ``(B) A biological product which--
                    ``(i) may only be dispensed upon prescription,
                    ``(ii) is licensed under section 351 of the Public 
                Health Service Act, and
                    ``(iii) is produced at an establishment licensed 
                under such section to produce such product.
            ``(C) Insulin certified under section 506 of the Federal 
        Food, Drug, and Cosmetic Act.
            ``(D) Enteral nutrients (but only if provided as a covered 
        home infusion drug).
            ``(E) Medically-necessary foods for persons with 
        Phenylketonuria (PKU) and other inborn errors of metabolism, in 
        accordance with guidelines developed by the Secretary.
    ``(3) The term `covered outpatient drug' does not include any 
product--
            ``(A) which is administered through infusion in a setting 
        described in paragraph (5)(A)(ii) unless the product is a 
        covered home infusion drug (as defined in paragraph (5));
            ``(B) when furnished as part of, or as incident to, a 
        diagnostic service or any other item or service for which 
        payment may be made under this title (other than physicians' 
        services or services which would be physicians' services if 
        furnished by a physician); or
            ``(C) which is listed under paragraph (2) of section 
        1927(d) (other than subparagraph (B), (I), or (J) of such 
        subparagraph) as a drug which may be excluded from coverage 
        under a State plan under title XIX and which the Secretary 
        elects to exclude from coverage under part B.
    ``(4) For purposes of paragraph (2), the term `medically accepted 
indication', with respect to the use of an outpatient drug, includes 
any use which has been approved by the Food and Drug Administration for 
the drug, and includes another use of the drug if--
            ``(A) the drug has been approved by the Food and Drug 
        Administration; and
            ``(B)(i) such use is supported by one or more citations 
        which are included (or approved for inclusion) in one or more 
        of the following compendia: the American Hospital Formulary 
        Service-Drug Information, the American Medical Association Drug 
        Evaluations, the United States Pharmacopoeia-Drug Information, 
        and other authoritative compendia as identified by the 
        Secretary, unless the Secretary has determined that the use is 
        not medically appropriate or the use is identified as not 
        indicated in one or more such compendia, or
            ``(ii) the carrier involved determines, based upon guidance 
        provided by the Secretary to carriers for determining accepted 
        uses of drugs, that such use is medically accepted based on 
        supportive clinical evidence in peer reviewed medical 
        literature appearing in publications which have been identified 
        for purposes of this clause by the Secretary.
The Secretary may revise the list of compendia in subparagraph (B)(i) 
designated as appropriate for identifying medically accepted 
indications for drugs.
    ``(5)(A) For purposes of paragraph (3), the term `covered home 
infusion drug' means a covered outpatient drug dispensed to an 
individual that--
            ``(i) is administered intravenously, subcutaneously, or 
        epidurally, using an access device that is inserted into the 
        body and an infusion device to control the rate of flow of the 
        drug (or through other means of administration determined by 
        the Secretary);
            ``(ii) is administered--
                    ``(I) in the individual's home,
                    ``(II) an institution used as the individual's 
                home, but only if the drug is administered during an 
                inpatient day for which payment is not made to the 
                institution under part A for inpatient or extended care 
                services furnished to the individual, or
                    ``(III) in a facility other than the individual's 
                home if the administration of the drug at the facility 
                is determined by the Secretary to be cost-effective (in 
                accordance with such criteria as the Secretary may 
                establish); and
            ``(iii) with respect to a drug furnished in a home 
        setting--
                    ``(I) is an antibiotic drug and the Secretary has 
                not determined, for the specific drug or the indication 
                to which the drug is applied, that the drug cannot 
                generally be administered safely, effectively, and cost 
                effectively in such a setting, or
                    ``(II) is not an antibiotic drug and the Secretary 
                has determined, for the specific drug or the indication 
                to which the drug is applied, that the drug can 
                generally be administered safely, effectively, and cost 
                effectively in such a setting.
    ``(B) Not later than January 1, 2002 (and periodically thereafter), 
the Secretary shall publish a list of the drugs, and indications for 
such drugs, that are covered home infusion drugs, with respect to which 
home infusion drug therapy may be provided under this title.
    ``(C) In this paragraph, the term `cost effectively' means, with 
respect to a home infusion drug, a determination by the Secretary that 
the coverage of the drug in a non-hospital setting will, considering 
all expenses, result in lower expenditures under this title than if the 
drug were not so covered.''.
    (c) Conforming Amendments Repealing Separate Coverage of Certain 
Drugs and Products.--(1) Effective January 1, 2002, section 1861(s)(2) 
of such Act (42 U.S.C. 1395x(s)(2)) is amended--
            (A) in subparagraph (A), by striking ``(including drugs'' 
        and all that follows through ``self-administered)'';
            (B) by striking subparagraphs (G), (I), (O), (Q), and (T);
            (C) by adding ``and'' at the end of subparagraph (R); and
            (D) by striking ``; and'' at the end of subparagraph (S) 
        and inserting a period.
    (2) Effective January 1, 2002, section 1861 of such Act (42 U.S.C. 
1395x) is amended by striking the subsection (kk).
    (3) Effective January 1, 2002, section 1881(b) of such Act (42 
U.S.C. 1395rr(b)) is amended--
            (A) in the first sentence of paragraph (1)--
                    (i) by striking ``, (B)'' and inserting ``, and 
                (B)'', and
                    (ii) by striking ``, and (C)'' and all that follows 
                and inserting a period;
            (B) in paragraph (11)--
                    (i) by striking ``(11)(A)'' and inserting ``(11)'', 
                and
                    (ii) by striking subparagraphs (B) and (C).

SEC. 3. PAYMENT RULES AND RELATED REQUIREMENTS FOR COVERED OUTPATIENT 
              DRUGS.

    (a) In General.--Section 1834 of the Social Security Act (42 U.S.C. 
1395m) is amended by inserting after subsection (d) the following new 
subsection:
    ``(e) Payment for and Certain Requirements Concerning Covered 
Outpatient Drugs.--
            ``(1) Deductible.--
                    ``(A) In general.--Payment shall be made under 
                paragraph (2) only for expenses incurred by an 
                individual for a covered outpatient drug during a 
                calendar year after the individual has incurred 
                expenses in the year for such drugs (during a period in 
                which the individual is entitled to benefits under this 
                part) equal to the deductible amount for that year.
                    ``(B) Deductible amount.--
                            ``(i) For purposes of subparagraph (A), 
                        subject to clause (iii), the deductible amount 
                        is--
                                    ``(I) for 2002, an amount equal to 
                                $____; and
                                    ``(II) for any succeeding year, the 
                                amount applicable under this 
                                subparagraph for the previous year, 
                                increased by the percentage increase in 
                                the consumer price index for all urban 
                                consumers (all items; U.S. city 
                                average) for the 12-month period ending 
                                with June of the previous year (or, if 
                                lower, the percentage increase in the 
                                pharmaceutical component of such index 
                                for such period).
                            ``(ii) The Secretary shall promulgate the 
                        deductible amount for 2003 and each succeeding 
                        year not later than October 1 of the previous 
                        year.
                            ``(iii) If the deductible amount computed 
                        under clause (i)(II) for a year is not a 
                        multiple of $10, the Secretary shall (for that 
                        year only) round it to the nearest multiple of 
                        $10.
            ``(2) Payment amount.--
                    ``(A) In general.--Subject to the deductible 
                established under paragraph (1), the amount payable 
                under this part for a covered outpatient drug furnished 
                to an individual during a calendar year shall be equal 
                to--
                            ``(i) 80 percent of the payment basis 
                        described in paragraph (3), in the case of an 
                        individual who has not incurred expenses for 
                        covered outpatient drugs during the year 
                        (including the deductible imposed under 
                        paragraph (1)) in excess of the out-of-pocket 
                        limit for the year under subparagraph (B); and
                            ``(ii) 100 percent of the payment basis 
                        described in paragraph (3), in the case of any 
                        other individual.
                    ``(B) Out-of-pocket limit described.--
                            ``(i) For purposes of subparagraph (A), the 
                        out-of-pocket limit for a year is equal to--
                                    ``(I) for 2002, $____; and
                                    ``(II) for any succeeding year, the 
                                amount applicable under this 
                                subparagraph for the previous year, 
                                increased by the percentage increase 
                                described in paragraph (1)(B)(i)(II).
                            ``(ii) The Secretary shall promulgate the 
                        out-of-pocket limit for 2003 and each 
                        succeeding year not later than October 1 of the 
                        previous year.
                            ``(iii) If the out-of-pocket limit computed 
                        under clause (i)(II) for a year is not a 
                        multiple of $10, the Secretary shall (for that 
                        year only) round it to the nearest multiple of 
                        $10.
            ``(3) Payment basis.--For purposes of paragraph (2), the 
        payment basis is the lesser of--
                    ``(A) the actual net payment for a covered 
                outpatient drug, or
                    ``(B) the applicable payment limit established 
                under paragraph (4).
            ``(4) Payment limits.--
                    ``(A) Payment limit for single source drugs and 
                multiple source drugs with restrictive prescriptions.--
                In the case of a covered outpatient drug that is a 
                multiple source drug which has a restrictive 
                prescription, or that is single source drug, the 
                payment limit for a payment calculation period is equal 
to the amount of the administrative allowance (established under 
paragraph (5)) plus the product of the number of dosage units dispensed 
and the per unit actual acquisition cost for the drug product 
(determined under subparagraph (C)) for the period.
                    ``(B) Payment limit for multiple source drugs 
                without restrictive prescriptions.--In the case of a 
                drug that is a multiple source drug which does not have 
                a restrictive prescription, the payment limit for a 
                payment calculation period is equal to the amount of 
                the administrative allowance (established under 
                paragraph (5)) plus the product of the number of dosage 
                units dispensed and the lowest actual acquisition cost 
                (determined under subparagraph (C)) of any of the 
                multiple source drugs in the category as determined by 
                the Secretary for the period.
                    ``(C) Determination of unit price.--
                            ``(i) Initial payment calculation period.--
                        The Secretary shall determine, for the 
                        dispensing of a covered outpatient drug product 
                        in the payment calculation period beginning 
                        January 1, 2002, the actual acquisition cost 
                        for the drug product, based upon--
                                    ``(I) in the case of a single 
                                source drug or multiple source drug 
                                with a restrictive prescription, based 
                                upon information from the period 
                                beginning in 1998 updated (in a 
                                compound manner) by the percentage 
                                change in the consumer price index for 
                                all urban consumers (U.S. city average) 
                                for the 4 12-month periods ending with 
                                June 2001; or
                                    ``(II) in the case of a multiple 
                                source drug without a restrictive 
                                prescription, based upon information 
                                from the most recent year for which 
                                data is available.
                            ``(ii) Subsequent periods.--The actual 
                        acquisition cost for a covered outpatient drug 
                        product applicable under this subparagraph for 
                        the dispensing of a drug product in a payment 
                        calculation period beginning in January of each 
                        year (beginning with 2003) shall be equal to 
                        the actual acquisition cost for the product 
                        determined under this subparagraph for the 
                        period ending in January of the previous year, 
                        increased by the percentage increase described 
                        in paragraph (1)(B)(i)(II).
                            ``(iii) Simplification in determination of 
                        actual acquisition cost.--The Secretary shall 
                        consult with the provider community to simplify 
                        the accounting and reporting requirements used 
                        in calculating actual acquisition cost and may 
                        accept various averaging procedures, tax 
                        documents, and tax accounting procedures (such 
                        as last-in-first-out (LIFO) and first-in-first-
                        out (FIFO)) instead of new reporting 
                        requirements.
                            ``(iv) Compliance with request for 
                        information.--If a wholesaler or direct seller 
                        of a covered outpatient drug refuses, after 
                        being requested by the Secretary, to provide 
                        price information requested to carry out 
                        clauses (i) or (ii), or deliberately provides 
                        information that is false, the Secretary may 
                        impose a civil money penalty of not to exceed 
                        $10,000 for each such refusal or provision of 
                        false information. The provisions of section 
                        1128A (other than subsections (a) and (b)) 
                        shall apply to civil money penalties under the 
                        previous sentence in the same manner as they 
                        apply to a penalty or proceeding under section 
                        1128A(a). Information gathered pursuant to 
                        clause (i) or (ii) shall not be disclosed 
                        except as the Secretary determines to be 
                        necessary to carry out the purposes of this 
                        part and to permit the Comptroller General and 
                        the Director of the Congressional Budget Office 
                        to review the information provided.
                    ``(D) Demonstration of alternative purchasing 
                arrangements.--The Secretary may conduct demonstrations 
                with different forms of purchasing, such as competitive 
                bidding, preferred provider organizations, bundling of 
                medical and pharmaceutical costs, and other devices to 
                obtain the lowest possible price for quality 
                pharmaceutical products under this part. If the 
                Secretary determines that a demonstration results in 
                lower costs to the program and beneficiaries under this 
                title while maintaining the quality and access to 
                needed products, the Secretary may implement the 
                demonstration regionally or nationally. The Secretary 
                shall from time to time report to Congress on 
                demonstrations conducted under this subparagraph.
            ``(5) Administrative allowance for purposes of payment 
        limit.--
                    ``(A) In general.--Except as provided in 
                subparagraphs (B) through (D), the administrative 
                allowance established under this paragraph is--
                            ``(i) for 2002, an amount equal to $____; 
                        and
                            ``(ii) for each succeeding year, the amount 
                        for the previous year, adjusted by the 
                        percentage increase described in paragraph 
                        (1)(B)(i)(II).
                    ``(B) Special rule.--The Secretary shall establish 
                a higher administrative allowance under subparagraph 
                (A) in the case of compounding, consultation, and to 
                ensure access to covered drugs and antigens that entail 
                extra or unusual expense.
                    ``(C) Reduction for mail order pharmacies.--The 
                Secretary may, after consulting with representatives of 
                pharmacists, individuals enrolled under this part, and 
                of private insurers, reduce the administrative 
                allowances established under subparagraph (A) for any 
                covered outpatient drug dispensed by a mail order 
                pharmacy, based on differences between such pharmacies 
                and other pharmacies with respect to operating costs 
                and other economies.
                    ``(D) No dispensing fee for certain drugs and 
                products.--No administrative allowance may be provided 
                under this paragraph with respect to any of the 
                following covered outpatient drugs, unless the 
                Secretary determines that an administrative allowance 
                is necessary to assure access:
                            ``(i) Erythropoietin provided to dialysis 
                        patients.
                            ``(ii) Drugs and biologicals provided as an 
                        incident to a physician's service or to a 
                        service which would be a physician's service if 
                        furnished by a physician.
                            ``(iii) Covered home infusion drugs.
            ``(6) Assuring appropriate prescribing and dispensing 
        practices.--
                    ``(A) In general.--The Secretary shall develop a 
                program to--
                            ``(i) provide on-line prospective review of 
                        prescriptions on a 24-hour basis (in accordance 
                        with subparagraph (B)) and retrospective review 
                        of claims;
                            ``(ii) establish standards for counseling 
                        individuals to whom covered outpatient drugs 
                        are prescribed; and
                            ``(iii) identify (and to educate 
                        physicians, patients, and pharmacists 
                        concerning)--
                                    ``(I) instances or patterns of 
                                unnecessary or inappropriate 
                                prescribing or dispensing practices for 
                                covered outpatient drugs,
                                    ``(II) instances or patterns of 
                                substandard care with respect to such 
                                drugs,
                                    ``(III) potential adverse 
                                reactions, and
                                    ``(IV) appropriate use of generic 
                                products.
                    ``(B) Prospective review.--
                            ``(i) In general.--The program under this 
                        paragraph shall provide for on-line prospective 
                        review of each covered outpatient drug 
                        prescribed for a patient before the 
                        prescription is filled or the drug is 
                        furnished, including screening for potential 
                        drug therapy problems due to therapeutic 
                        duplication, drug-to-drug interactions, and 
                        incorrect drug dosage or duration of drug 
                        treatment, including inadequate pain management 
                        therapy.
                            ``(ii) Discussion of appropriate use.--In 
                        conducting prospective review under this 
                        subparagraph, any individual or entity that 
                        dispenses a covered outpatient drug shall offer 
                        to discuss with the patient to whom the drug is 
                        furnished or the patient's caregiver (in person 
                        if practicable, or through access to a toll-
                        free telephone service) information regarding 
                        the appropriate use of the drug, potential 
                        interactions between the drug and other drugs 
                        dispensed to the individual, the need for 
                        adequate pain management, and such other 
                        matters as the Secretary may require.
                            ``(iii) Additional duties.--In carrying out 
                        this subparagraph, the Secretary shall--
                                    ``(I) develop public domain 
                                software which could be used by 
                                carriers and pharmacies to provide the 
                                on-line prospective review; and
                                    ``(II) study the feasibility and 
                                desirability of requiring confidential, 
                                encoded patient diagnosis codes on 
                                prescriptions and the feasibility of 
                                expanding the prospective review 
                                program to include the identification 
                                of drug-disease contraindications, 
                                interactions with over-the-counter 
                                drugs, and drug-allergy interactions.
                  ``(C) Prior authorization.--
                            ``(i) Development of list of misused 
                        drugs.--The Secretary shall develop (and 
                        periodically) update a list of covered 
                        outpatient drugs which the Secretary has 
                        determined, based on data collected, may be 
                        subject to misuse or inappropriate use. The 
Secretary shall provide a means for manufacturers to appeal an initial 
decision to include a drug on the list.
                            ``(ii) Prior authorization for drugs on 
                        list.--The Secretary shall establish a process 
                        under which (subject to clause (iii)) the 
                        Secretary may require advance approval for any 
                        covered outpatient drug included on the list 
                        developed under clause (i), and the Secretary 
                        shall develop exceptions for oncologists, 
                        medical directors of hospice programs, and 
                        others who are or should be regularly involved 
                        in aggressive pain management.
                            ``(iii) Restrictions on denial of 
                        approval.--The Secretary may not deny the 
                        approval of a drug under the process 
                        established under clause (ii) before its 
                        dispensing unless the process--
                                    ``(I) provides responses by 
                                telephone or other telecommunication 
                                device within 24 hours of a request for 
                                prior authorization; and
                                    ``(II) provides for the dispensing 
                                of at least a 72-hour supply of a 
                                covered outpatient prescription drug in 
                                emergency situations.
                    ``(D) Drug use review.--As part of the program 
                established under subparagraph (A), the Secretary shall 
                provide for a drug use review program to provide for 
                the ongoing periodic examination of claims data and 
                other records on covered outpatient drugs furnished to 
                patients under this title in order to identify patterns 
                of fraud, abuse, gross overuse or underuse, or 
                inappropriate or medically unnecessary care among 
                physicians, pharmacists, and patients.
                    ``(E) Exception for managed care programs.--The 
                Secretary may waive the application of any provision of 
                this paragraph to the dispensing of covered outpatient 
                drugs by an organization described in section 
                1833(a)(1)(A) or a Medicare+Choice organization under 
                part C to the extent the Secretary finds that the 
                organization has in effect a program that meets the 
                objectives of such provision.
                    ``(F) Adoption of medicaid programs.--To the extent 
                considered appropriate by the Secretary, the program 
                developed under this paragraph with respect to drugs 
                furnished in a State may include elements applicable to 
                the furnishing of covered outpatient drugs under the 
                State Medicaid program under section 1927.
          ``(7) Administrative and reporting requirements.--
                    ``(A) Requirements relating to controlled 
                substances and illegal uses.--The Secretary shall 
                require an entity furnishing covered outpatient drugs 
                under this part to report electronically to the 
                appropriate State agency on any covered outpatient 
                drugs dispensed to individuals enrolled under this part 
                that are controlled substances under schedules II 
                through V of the Controlled Substance Act, and on the 
                illegal use or diversion of any such drugs furnished by 
                the entity.
                    ``(B) Privacy protection.--The Secretary shall 
                establish standards to protect from public disclosure 
                the identity of any individual (whether a patient or an 
                individual involved in the prescribing, dispensing, or 
                administration of the drug) who is the subject of 
                information under this section. Under such standards--
                            ``(i) no information on the use of a 
                        pharmaceutical by an identifiable individual 
                        shall be shared with anyone other than the 
                        individual, the individual's legal guardian or 
                        custodian, or the individual's physician;
                            ``(ii) no information shall be shared with 
                        the individual's employer, or with a 
                        pharmaceutical manufacturer or wholesaler, or 
                        with any other individual for purposes of 
                        contacting the individual to persuade, sell, or 
                        influence the individual's choice of 
                        pharmaceuticals; and
                            ``(iii) no physician, pharmacist, or other 
                        health care provider who receives any form of 
                        compensation or thing of value from a drug 
                        manufacturer or wholesaler may contact a 
                        patient for purposes of influencing the patient 
                        to use the product of that drug manufacturer or 
                        wholesaler.
                    ``(C) Standard claims form.--The Secretary shall 
                develop, in consultation with representatives of 
                pharmacies and of other interested persons, a standard 
                claims form for covered outpatient drugs in accordance 
                with part C of title IX.
            ``(8) Billing requirements.--
                    ``(A) Mandatory assignment.--(i) Payment under this 
                part for a covered outpatient drug may only be made on 
                an assignment-related basis.
                    ``(ii) Except for deductible, coinsurance, or 
                copayment amounts applicable under this part, no person 
                may bill or collect any amount from an individual 
                enrolled under this part or other person for a covered 
                outpatient drug for which payment may be made under 
                this part, and no such individual or person is liable 
                for payment of any amounts billed in violation of this 
                clause. If a person knowingly and willfully bills or 
                collects an amount in violation of the previous 
                sentence, the Secretary may apply sanctions against 
                such person in accordance with section 1842(j)(2). 
                Paragraph (4) of section 1842(j) shall apply in this 
                clause in the same manner as such paragraph applies to 
                such section.
                    ``(B) Use of electronic system.--The Secretary 
                shall establish, by not later than July 1, 2001, a 
point-of-sale electronic system for use by carriers and pharmacies in 
the submission of information respecting covered outpatient drugs 
dispensed to Medicare beneficiaries under this part. Such system shall 
be consistent with the standards established by the National Council of 
Prescription Drug Programs, and to the maximum extent possible shall be 
based on current industry best practices.
            ``(9) Definitions.--In this subsection:
                    ``(A) Multiple and single source drugs.--The terms 
                `multiple source drug' and `single source drug' have 
                the meanings of those terms under section 1927(k)(7), 
                except that the reference in such section to a `covered 
                outpatient drug' shall be considered a reference to a 
                covered outpatient drug under this title.
                    ``(B) Restrictive prescription.--A drug has a 
                `restrictive prescription' only if--
                            ``(i) in the case of a written 
                        prescription, the prescription for the drug 
                        indicates, in the handwriting of the physician 
                        or other person prescribing the drug and with 
                        an appropriate phrase (such as `brand medically 
                        necessary') recognized by the Secretary, that a 
                        particular drug product must be dispensed, or
                            ``(ii) in the case of a prescription issued 
                        by telephone--
                                    ``(I) the physician or other person 
                                prescribing the drug (through use of 
                                such an appropriate phrase) states that 
                                a particular drug product must be 
                                dispensed, and
                                    ``(II) the physician or other 
                                person submits to the pharmacy 
                                involved, within 30 days after the date 
                                of the telephone prescription, a 
                                written confirmation which is in the 
                                handwriting of the physician or other 
                                person prescribing the drug and which 
                                indicates with such appropriate phrase 
                                that the particular drug product was 
                                required to have been dispensed.
                        The requirement of subclause (II) may be 
                        satisfied in such alternative manner, included 
                        electronic transmission of appropriate 
                        information, as the Secretary, after 
                        consultation with physicians and providers, 
                        finds will reduce paperwork and administrative 
                        costs while maintaining program integrity.
                    ``(C) Payment calculation period.--The term 
                `payment calculation period' means a calendar year.''.
    (b) Requiring Pharmacies to Submit Claims.--Section 1848(g)(4) of 
such Act (42 U.S.C. 1395w-4(g)(4)) is amended--
            (1) in the heading--
                    (A) by striking ``Physician submission'' and 
                inserting ``Submission'', and
                    (B) by inserting ``by physicians and suppliers'' 
                after ``claims'';
            (2) in the matter in subparagraph (A) preceding clause 
        (i)--
                    (A) by striking ``For services furnished on or 
                after September 1, 1990, within 1 year'' and inserting 
                ``Within 1 year (or 90 days in the case of covered 
                outpatient drugs)'',
                    (B) by striking ``a service'' and inserting ``an 
                item or service'', and
                    (C) by inserting ``or of providing a covered 
                outpatient drug,'' after ``basis,''; and
            (3) in subparagraph (A)(i), by inserting ``item or'' before 
        ``service''.
    (c) Special Rules for Carriers.--
            (1) Use of carriers.--Section 1842(b)(2) of such Act (42 
        U.S.C. 1395u(b)(2)) is amended by adding at the end the 
        following:
    ``(F) With respect to activities related to covered outpatient 
drugs, the Secretary may enter into contracts with carriers under this 
section to perform the activities on a regional or national basis.''.
            (2) Additional functions.--Section 1842(b)(3) of such Act 
        (42 U.S.C. 1395u(b)(3)) is amended--
                    (A) by striking ``and'' at the end of subparagraph 
                (H); and
                    (B) by inserting after subparagraph (H) the 
                following new subparagraphs:
            ``(I) if it makes determinations or payments with respect 
        to covered outpatient drugs, will--
                    ``(i) receive information transmitted under the 
                electronic system established under section 
                1834(e)(8)(B), and
                    ``(ii) respond to requests by pharmacies (and 
                individuals entitled to benefits under this part) as to 
                whether or not such an individual has met the 
                prescription drug deductible established under section 
                1834(e)(1)(B) for a year;
            ``(J) will enter into such contracts with organizations 
        described in subsection (f)(3) as the Secretary determines may 
        be necessary to implement and operate (and for related 
        functions with respect to) the electronic system established 
        under section 1834(e)(8)(B) for covered outpatient drugs under 
        this part; and''.
            (3) Payment on other than a cost basis.--Section 1842(c)(1) 
        of such Act (42 U.S.C. 1395u(c)(1)) is amended--
                    (A) by inserting ``(A)'' after ``(c)(1)'',
                    (B) in the first sentence, by inserting ``, except 
                as otherwise provided in subparagraph (B),'' after 
                ``under this part, and'', and
                    (C) by adding at the end the following:
    ``(B) To the extent that a contract under this section provides for 
activities related to covered outpatient drugs, the Secretary may 
provide for payment for those activities based on any method of payment 
determined by the Secretary to be appropriate.''.
            (4) Batch prompt processing of claims.--Section 1842(c) of 
        such Act (42 U.S.C. 1395u(c)) is amended--
                    (A) in paragraphs (2)(A) and (3)(A), by striking 
                ``Each'' and inserting ``Except as provided in 
                paragraph (7), each''; and
                    (B) by adding at the end the following new 
                paragraph:
    ``(7)(A) Each contract under this section which provides for the 
disbursement of funds, as described in subsection (a)(1)(B), with 
respect to claims for payment for covered outpatient drugs shall 
provide for a payment cycle under which each carrier will, on a monthly 
basis, make a payment with respect to all claims which were received 
and approved for payment in the period since the most recent date on 
which such a payment was made with respect to the participating 
pharmacy or individual submitting the claim.
    ``(B) If payment is not issued, mailed, or otherwise transmitted 
within 5 days of when such a payment is required to be made under 
subparagraph (A), interest shall be paid at the rate used for purposes 
of section 3902(a) of title 31, United States Code (relating to 
interest penalties for failure to make prompt payments) for the period 
beginning on the day after such 5-day period and ending on the date on 
which payment is made.''.
            (5) Use of other entities for covered outpatient drugs.--
        Section 1842(f) of such Act (42 U.S.C. 1395u(f)) is amended--
                    (A) by striking ``and'' at the end of paragraph 
                (1),
                    (B) by striking the period at the end of paragraph 
                (2) and inserting ``; and'', and
                    (C) by adding at the end the following:
            ``(3) with respect to activities related to covered 
        outpatient drugs, any other private entity which the Secretary 
        determines is qualified to conduct such activities.''.
            (6) Designated carriers to process claims of railroad 
        retirees.--Section 1842(g) of such Act (42 U.S.C. 1395u(g)) is 
        amended by inserting ``(other than functions related to covered 
        outpatient drugs)'' after ``functions''.
    (d) Conforming Amendments.--
            (1)(A) Section 1833(a)(1) of such Act (42 U.S.C. 
        1395l(a)(1)) is amended--
                    (i) by striking ``and'' at the end of clause (R), 
                and
                    (ii) by inserting before the semicolon at the end 
                the following: ``, and (T) with respect to covered 
                outpatient drugs, the amounts paid shall be as 
                prescribed by section 1834(e)''.
            (B) Section 1833(a)(2) of such Act (42 U.S.C. 1395l(a)(2)) 
        is amended in the matter preceding subparagraph (A) by 
        inserting ``, except for covered outpatient drugs,'' after 
        ``and (I) of such section''.
            (2) Section 1833(b)(2) of such Act (42 U.S.C. 1395l(b)(2)) 
        is amended by inserting ``or with respect to covered outpatient 
        drugs'' before the comma.
            (3) The first sentence of section 1842(h)(2) of such Act 
        (42 U.S.C. 1395u(h)(2)) is amended by inserting ``(other than a 
        carrier described in subsection (f)(3))'' after ``Each 
        carrier''.
            (4) The first sentence of section 1866(a)(2)(A) of such Act 
        (42 U.S.C. 1395cc(a)(2)(A)) is amended--
                    (A) in clause (i), by inserting ``section 
                1834(e),'' after ``section 1833(b),'', and
                    (B) in clause (ii), by inserting ``, other than for 
                covered outpatient drugs,'' after ``provider)''.

SEC. 4. MEDICARE REBATES FOR COVERED OUTPATIENT DRUGS.

    (a) In General.--Part B of title XVIII of the Social Security Act 
is amended by adding at the end the following new section:

                 ``rebates for covered outpatient drugs

    ``Sec. 1849. (a) Requirement for Rebate Agreement.--
            ``(1) In general.--In order for payment to be available 
        under this part for covered outpatient drugs of a manufacturer 
        dispensed or provided on or after January 1, 2002, subject to 
        paragraph (2), the manufacturer must have entered into and have 
        in effect a rebate agreement with the Secretary meeting the 
        requirements of subsection (b) and an agreement to give equal 
        access to discounts in accordance with subsection (e).
            ``(2) Demonstrations.--The Secretary may conduct 
        demonstrations with different forms of purchasing, such a 
        competitive bidding, exclusive long-term contracts resulting in 
        lower prices, and other devices to obtain the lowest possible 
        price for quality pharmaceutical products. If the Secretary 
        determines that a demonstration results in lower costs to the 
        program and beneficiaries under this title than the rebate 
        program under paragraph (1) while maintaining quality and 
        access to needed products, the Secretary may implement use of 
        the demonstration regionally or nationally as an alternative to 
        the rebate program. The Secretary shall from time to time 
        report to Congress on such demonstrations.
    ``(b) Terms, Implementation, and Enforcement of Rebate Agreement.--
            ``(1) Periodic rebates.--
                    ``(A) In general.--A rebate agreement under this 
                section shall require the manufacturer to pay to the 
                Secretary for each calendar quarter, not later than 30 
                days after the date of receipt of the information 
                described in paragraph (2) for such quarter, a rebate 
                in an amount determined under subsection (c) for all 
                covered outpatient drugs of the manufacturer described 
                in subparagraph (B).
                    ``(B) Drugs included in quarterly rebate 
                calculation.--Drugs subject to a rebate with respect to 
                a calendar quarter are covered outpatient drugs which 
                are single source and innovator multiple source drugs 
                which are dispensed or provided during such quarter to 
                individuals (other than individuals enrolled with a 
                Medicare+Choice organization under part C) eligible for 
benefits under this part, as reported to the Secretary.
            ``(2) Information furnished to manufacturers.--The 
        Secretary shall report to each manufacturer, not later than 60 
        days after the end of each calendar quarter, information on the 
        total number, for each covered outpatient drug described in 
        paragraph (1)(B), of units of each dosage form, strength, and 
        package size dispensed or provided under the plan during the 
        quarter, on the basis of the data reported to the Secretary 
        described in paragraph (1)(B).
            ``(3) Provision of price information by manufacturer.--
                    ``(A) Quarterly pricing information.--Each 
                manufacturer with an agreement in effect under this 
                section shall report to the Secretary, not later than 
                30 days after the last day of each calendar quarter, on 
                the average manufacturer retail price and the average 
                manufacturer non-retail price for each dosage form and 
                strength of each covered outpatient drug described in 
                paragraph (1)(B) for the quarter.
                    ``(B) Base quarter prices.--Each manufacturer of a 
                covered outpatient drug with an agreement under this 
                section shall report to the Secretary, by not later 
                than 30 days after the effective date of such agreement 
                (or, if later, 30 days after the end of the base 
                quarter), the average manufacturer retail price, for 
                such base quarter, for each dosage form and strength of 
                each such covered drug.
                    ``(C) Verification of average manufacturer price.--
                The Secretary may inspect the records of manufacturers, 
                and survey wholesalers, pharmacies, and institutional 
                purchasers of drugs, as necessary to verify prices 
                reported under subparagraph (A).
                    ``(D) Penalties.--
                            ``(i) Civil money penalties.--The Secretary 
                        may impose a civil money penalty on a 
                        manufacturer with an agreement under this 
                        section--
                                    ``(I) for failure to provide 
                                information required under subparagraph 
                                (A) on a timely basis, in an amount up 
                                to $10,000 per day of delay;
                                    ``(II) for refusal to provide 
                                information about charges or prices 
                                requested by the Secretary for purposes 
                                of verification pursuant to 
                                subparagraph (C), in an amount up to 
                                $100,000; and
                                    ``(III) for provision, pursuant to 
                                subparagraph (A) or (B), of information 
                                that the manufacturer knows or should 
                                know is false, in an amount up to 
                                $100,000 per item of information.
                        Such civil money penalties are in addition to 
                        any other penalties prescribed by law. The 
                        provisions of section 1128A (other than 
                        subsections (a) (with respect to amounts of 
                        penalties or additional assessments) and (b)) 
                        shall apply to a civil money penalty under this 
                        subparagraph in the same manner as such 
                        provisions apply to a penalty or proceeding 
                        under section 1128A(a).
                            ``(ii) Termination of agreement.--If a 
                        manufacturer with an agreement under this 
                        section has not provided information required 
                        under subparagraph (A) or (B) within 90 days of 
                        the deadline imposed, the Secretary may suspend 
                        the agreement with respect to covered 
                        outpatient drugs dispensed after the end of 
                        such 90-day period and until the date such 
                        information is reported (but in no case shall a 
                        suspension be for less than 30 days).
            ``(4) Length of agreement.--
                    ``(A) In general.--A rebate agreement shall be 
                effective for an initial period of not less than one 
                year and shall be automatically renewed for a period of 
                not less than one year unless terminated under 
                subparagraph (B).
                    ``(B) Termination.--
                            ``(i) By the secretary.--The Secretary may 
                        provide for termination of a rebate agreement 
                        for violation of the requirements of the 
                        agreement or other good cause shown. Such 
                        termination shall not be effective earlier than 
                        60 days after the date of notice of such 
                        termination. The Secretary shall afford a 
                        manufacturer an opportunity for a hearing 
                        concerning such termination, but such hearing 
                        shall not delay the effective date of the 
                        termination.
                            ``(ii) By a manufacturer.--A manufacturer 
                        may terminate a rebate agreement under this 
                        section for any reason. Any such termination 
                        shall not be effective until the calendar 
                        quarter beginning at least 60 days after the 
                        date the manufacturer provides notice to the 
                        Secretary.
                            ``(iii) Effective date of termination.--Any 
                        termination under this subparagraph shall not 
                        affect rebates due under the agreement before 
                        the effective date of its termination.
                            ``(iv) Notice to pharmacies.--In the case 
                        of a termination under this subparagraph, the 
                        Secretary shall notify pharmacies and physician 
                        organizations not less than 30 days before the 
                        effective date of such termination.
    ``(c) Amount of Rebate.--
            ``(1) Base rebate.--Each manufacturer shall remit a basic 
        rebate to the Secretary for each calendar quarter in an amount, 
        with respect to each dosage form and strength of a covered 
        outpatient drug equal to the product of--
                    ``(A) the total number of units subject to rebate 
                for such quarter, as described in subsection (b)(1)(B); 
                and
                    ``(B)(i) in the case of a single-source drug or an 
                innovator-multiple source drug (other than insulin 
                furnished over-the-counter), 15 percent of the average 
                manufacturer retail price, or
                    ``(ii) in the case of insulin furnished over-the-
                counter, 10 percent of the average manufacturer retail 
                price.
            ``(2) Additional rebate.--Each manufacturer shall remit to 
        the Secretary, for each calendar quarter, an additional rebate 
        for each dosage form and strength of a single-source drug or an 
        innovator-multiple source drug, in an amount equal to--
                    ``(A) the total number of units subject to rebate 
                for such quarter, as described in subsection (b)(1)(B), 
                multiplied by
                    ``(B) the amount, if any, by which the average 
                manufacturer retail price for such drugs of the 
                manufacturer exceeds the average manufacturer retail 
                price for the base quarter, increased by the percentage 
                increase in the Consumer Price Index for all urban 
                consumers (U.S. average) from the end of such base 
                quarter to the month before the beginning of such 
                calendar quarter.
            ``(3) Deposit of rebates.--The Secretary shall deposit 
        rebates under this section in the Federal Supplementary Medical 
        Insurance Trust Fund established under section 1841.
    ``(d) Confidentiality of Information.--Notwithstanding any other 
provision of law, information disclosed by a manufacturer under this 
section is confidential and shall not be disclosed by the Secretary (or 
a carrier), except--
            ``(1) as the Secretary determines to be necessary to carry 
        out this section,
            ``(2) to permit the Comptroller General to review the 
        information provided, and
            ``(3) to permit the Director of the Congressional Budget 
        Office to review the information provided.
    ``(e) Agreement to Give Equal Access to Discounts.--An agreement 
under this subsection by a manufacturer of covered outpatient drugs 
shall guarantee that the manufacturer will offer, to each wholesaler or 
retailer (or other purchaser representing a group of such wholesalers 
or retailers) that purchases such drugs on substantially the same terms 
(including such terms as prompt payment, cash payment, volume purchase, 
single-site delivery, the use of formularies by purchasers, and any 
other terms effectively reducing the manufacturer's costs) as any other 
purchaser (including any institutional purchaser) the same price for 
such drugs as is offered to such other purchaser. In determining a 
manufacturer's compliance with the previous sentence, there shall not 
be taken into account prices that are merely nominal in amount or 
prices excluded under section 1927(c)(1)(C)(i).
    ``(f) Definitions.--For purposes of this section--
            ``(1) Average manufacturer retail price.--The term `average 
        manufacturer retail price' means, with respect to a covered 
        outpatient drug of a manufacturer for a calendar quarter, the 
        average price (inclusive of discounts for cash payment, prompt 
        payment, volume purchases, and rebates (other than rebates 
        under this section), but exclusive of nominal prices) paid to 
        the manufacturer for the drug in the United States for drugs 
        distributed to the retail pharmacy class of trade.
            ``(2) Average manufacturer non-retail price.--The term 
        `average manufacturer non-retail price' means, with respect to 
        a covered outpatient drug of a manufacturer for a calendar 
        quarter, the weighted average price (inclusive of discounts for 
        cash payment, prompt payment, volume purchases, and rebates 
        (other than rebates under this section), but exclusive of 
        nominal prices) paid to the manufacturer for the drug in the 
        United States by hospitals and other institutional purchasers 
        that purchase drugs for institutional use and not for resale.
            ``(3) Base quarter.--The term `base quarter' means, with 
        respect to a covered outpatient drug of a manufacturer, the 
        calendar quarter beginning April 1, 2002, or (if later) the 
        first full calendar quarter during which the drug was marketed 
        in the United States.
            ``(4) Drug.--The terms `innovator multiple source drug', 
        `noninnovator multiple source drug', and `single source drug' 
        have the meanings of those terms under section 1927(k)(7), 
        except that the reference in such section to a `covered 
        outpatient drug' shall be considered a reference to a covered 
        outpatient drug under this part.
            ``(5) Manufacturer.--The term `manufacturer' means, with 
        respect to a covered outpatient drug--
                    ``(A) the entity whose National Drug Code number 
                (as issued pursuant to section 510(e) of the Federal 
                Food, Drug, and Cosmetic Act) appears on the labeling 
                of the drug; or
                    ``(B) if the number described in subparagraph (A) 
                does not appear on the labeling of the drug, the person 
                named as the applicant in a human drug application (in 
                the case of a new drug) or the product license 
                application (in the case of a biological product) for 
                such drug approved by the Food and Drug 
                Administration.''.
    (b) Exclusions From Coverage.--Section 1862(a) of such Act (42 
U.S.C. 1395y(a)) is amended--
            (1) by striking ``and'' at the end of paragraph (20),
            (2) by striking the period at the end of paragraph (21) and 
        inserting ``; or'', and
            (3) by inserting after paragraph (21) the following new 
        paragraph:
            ``(22) consisting of a covered outpatient drug (as 
        described in section 1861(t)) furnished during a year for which 
        the drug's manufacturer does not have in effect a rebate 
        agreement with the Secretary that meets the requirements of 
        section 1849 for the year.''.

SEC. 5. EXPANSION OF MEDICARE PAYMENT ADVISORY COMMISSION.

    (a) In General.--Effective January 1, 2000, the membership of the 
Medicare Payment Advisory Commission (established under section 1805 of 
the Social Security Act, (42 U.S.C. 1395b-6)) shall be expanded to 
include 2 additional members, appointed by the Comptroller General of 
the United States, with expertise in the area of pharmacology and 
prescription drug benefit programs.
    (b) Application of Provisions.--The provisions of paragraphs 
(2)(D), (3), and (4) of subsection (c) of such section (relating to 
ethical disclosure, terms, and compensation) shall apply to the 
additional members appointed under subsection (a) in the same manner as 
they apply to other members of the Commission.

SEC. 6. COVERAGE OF HOME INFUSION DRUG THERAPY SERVICES.

    (a) In General.--Section 1832(a)(2)(A) of the Social Security Act 
(42 U.S.C. 1395k(a)(2)(A)) is amended by inserting ``and home infusion 
drug therapy services'' before the semicolon.
    (b) Home Infusion Drug Therapy Services Defined.--Section 1861 of 
such Act (42 U.S.C. 1395x) is amended by adding at the end the 
following new subsection:

                 ``Home Infusion Drug Therapy Services

    ``(uu)(1) The term `home infusion drug therapy services' means the 
items and services described in paragraph (2) furnished to an 
individual who is under the care of a physician--
            ``(A) in a setting described in section 1861(t)(5)(A)(ii),
            ``(B) by a qualified home infusion drug therapy provider 
        (as defined in paragraph (3)) or by others under arrangements 
        with them made by that provider, and
            ``(C) under a plan established and periodically reviewed by 
        a physician.
    ``(2) The items and services described in this paragraph are such 
nursing, pharmacy, and related services (including medical supplies, 
intravenous fluids, delivery, and equipment) as are necessary to 
conduct safely and effectively a drug regimen through use of a covered 
home infusion drug (as defined in subsection (t)(5)), but do not 
include such covered home infusion drugs.
    ``(3) The term `qualified home infusion drug therapy provider' 
means any entity that the Secretary determines meets the following 
requirements (or, in the case of a home health agency or an entity with 
respect to which the only items and services described in paragraph (2) 
furnished by the entity are enteral nutrition therapy services, meets 
any of the following requirements which the Secretary considers 
appropriate):
            ``(A) The entity is capable of providing or arranging for 
        the items and services described in paragraph (2) and covered 
        home infusion drugs.
            ``(B) The entity maintains clinical records on all 
        patients.
            ``(C) The entity adheres to written protocols and policies 
        with respect to the provision of items and services.
            ``(D) The entity makes services available (as needed) seven 
        days a week on a 24-hour basis.
            ``(E) The entity coordinates all service with the patient's 
        physician.
            ``(F) The entity conducts a quality assessment and 
        assurance program, including drug regimen review and 
        coordination of patient care.
            ``(G) The entity assures that only trained personnel 
        provide covered home infusion drugs (and any other service for 
        which training is required to provide the service safely).
            ``(H) The entity assumes responsibility for the quality of 
        services provided by others under arrangements with the entity.
            ``(I) In the case of an entity in any State in which State 
        or applicable local law provides for the licensing of entities 
        of this nature, the entity (i) is licensed pursuant to such 
        law, or (ii) is approved, by the agency of such State or 
        locality responsible for licensing entities of this nature, as 
        meeting the standards established for such licensing.
            ``(J) The entity meets such other requirements as the 
        Secretary may determine are necessary to assure the safe and 
        effective provision of home infusion drug therapy services and 
        the efficient administration of the home infusion drug therapy 
        benefit.''.
    (c) Payment.--
            (1) In general.--Section 1833 of such Act (42 U.S.C. 1395l) 
        is amended--
                    (A) in subsection (a)(2)(B), by striking ``or (E)'' 
                and inserting ``(E), or (H)'',
                    (B) in subsection (a)(2)(F), by striking ``and'' at 
                the end,
                    (C) in subsection (a)(2)(G), by striking the 
                semicolon and inserting ``; and'',
                    (D) by inserting after subsection (a)(2)(G) the 
                following new subparagraph:
                    ``(H) with respect to home infusion drug therapy 
                services, the amounts described in section 1834(m);'', 
                and
                    (E) in the first sentence of subsection (b), by 
                inserting ``and home infusion drug therapy services'' 
                after ``1861(kk)))''.
            (2) Amount described.--Section 1834 of such Act is amended 
        by adding at the end the following new subsection:
    ``(m) Home Infusion Drug Therapy Services.--
            ``(1) In general.--With respect to home infusion drug 
        therapy services, payment under this part shall be made in an 
        amount equal to the lesser of the actual charges for such 
        services or the fee schedule established under paragraph (2).
            ``(2) Establishment of fee schedule.--
                    ``(A) In general.--The Secretary shall establish by 
                regulation before the beginning of 2002 and each 
                succeeding year a fee schedule for home infusion drug 
                therapy services for which payment is made under this 
                part. A fee schedule established under this subsection 
                shall be on a per diem basis.
                    ``(B) Adjustment for services furnished by 
                institutions.--The fee schedule established by the 
                Secretary under subparagraph (A) shall provide for 
                adjustments in the case of home infusion drug therapy 
                services for which payment is made under this part that 
                are furnished by a provider of services to avoid 
                duplicative payments under this title for the service 
                costs associated with such services.''.
    (d) Certification.--Section 1835(a)(2) of such Act (42 U.S.C. 
1395n(a)(2)) is amended--
            (1) by striking ``and'' at the end of subparagraph (E),
            (2) by striking the period at the end of subparagraph (F) 
        and inserting ``; and'', and
            (3) by inserting after subparagraph (F) the following:
                    ``(G) in the case of home infusion drug therapy 
                services, (i) such services are or were required 
                because the individual needed such services for the 
                administration of a covered home infusion drug, (ii) a 
                plan for furnishing such services has been established 
                and is reviewed periodically by a physician, and (iii) 
                such services are or were furnished while the 
                individual is or was under the care of a physician.''.
    (e) Certification of Home Infusion Drug Therapy Providers; 
Intermediate Sanctions for Noncompliance.--
            (1) Treatment as provider of services.--Section 1861(u) of 
        such Act (42 U.S.C. 1395x(u)) is amended by inserting ``home 
        infusion drug therapy provider,'' after ``hospice program,''.
            (2) Consultation with state agencies and other 
        organizations.--Section 1863 of such Act (42 U.S.C. 1395z) is 
        amended by striking ``and (dd)(2)'' and inserting ``(dd)(2), 
        and (uu)(3)''.
            (3) Use of state agencies in determining compliance.--
        Section 1864(a) of such Act (42 U.S.C. 1395aa(a)) is amended--
                    (A) in the first sentence, by striking ``an agency 
                is a hospice program'' and inserting ``an agency or 
                entity is a hospice program or a home infusion drug 
                therapy provider,''; and
                    (B) in the second sentence--
                            (i) by striking ``institution or agency'' 
                        and inserting ``institution, agency, or 
                        entity'', and
                            (ii) by striking ``or hospice program'' and 
                        inserting ``hospice program, or home infusion 
                        drug therapy provider''.
            (4) Application of intermediate sanctions.--Section 1846 of 
        such Act (42 U.S.C. 1395w-2) is amended--
                    (A) in the heading, by adding ``and for qualified 
                home infusion drug therapy providers'' at the end,
                    (B) in subsection (a), by inserting ``or that a 
                qualified home infusion drug therapy provider that is 
                certified for participation under this title no longer 
                substantially meets the requirements of section 
                1861(uu)(3)'' after ``under this part'', and
                    (C) in subsection (b)(2)(A)(iv), by inserting ``or 
                home infusion drug therapy services'' after ``clinical 
                diagnostic laboratory tests''.
    (f) Use of Intermediaries in Administration of Benefit.--Section 
1816 of such Act (42 U.S.C. 1395h) is amended by adding at the end the 
following new subsection:
    ``(l) With respect to carrying out functions relating to payment 
for home infusion drug therapy services and covered home infusion 
drugs, the Secretary may enter into contracts with agencies or 
organizations under this section to perform such functions on a 
regional or national basis.''.
    (g) Conforming Amendments.--(1) Section 1834(h)(4)(B) of such Act 
(42 U.S.C. 1395m(h)(4)(B)) is amended by striking ``, except that'' and 
all that follows through ``equipment''.
    (2) Section 1861(n) of such Act (42 U.S.C. 1395x(n)) is amended by 
adding at the end the following: ``Such term does not include any home 
infusion drug therapy services described in section 1861(uu) or any 
covered outpatient drug used as a supply related to the furnishing of 
an item of durable medical equipment.''.
    (3) Section 1861(s)(8) of such Act (42 U.S.C. 1395x(s)(8)) is 
amended by inserting after ``dental'' the following: ``devices or 
enteral and parenteral nutrients, supplies, and equipment''.

SEC. 7. NO MARK-UP FOR DRUGS, BIOLOGICALS, OR PARENTERAL NUTRIENTS.

    (a) In General.--Section 1842(o) of the Social Security Act (42 
U.S.C. 1395u(o)) is amended to read as follows:
    ``(o)(1) If a physician's, supplier's, or any other person's bill 
or request for payment for services includes a charge for a drug, 
biological, or parenteral nutrient for which payment may be made under 
this part and the drug, biological, or parenteral nutrient is not paid 
on a cost or prospective payment basis as otherwise provided in this 
part, the payment amount established in this subsection for the drug, 
biological, or parenteral nutrient shall be the lowest of the 
following:
            ``(A) The actual acquisition cost, as defined in paragraph 
        (2), to the person submitting the claim for payment for the 
        drug, biological, or parenteral nutrient.
            ``(B) 95 percent of the average wholesale price of such 
        drug, biological, or parenteral nutrient, as determined by the 
        Secretary.
            ``(C) For payments for drugs, biologicals, or parenteral 
        nutrients furnished on or after January 1, 2000, the median 
        actual acquisition cost of all claims for payment for such 
        drugs, biologicals, or parenteral nutrients for the 12-month 
        period beginning July 1, 1998 (and adjusted, as the Secretary 
        determines appropriate, to reflect changes in the cost of such 
        drugs, biologicals, or parenteral nutrients due to inflation, 
        and such other factors as the Secretary determines 
        appropriate).
            ``(D) The amount otherwise determined under this part.
    ``(2) For purposes of paragraph (1)(A), the term `actual 
acquisition cost' means, with respect to such drugs, biologicals, or 
parenteral nutrients the cost of the drugs, biologicals, or parenteral 
nutrients based on the most economical case size in inventory on the 
date of dispensing or, if less, the most economical case size purchased 
within six months of the date of dispensing whether or not that 
specific drug, biological, or nutrient was furnished to an individual 
whether or not enrolled under this part. Such term includes appropriate 
adjustments, as determined by the Secretary, for all discounts, 
rebates, or any other benefit in cash or in kind (including travel, 
equipment, or free products). The Secretary shall include an additional 
payment to cover costs reasonably incurred for administrative, storage, 
and handling. The Secretary shall consult with the provider community 
to simplify the accounting and reporting requirements used in 
calculating actual acquisition cost and may accept various averaging 
procedures, tax documents, and tax accounting procedures (such as last-
in-first-out (LIFO) and first-in-first-out (FIFO)) instead of new 
reporting requirements.
    ``(3)(A) No payment shall be made under this part for drugs, 
biologicals, or parenteral nutrients to a person whose bill or request 
for payment for such drugs, biologicals, or parenteral nutrients does 
not include a statement of the person's actual acquisition cost.
    ``(B) A person may not bill an individual enrolled under this 
part--
            ``(i) any amount other than the payment amount specified in 
        paragraph (1), (4), or (5) (plus any applicable deductible and 
        coinsurance amounts), or
            ``(ii) any amount for such drugs, biologicals, or 
        parenteral nutrients for which payment may not be made pursuant 
        to subparagraph (A).
    ``(C) If a person knowingly and willfully in repeated cases bills 
one or more individuals in violation of subparagraph (B), the Secretary 
may apply sanctions against that person in accordance with subsection 
(j)(2).
    ``(4) The Secretary may pay a reasonable dispensing fee (less the 
applicable deductible and coinsurance amounts) for drugs or biologicals 
to a licensed pharmacy approved to dispense drugs or biologicals under 
this part, if payment for such drugs or biologicals is made to the 
pharmacy.
    ``(5) The Secretary shall pay a reasonable amount (less the 
applicable deductible and coinsurance amounts) for the services 
associated with the furnishing of parenteral nutrients for which 
payment is determined under this subsection.''.
    (b) Effective Date.--The amendments made by subsection (a) apply to 
drugs, biologicals, and parenteral nutrients furnished on or after 
January 1, 2001.
    (c) Elimination of Report on Average Wholesale Price.--Section 4556 
of the Balanced Budget Act of 1997 is amended--
            (1) by striking subsection (c); and
            (2) by redesignating subsection (d) as subsection (c).

SEC. 8. TREATMENT OF PART B PREMIUM INCREASES RESULTING FROM ENACTMENT.

    (a) Additional Part B Premium Covered under QMB and SLMB 
Programs.--Any increase in the premium under part B of title XVIII of 
the Social Security Act resulting from the amendments made by this Act 
is covered for qualified Medicare beneficiaries and for special low 
income Medicare beneficiaries under the medicaid program under clauses 
(i) and (iii) of section 1902(a)(10)(A) of such Act.
    (b) Separate Listing of Portion of Premium Covering Prescription 
Drug Benefit.--The Secretary of Health and Human Services shall 
provide, in any statement of premiums established under section 1839 of 
the Social Security Act, for a separate statement of the portion of 
such premiums which is attributable to the amendments made by this Act.
    (c) Waiver of Additional Portion for Medicare Beneficiaries Having 
Actuarially Equivalent Coverage.--The Secretary of Health and Human 
Services shall establish a method under which the portion of the 
premium described in subsection (b) is waived (and not collected) for 
any individual enrolled under part B of title XVIII of the Social 
Security Act who demonstrates that the individual has coverage (through 
a group health plan, Medicare supplemental policy, under the medicaid 
program under title XIX of the Social Security Act, through the 
Department of Veterans Affairs, or otherwise) that is actuarially 
equivalent to the coverage provided under such part.

SEC. 9. EFFECTIVE DATE.

    Except as otherwise provided, the amendments made by this Act apply 
to items and services furnished on or after January 1, 2002.
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