I

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.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Medicare Prescription Drug Coverage Act of 1998’’.

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

7 this Act is as follows:

Sec. 1. Short title; table of contents.
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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.

1 SEC. 2. COVERAGE OF OUTPATIENT PRESCRIPTION DRUGS.

2 (a) COVERED OUTPATIENT DRUGS AS MEDICAL AND

3 OTHER HEALTH SERVICES.—Section 1861(s)(2)(J) of the

4 Social Security Act (42 U.S.C. 1395x(s)(2)(J)) is amend5 ed to read as follows:

6 ‘‘(J) covered outpatient drugs;’’.

7 (b) DEFINITION OF COVERED OUTPATIENT DRUG.—

8 Section 1861(t) of such Act (42 U.S.C. 1395x(t)) is

9 amended—

10 (1) in the heading, by adding at the end the fol11 lowing: ‘‘; Covered Outpatient Drugs’’;

12 (2) in paragraph (1)—

13 (A) by striking ‘‘paragraph (2)’’ and in14 serting ‘‘the succeeding paragraphs of this sub15 section’’, and

16 (B) by striking the period at the end and

17 inserting ‘‘, but only if used for a medically ac18 cepted indication (as described in paragraph

19 (4)).’’; and

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

21 following:
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1 ‘‘(2) Except as otherwise provided in paragraph (3),

2 the term ‘covered outpatient drug’ means any of the fol3 lowing products used for a medically accepted indication

4 (as described in paragraph (4)):

5 ‘‘(A) A drug which may be dispensed only upon

6 prescription and—

7 ‘‘(i) which is approved for safety and effec8 tiveness as a prescription drug under section

9 505 or 507 of the Federal Food, Drug, and

10 Cosmetic Act or which is approved under sec11 tion 505(j) of such Act;

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

13 sold in the United States before the date of the

14 enactment of the Drug Amendments of 1962 or

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

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

17 Code of Federal Regulations) to such a drug,

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

19 final determination by the Secretary that it is

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

21 201(p) of the Federal Food, Drug, and Cos22 metic Act) or an action brought by the Sec23 retary under section 301, 302(a), or 304(a) of

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

25 such Act; or
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1 ‘‘(iii)(I) which is described in section

2 107(c)(3) of the Drug Amendments of 1962

3 and for which the Secretary has determined

4 there is a compelling justification for its medi5 cal need, or is identical, similar, or related

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

7 title 21 of the Code of Federal Regulations) to

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

9 has not issued a notice of an opportunity for a

10 hearing under section 505(e) of the Federal

11 Food, Drug, and Cosmetic Act on a proposed

12 order of the Secretary to withdraw approval of

13 an application for such drug under such section

14 because the Secretary has determined that the

15 drug is less than effective for all conditions of

16 use prescribed, recommended, or suggested in

17 its labeling.

18 ‘‘(B) A biological product which—

19 ‘‘(i) may only be dispensed upon prescrip20 tion,

21 ‘‘(ii) is licensed under section 351 of the

22 Public Health Service Act, and

23 ‘‘(iii) is produced at an establishment li24 censed under such section to produce such

25 product.
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1 ‘‘(C) Insulin certified under section 506 of the

2 Federal Food, Drug, and Cosmetic Act.

3 ‘‘(D) Enteral nutrients (but only if provided as

4 a covered home infusion drug).

5 ‘‘(E) Medically-necessary foods for persons with

6 Phenylketonuria (PKU) and other inborn errors of

7 metabolism, in accordance with guidelines developed

8 by the Secretary.

9 ‘‘(3) The term ‘covered outpatient drug’ does not in10 clude any product—

11 ‘‘(A) which is administered through infusion in

12 a setting described in paragraph (5)(A)(ii) unless

13 the product is a covered home infusion drug (as de14 fined in paragraph (5));

15 ‘‘(B) when furnished as part of, or as incident

16 to, a diagnostic service or any other item or service

17 for which payment may be made under this title

18 (other than physicians’ services or services which

19 would be physicians’ services if furnished by a physi20 cian); or

21 ‘‘(C) which is listed under paragraph (2) of sec22 tion 1927(d) (other than subparagraph (B), (I), or

23 (J) of such subparagraph) as a drug which may be

24 excluded from coverage under a State plan under
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1 title XIX and which the Secretary elects to exclude

2 from coverage under part B.

3 ‘‘(4) For purposes of paragraph (2), the term ‘medi4 cally accepted indication’, with respect to the use of an

5 outpatient drug, includes any use which has been approved

6 by the Food and Drug Administration for the drug, and

7 includes another use of the drug if—

8 ‘‘(A) the drug has been approved by the Food

9 and Drug Administration; and

10 ‘‘(B)(i) such use is supported by one or more

11 citations which are included (or approved for inclu12 sion) in one or more of the following compendia: the

13 American Hospital Formulary Service-Drug Infor14 mation, the American Medical Association Drug

15 Evaluations, the United States Pharmacopoeia-Drug

16 Information, and other authoritative compendia as

17 identified by the Secretary, unless the Secretary has

18 determined that the use is not medically appropriate

19 or the use is identified as not indicated in one or

20 more such compendia, or

21 ‘‘(ii) the carrier involved determines, based

22 upon guidance provided by the Secretary to carriers

23 for determining accepted uses of drugs, that such

24 use is medically accepted based on supportive clinical

25 evidence in peer reviewed medical literature appear-
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1 ing in publications which have been identified for

2 purposes of this clause by the Secretary.

3 The Secretary may revise the list of compendia in sub4 paragraph (B)(i) designated as appropriate for identifying

5 medically accepted indications for drugs.

6 ‘‘(5)(A) For purposes of paragraph (3), the term

7 ‘covered home infusion drug’ means a covered outpatient

8 drug dispensed to an individual that—

9 ‘‘(i) is administered intravenously,

10 subcutaneously, or epidurally, using an access device

11 that is inserted into the body and an infusion device

12 to control the rate of flow of the drug (or through

13 other means of administration determined by the

14 Secretary);

15 ‘‘(ii) is administered—

16 ‘‘(I) in the individual’s home,

17 ‘‘(II) an institution used as the individual’s

18 home, but only if the drug is administered dur19 ing an inpatient day for which payment is not

20 made to the institution under part A for inpa21 tient or extended care services furnished to the

22 individual, or

23 ‘‘(III) in a facility other than the individ24 ual’s home if the administration of the drug at

25 the facility is determined by the Secretary to be
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1 cost-effective (in accordance with such criteria

2 as the Secretary may establish); and

3 ‘‘(iii) with respect to a drug furnished in a

4 home setting—

5 ‘‘(I) is an antibiotic drug and the Sec6 retary has not determined, for the specific drug

7 or the indication to which the drug is applied,

8 that the drug cannot generally be administered

9 safely, effectively, and cost effectively in such a

10 setting, or

11 ‘‘(II) is not an antibiotic drug and the Sec12 retary has determined, for the specific drug or

13 the indication to which the drug is applied, that

14 the drug can generally be administered safely,

15 effectively, and cost effectively in such a setting.

16 ‘‘(B) Not later than January 1, 2002 (and periodi17 cally thereafter), the Secretary shall publish a list of the

18 drugs, and indications for such drugs, that are covered

19 home infusion drugs, with respect to which home infusion

20 drug therapy may be provided under this title.

21 ‘‘(C) In this paragraph, the term ‘cost effectively’

22 means, with respect to a home infusion drug, a determina23 tion by the Secretary that the coverage of the drug in a

24 non-hospital setting will, considering all expenses, result
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1 in lower expenditures under this title than if the drug were

2 not so covered.’’.

3 (c) CONFORMING AMENDMENTS REPEALING SEPA4 RATE COVERAGE OF CERTAIN DRUGS AND PRODUCTS.—

5 (1) Effective January 1, 2002, section 1861(s)(2) of such

6 Act (42 U.S.C. 1395x(s)(2)) is amended—

7 (A) in subparagraph (A), by striking ‘‘(includ8 ing drugs’’ and all that follows through ‘‘self-admin9 istered)’’;

10 (B) by striking subparagraphs (G), (I), (O),

11 (Q), and (T);

12 (C) by adding ‘‘and’’ at the end of subpara13 graph (R); and

14 (D) by striking ‘‘; and’’ at the end of subpara15 graph (S) and inserting a period.

16 (2) Effective January 1, 2002, section 1861 of such

17 Act (42 U.S.C. 1395x) is amended by striking the sub18 section (kk).

19 (3) Effective January 1, 2002, section 1881(b) of

20 such Act (42 U.S.C. 1395rr(b)) is amended—

21 (A) in the first sentence of paragraph (1)—

22 (i) by striking ‘‘, (B)’’ and inserting ‘‘, and

23 (B)’’, and

24 (ii) by striking ‘‘, and (C)’’ and all that

25 follows and inserting a period;
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1 (B) in paragraph (11)—

2 (i) by striking ‘‘(11)(A)’’ and inserting

3 ‘‘(11)’’, and

4 (ii) by striking subparagraphs (B) and (C).

5 SEC. 3. PAYMENT RULES AND RELATED REQUIREMENTS

6 FOR COVERED OUTPATIENT DRUGS.

7 (a) IN GENERAL.—Section 1834 of the Social Secu8 rity Act (42 U.S.C. 1395m) is amended by inserting after

9 subsection (d) the following new subsection:

10 ‘‘(e) PAYMENT FOR AND CERTAIN REQUIREMENTS

11 CONCERNING COVERED OUTPATIENT DRUGS.—

12 ‘‘(1) DEDUCTIBLE.—

13 ‘‘(A) IN GENERAL.—Payment shall be

14 made under paragraph (2) only for expenses in15 curred by an individual for a covered outpatient

16 drug during a calendar year after the individual

17 has incurred expenses in the year for such

18 drugs (during a period in which the individual

19 is entitled to benefits under this part) equal to

20 the deductible amount for that year.

21 ‘‘(B) DEDUCTIBLE AMOUNT.—

22 ‘‘(i) For purposes of subparagraph

23 (A), subject to clause (iii), the deductible

24 amount is—
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1 ‘‘(I) for 2002, an amount equal

2 to $ll; and

3 ‘‘(II) for any succeeding year, the

4 amount applicable under this subpara5 graph for the previous year, increased

6 by the percentage increase in the con7 sumer price index for all urban con8 sumers (all items; U.S. city average)

9 for the 12-month period ending with

10 June of the previous year (or, if

11 lower, the percentage increase in the

12 pharmaceutical component of such

13 index for such period).

14 ‘‘(ii) The Secretary shall promulgate

15 the deductible amount for 2003 and each

16 succeeding year not later than October 1

17 of the previous year.

18 ‘‘(iii) If the deductible amount com19 puted under clause (i)(II) for a year is not

20 a multiple of $10, the Secretary shall (for

21 that year only) round it to the nearest

22 multiple of $10.

23 ‘‘(2) PAYMENT AMOUNT.—

24 ‘‘(A) IN GENERAL.—Subject to the deduct25 ible established under paragraph (1), the
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1 amount payable under this part for a covered

2 outpatient drug furnished to an individual dur3 ing a calendar year shall be equal to—

4 ‘‘(i) 80 percent of the payment basis

5 described in paragraph (3), in the case of

6 an individual who has not incurred ex7 penses for covered outpatient drugs during

8 the year (including the deductible imposed

9 under paragraph (1)) in excess of the out10 of-pocket limit for the year under subpara11 graph (B); and

12 ‘‘(ii) 100 percent of the payment basis

13 described in paragraph (3), in the case of

14 any other individual.

15 ‘‘(B) OUT-OF-POCKET LIMIT DE16 SCRIBED.—

17 ‘‘(i) For purposes of subparagraph

18 (A), the out-of-pocket limit for a year is

19 equal to—

20 ‘‘(I) for 2002, $ll; and

21 ‘‘(II) for any succeeding year, the

22 amount applicable under this subpara23 graph for the previous year, increased

24 by the percentage increase described

25 in paragraph (1)(B)(i)(II).
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1 ‘‘(ii) The Secretary shall promulgate

2 the out-of-pocket limit for 2003 and each

3 succeeding year not later than October 1

4 of the previous year.

5 ‘‘(iii) If the out-of-pocket limit com6 puted under clause (i)(II) for a year is not

7 a multiple of $10, the Secretary shall (for

8 that year only) round it to the nearest

9 multiple of $10.

10 ‘‘(3) PAYMENT BASIS.—For purposes of para11 graph (2), the payment basis is the lesser of—

12 ‘‘(A) the actual net payment for a covered

13 outpatient drug, or

14 ‘‘(B) the applicable payment limit estab15 lished under paragraph (4).

16 ‘‘(4) PAYMENT LIMITS.—

17 ‘‘(A) PAYMENT LIMIT FOR SINGLE SOURCE

18 DRUGS AND MULTIPLE SOURCE DRUGS WITH

19 RESTRICTIVE PRESCRIPTIONS.—In the case of a

20 covered outpatient drug that is a multiple

21 source drug which has a restrictive prescription,

22 or that is single source drug, the payment limit

23 for a payment calculation period is equal to the

24 amount of the administrative allowance (estab25 lished under paragraph (5)) plus the product of
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1 the number of dosage units dispensed and the

2 per unit actual acquisition cost for the drug

3 product (determined under subparagraph (C))

4 for the period.

5 ‘‘(B) PAYMENT LIMIT FOR MULTIPLE

6 SOURCE DRUGS WITHOUT RESTRICTIVE PRE7 SCRIPTIONS.—In the case of a drug that is a

8 multiple source drug which does not have a re9 strictive prescription, the payment limit for a

10 payment calculation period is equal to the

11 amount of the administrative allowance (estab12 lished under paragraph (5)) plus the product of

13 the number of dosage units dispensed and the

14 lowest actual acquisition cost (determined under

15 subparagraph (C)) of any of the multiple source

16 drugs in the category as determined by the Sec17 retary for the period.

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

19 ‘‘(i) INITIAL PAYMENT CALCULATION

20 PERIOD.—The Secretary shall determine,

21 for the dispensing of a covered outpatient

22 drug product in the payment calculation

23 period beginning January 1, 2002, the ac24 tual acquisition cost for the drug product,

25 based upon—
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1 ‘‘(I) in the case of a single source

2 drug or multiple source drug with a

3 restrictive prescription, based upon in4 formation from the period beginning

5 in 1998 updated (in a compound man6 ner) by the percentage change in the

7 consumer price index for all urban

8 consumers (U.S. city average) for the

9 4 12-month periods ending with June

10 2001; or

11 ‘‘(II) in the case of a multiple

12 source drug without a restrictive pre13 scription, based upon information

14 from the most recent year for which

15 data is available.

16 ‘‘(ii) SUBSEQUENT PERIODS.—The ac17 tual acquisition cost for a covered out18 patient drug product applicable under this

19 subparagraph for the dispensing of a drug

20 product in a payment calculation period

21 beginning in January of each year (begin22 ning with 2003) shall be equal to the ac23 tual acquisition cost for the product deter24 mined under this subparagraph for the pe25 riod ending in January of the previous
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1 year, increased by the percentage increase

2 described in paragraph (1)(B)(i)(II).

3 ‘‘(iii) SIMPLIFICATION IN DETERMINA4 TION OF ACTUAL ACQUISITION COST.—The

5 Secretary shall consult with the provider

6 community to simplify the accounting and

7 reporting requirements used in calculating

8 actual acquisition cost and may accept var9 ious averaging procedures, tax documents,

10 and tax accounting procedures (such as

11 last-in-first-out (LIFO) and first-in-first12 out (FIFO)) instead of new reporting re13 quirements.

14 ‘‘(iv) COMPLIANCE WITH REQUEST

15 FOR INFORMATION.—If a wholesaler or di16 rect seller of a covered outpatient drug re17 fuses, after being requested by the Sec18 retary, to provide price information re19 quested to carry out clauses (i) or (ii), or

20 deliberately provides information that is

21 false, the Secretary may impose a civil

22 money penalty of not to exceed $10,000

23 for each such refusal or provision of false

24 information. The provisions of section

25 1128A (other than subsections (a) and (b))
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1 shall apply to civil money penalties under

2 the previous sentence in the same manner

3 as they apply to a penalty or proceeding

4 under section 1128A(a). Information gath5 ered pursuant to clause (i) or (ii) shall not

6 be disclosed except as the Secretary deter7 mines to be necessary to carry out the pur8 poses of this part and to permit the Comp9 troller General and the Director of the

10 Congressional Budget Office to review the

11 information provided.

12 ‘‘(D) DEMONSTRATION OF ALTERNATIVE

13 PURCHASING ARRANGEMENTS.—The Secretary

14 may conduct demonstrations with different

15 forms of purchasing, such as competitive bid16 ding, preferred provider organizations, bundling

17 of medical and pharmaceutical costs, and other

18 devices to obtain the lowest possible price for

19 quality pharmaceutical products under this

20 part. If the Secretary determines that a dem21 onstration results in lower costs to the program

22 and beneficiaries under this title while main23 taining the quality and access to needed prod24 ucts, the Secretary may implement the dem25 onstration regionally or nationally. The Sec-
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1 retary shall from time to time report to Con2 gress on demonstrations conducted under this

3 subparagraph.

4 ‘‘(5) ADMINISTRATIVE ALLOWANCE FOR PUR5 POSES OF PAYMENT LIMIT.—

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

7 subparagraphs (B) through (D), the adminis8 trative allowance established under this para9 graph is—

10 ‘‘(i) for 2002, an amount equal to

11 $ll; and

12 ‘‘(ii) for each succeeding year, the

13 amount for the previous year, adjusted by

14 the percentage increase described in para15 graph (1)(B)(i)(II).

16 ‘‘(B) SPECIAL RULE.—The Secretary shall

17 establish a higher administrative allowance

18 under subparagraph (A) in the case of

19 compounding, consultation, and to ensure ac20 cess to covered drugs and antigens that entail

21 extra or unusual expense.

22 ‘‘(C) REDUCTION FOR MAIL ORDER PHAR23 MACIES.—The Secretary may, after consulting

24 with representatives of pharmacists, individuals

25 enrolled under this part, and of private insur-
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1 ers, reduce the administrative allowances estab2 lished under subparagraph (A) for any covered

3 outpatient drug dispensed by a mail order phar4 macy, based on differences between such phar5 macies and other pharmacies with respect to

6 operating costs and other economies.

7 ‘‘(D) NO DISPENSING FEE FOR CERTAIN

8 DRUGS AND PRODUCTS.—No administrative al9 lowance may be provided under this paragraph

10 with respect to any of the following covered out11 patient drugs, unless the Secretary determines

12 that an administrative allowance is necessary to

13 assure access:

14 ‘‘(i) Erythropoietin provided to dialy15 sis patients.

16 ‘‘(ii) Drugs and biologicals provided

17 as an incident to a physician’s service or to

18 a service which would be a physician’s

19 service if furnished by a physician.

20 ‘‘(iii) Covered home infusion drugs.

21 ‘‘(6) ASSURING APPROPRIATE PRESCRIBING

22 AND DISPENSING PRACTICES.—

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

24 develop a program to—
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1 ‘‘(i) provide on-line prospective review

2 of prescriptions on a 24-hour basis (in ac3 cordance with subparagraph (B)) and ret4 rospective review of claims;

5 ‘‘(ii) establish standards for counsel6 ing individuals to whom covered outpatient

7 drugs are prescribed; and

8 ‘‘(iii) identify (and to educate physi9 cians, patients, and pharmacists concern10 ing)—

11 ‘‘(I) instances or patterns of un12 necessary or inappropriate prescribing

13 or dispensing practices for covered

14 outpatient drugs,

15 ‘‘(II) instances or patterns of

16 substandard care with respect to such

17 drugs,

18 ‘‘(III) potential adverse reactions,

19 and

20 ‘‘(IV) appropriate use of generic

21 products.

22 ‘‘(B) PROSPECTIVE REVIEW.—

23 ‘‘(i) IN GENERAL.—The program

24 under this paragraph shall provide for on25 line prospective review of each covered out-
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1 patient drug prescribed for a patient be2 fore the prescription is filled or the drug is

3 furnished, including screening for potential

4 drug therapy problems due to therapeutic

5 duplication, drug-to-drug interactions, and

6 incorrect drug dosage or duration of drug

7 treatment, including inadequate pain man8 agement therapy.

9 ‘‘(ii) DISCUSSION OF APPROPRIATE

10 USE.—In conducting prospective review

11 under this subparagraph, any individual or

12 entity that dispenses a covered outpatient

13 drug shall offer to discuss with the patient

14 to whom the drug is furnished or the pa15 tient’s caregiver (in person if practicable,

16 or through access to a toll-free telephone

17 service) information regarding the appro18 priate use of the drug, potential inter19 actions between the drug and other drugs

20 dispensed to the individual, the need for

21 adequate pain management, and such

22 other matters as the Secretary may re23 quire.
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1 ‘‘(iii) ADDITIONAL DUTIES.—In carry2 ing out this subparagraph, the Secretary

3 shall—

4 ‘‘(I) develop public domain soft5 ware which could be used by carriers

6 and pharmacies to provide the on-line

7 prospective review; and

8 ‘‘(II) study the feasibility and de9 sirability of requiring confidential, en10 coded patient diagnosis codes on pre11 scriptions and the feasibility of ex12 panding the prospective review pro13 gram to include the identification of

14 drug-disease contraindications, inter15 actions with over-the-counter drugs,

16 and drug-allergy interactions.

17 ‘‘(C) PRIOR AUTHORIZATION.—

18 ‘‘(i) DEVELOPMENT OF LIST OF MIS19 USED DRUGS.—The Secretary shall develop

20 (and periodically) update a list of covered

21 outpatient drugs which the Secretary has

22 determined, based on data collected, may

23 be subject to misuse or inappropriate use.

24 The Secretary shall provide a means for
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1 manufacturers to appeal an initial decision

2 to include a drug on the list.

3 ‘‘(ii) PRIOR AUTHORIZATION FOR

4 DRUGS ON LIST.—The Secretary shall es5 tablish a process under which (subject to

6 clause (iii)) the Secretary may require ad7 vance approval for any covered outpatient

8 drug included on the list developed under

9 clause (i), and the Secretary shall develop

10 exceptions for oncologists, medical direc11 tors of hospice programs, and others who

12 are or should be regularly involved in ag13 gressive pain management.

14 ‘‘(iii) RESTRICTIONS ON DENIAL OF

15 APPROVAL.—The Secretary may not deny

16 the approval of a drug under the process

17 established under clause (ii) before its dis18 pensing unless the process—

19 ‘‘(I) provides responses by tele20 phone or other telecommunication de21 vice within 24 hours of a request for

22 prior authorization; and

23 ‘‘(II) provides for the dispensing

24 of at least a 72-hour supply of a cov-
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1 ered outpatient prescription drug in

2 emergency situations.

3 ‘‘(D) DRUG USE REVIEW.—As part of the

4 program established under subparagraph (A),

5 the Secretary shall provide for a drug use re6 view program to provide for the ongoing peri7 odic examination of claims data and other

8 records on covered outpatient drugs furnished

9 to patients under this title in order to identify

10 patterns of fraud, abuse, gross overuse or

11 underuse, or inappropriate or medically unnec12 essary care among physicians, pharmacists, and

13 patients.

14 ‘‘(E) EXCEPTION FOR MANAGED CARE

15 PROGRAMS.—The Secretary may waive the ap16 plication of any provision of this paragraph to

17 the dispensing of covered outpatient drugs by

18 an organization described in section

19 1833(a)(1)(A) or a Medicare+Choice organiza20 tion under part C to the extent the Secretary

21 finds that the organization has in effect a pro22 gram that meets the objectives of such provi23 sion.

24 ‘‘(F) ADOPTION OF MEDICAID PRO25 GRAMS.—To the extent considered appropriate
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1 by the Secretary, the program developed under

2 this paragraph with respect to drugs furnished

3 in a State may include elements applicable to

4 the furnishing of covered outpatient drugs

5 under the State Medicaid program under sec6 tion 1927.

7 ‘‘(7) ADMINISTRATIVE AND REPORTING REQUIRE8 MENTS.—

9 ‘‘(A) REQUIREMENTS RELATING TO CON10 TROLLED SUBSTANCES AND ILLEGAL USES.—

11 The Secretary shall require an entity furnishing

12 covered outpatient drugs under this part to re13 port electronically to the appropriate State

14 agency on any covered outpatient drugs dis15 pensed to individuals enrolled under this part

16 that are controlled substances under schedules

17 II through V of the Controlled Substance Act,

18 and on the illegal use or diversion of any such

19 drugs furnished by the entity.

20 ‘‘(B) PRIVACY PROTECTION.—The Sec21 retary shall establish standards to protect from

22 public disclosure the identity of any individual

23 (whether a patient or an individual involved in

24 the prescribing, dispensing, or administration of
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1 the drug) who is the subject of information

2 under this section. Under such standards—

3 ‘‘(i) no information on the use of a

4 pharmaceutical by an identifiable individ5 ual shall be shared with anyone other than

6 the individual, the individual’s legal guard7 ian or custodian, or the individual’s physi8 cian;

9 ‘‘(ii) no information shall be shared

10 with the individual’s employer, or with a

11 pharmaceutical manufacturer or whole12 saler, or with any other individual for pur13 poses of contacting the individual to per14 suade, sell, or influence the individual’s

15 choice of pharmaceuticals; and

16 ‘‘(iii) no physician, pharmacist, or

17 other health care provider who receives any

18 form of compensation or thing of value

19 from a drug manufacturer or wholesaler

20 may contact a patient for purposes of in21 fluencing the patient to use the product of

22 that drug manufacturer or wholesaler.

23 ‘‘(C) STANDARD CLAIMS FORM.—The Sec24 retary shall develop, in consultation with rep25 resentatives of pharmacies and of other inter-
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1 ested persons, a standard claims form for cov2 ered outpatient drugs in accordance with part C

3 of title IX.

4 ‘‘(8) BILLING REQUIREMENTS.—

5 ‘‘(A) MANDATORY ASSIGNMENT.—(i) Pay6 ment under this part for a covered outpatient

7 drug may only be made on an assignment-relat8 ed basis.

9 ‘‘(ii) Except for deductible, coinsurance, or

10 copayment amounts applicable under this part,

11 no person may bill or collect any amount from

12 an individual enrolled under this part or other

13 person for a covered outpatient drug for which

14 payment may be made under this part, and no

15 such individual or person is liable for payment

16 of any amounts billed in violation of this clause.

17 If a person knowingly and willfully bills or col18 lects an amount in violation of the previous sen19 tence, the Secretary may apply sanctions

20 against such person in accordance with section

21 1842(j)(2). Paragraph (4) of section 1842(j)

22 shall apply in this clause in the same manner

23 as such paragraph applies to such section.

24 ‘‘(B) USE OF ELECTRONIC SYSTEM.—The

25 Secretary shall establish, by not later than July
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1 1, 2001, a point-of-sale electronic system for

2 use by carriers and pharmacies in the submis3 sion of information respecting covered out4 patient drugs dispensed to Medicare bene5 ficiaries under this part. Such system shall be

6 consistent with the standards established by the

7 National Council of Prescription Drug Pro8 grams, and to the maximum extent possible

9 shall be based on current industry best prac10 tices.

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

12 ‘‘(A) MULTIPLE AND SINGLE SOURCE

13 DRUGS.—The terms ‘multiple source drug’ and

14 ‘single source drug’ have the meanings of those

15 terms under section 1927(k)(7), except that the

16 reference in such section to a ‘covered out17 patient drug’ shall be considered a reference to

18 a covered outpatient drug under this title.

19 ‘‘(B) RESTRICTIVE PRESCRIPTION.—A

20 drug has a ‘restrictive prescription’ only if—

21 ‘‘(i) in the case of a written prescrip22 tion, the prescription for the drug indi23 cates, in the handwriting of the physician

24 or other person prescribing the drug and

25 with an appropriate phrase (such as ‘brand
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1 medically necessary’) recognized by the

2 Secretary, that a particular drug product

3 must be dispensed, or

4 ‘‘(ii) in the case of a prescription

5 issued by telephone—

6 ‘‘(I) the physician or other per7 son prescribing the drug (through use

8 of such an appropriate phrase) states

9 that a particular drug product must

10 be dispensed, and

11 ‘‘(II) the physician or other per12 son submits to the pharmacy involved,

13 within 30 days after the date of the

14 telephone prescription, a written con15 firmation which is in the handwriting

16 of the physician or other person pre17 scribing the drug and which indicates

18 with such appropriate phrase that the

19 particular drug product was required

20 to have been dispensed.

21 The requirement of subclause (II) may be

22 satisfied in such alternative manner, in23 cluded electronic transmission of appro24 priate information, as the Secretary, after

25 consultation with physicians and providers,
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1 finds will reduce paperwork and adminis2 trative costs while maintaining program in3 tegrity.

4 ‘‘(C) PAYMENT CALCULATION PERIOD.—

5 The term ‘payment calculation period’ means a

6 calendar year.’’.

7 (b) REQUIRING PHARMACIES TO SUBMIT CLAIMS.—

8 Section 1848(g)(4) of such Act (42 U.S.C. 1395w–

9 4(g)(4)) is amended—

10 (1) in the heading—

11 (A) by striking ‘‘PHYSICIAN SUBMISSION’’

12 and inserting ‘‘SUBMISSION’’, and

13 (B) by inserting ‘‘BY PHYSICIANS AND

14 SUPPLIERS’’ after ‘‘CLAIMS’’;

15 (2) in the matter in subparagraph (A) preced16 ing clause (i)—

17 (A) by striking ‘‘For services furnished on

18 or after September 1, 1990, within 1 year’’ and

19 inserting ‘‘Within 1 year (or 90 days in the

20 case of covered outpatient drugs)’’,

21 (B) by striking ‘‘a service’’ and inserting

22 ‘‘an item or service’’, and

23 (C) by inserting ‘‘or of providing a covered

24 outpatient drug,’’ after ‘‘basis,’’; and
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1 (3) in subparagraph (A)(i), by inserting ‘‘item

2 or’’ before ‘‘service’’.

3 (c) SPECIAL RULES FOR CARRIERS.—

4 (1) USE OF CARRIERS.—Section 1842(b)(2) of

5 such Act (42 U.S.C. 1395u(b)(2)) is amended by

6 adding at the end the following:

7 ‘‘(F) With respect to activities related to covered out8 patient drugs, the Secretary may enter into contracts with

9 carriers under this section to perform the activities on a

10 regional or national basis.’’.

11 (2) ADDITIONAL FUNCTIONS.—Section

12 1842(b)(3) of such Act (42 U.S.C. 1395u(b)(3)) is

13 amended—

14 (A) by striking ‘‘and’’ at the end of sub15 paragraph (H); and

16 (B) by inserting after subparagraph (H)

17 the following new subparagraphs:

18 ‘‘(I) if it makes determinations or payments

19 with respect to covered outpatient drugs, will—

20 ‘‘(i) receive information transmitted under

21 the electronic system established under section

22 1834(e)(8)(B), and

23 ‘‘(ii) respond to requests by pharmacies

24 (and individuals entitled to benefits under this

25 part) as to whether or not such an individual
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1 has met the prescription drug deductible estab2 lished under section 1834(e)(1)(B) for a year;

3 ‘‘(J) will enter into such contracts with organi4 zations described in subsection (f)(3) as the Sec5 retary determines may be necessary to implement

6 and operate (and for related functions with respect

7 to) the electronic system established under section

8 1834(e)(8)(B) for covered outpatient drugs under

9 this part; and’’.

10 (3) PAYMENT ON OTHER THAN A COST

11 BASIS.—Section 1842(c)(1) of such Act (42 U.S.C.

12 1395u(c)(1)) is amended—

13 (A) by inserting ‘‘(A)’’ after ‘‘(c)(1)’’,

14 (B) in the first sentence, by inserting ‘‘,

15 except as otherwise provided in subparagraph

16 (B),’’ after ‘‘under this part, and’’, and

17 (C) by adding at the end the following:

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

19 provides for activities related to covered outpatient drugs,

20 the Secretary may provide for payment for those activities

21 based on any method of payment determined by the Sec22 retary to be appropriate.’’.

23 (4) BATCH PROMPT PROCESSING OF CLAIMS.—

24 Section 1842(c) of such Act (42 U.S.C. 1395u(c)) is

25 amended—
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1 (A) in paragraphs (2)(A) and (3)(A), by

2 striking ‘‘Each’’ and inserting ‘‘Except as pro3 vided in paragraph (7), each’’; and

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

5 paragraph:

6 ‘‘(7)(A) Each contract under this section which pro7 vides for the disbursement of funds, as described in sub8 section (a)(1)(B), with respect to claims for payment for

9 covered outpatient drugs shall provide for a payment cycle

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

11 a payment with respect to all claims which were received

12 and approved for payment in the period since the most

13 recent date on which such a payment was made with re14 spect to the participating pharmacy or individual submit15 ting the claim.

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

17 transmitted within 5 days of when such a payment is re18 quired to be made under subparagraph (A), interest shall

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

20 of title 31, United States Code (relating to interest pen21 alties for failure to make prompt payments) for the period

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

23 on the date on which payment is made.’’.
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1 (5) USE OF OTHER ENTITIES FOR COVERED

2 OUTPATIENT DRUGS.—Section 1842(f) of such Act

3 (42 U.S.C. 1395u(f)) is amended—

4 (A) by striking ‘‘and’’ at the end of para5 graph (1),

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

7 paragraph (2) and inserting ‘‘; and’’, and

8 (C) by adding at the end the following:

9 ‘‘(3) with respect to activities related to covered

10 outpatient drugs, any other private entity which the

11 Secretary determines is qualified to conduct such ac12 tivities.’’.

13 (6) DESIGNATED CARRIERS TO PROCESS

14 CLAIMS OF RAILROAD RETIREES.—Section 1842(g)

15 of such Act (42 U.S.C. 1395u(g)) is amended by in16 serting ‘‘(other than functions related to covered

17 outpatient drugs)’’ after ‘‘functions’’.

18 (d) CONFORMING AMENDMENTS.—

19 (1)(A) Section 1833(a)(1) of such Act (42

20 U.S.C. 1395l(a)(1)) is amended—

21 (i) by striking ‘‘and’’ at the end of clause

22 (R), and

23 (ii) by inserting before the semicolon at the

24 end the following: ‘‘, and (T) with respect to
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1 covered outpatient drugs, the amounts paid

2 shall be as prescribed by section 1834(e)’’.

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

4 1395l(a)(2)) is amended in the matter preceding

5 subparagraph (A) by inserting ‘‘, except for covered

6 outpatient drugs,’’ after ‘‘and (I) of such section’’.

7 (2) Section 1833(b)(2) of such Act (42 U.S.C.

8 1395l(b)(2)) is amended by inserting ‘‘or with re9 spect to covered outpatient drugs’’ before the

10 comma.

11 (3) The first sentence of section 1842(h)(2) of

12 such Act (42 U.S.C. 1395u(h)(2)) is amended by in13 serting ‘‘(other than a carrier described in sub14 section (f)(3))’’ after ‘‘Each carrier’’.

15 (4) The first sentence of section 1866(a)(2)(A)

16 of such Act (42 U.S.C. 1395cc(a)(2)(A)) is amend17 ed—

18 (A) in clause (i), by inserting ‘‘section

19 1834(e),’’ after ‘‘section 1833(b),’’, and

20 (B) in clause (ii), by inserting ‘‘, other

21 than for covered outpatient drugs,’’ after ‘‘pro22 vider)’’.
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1 SEC. 4. MEDICARE REBATES FOR COVERED OUTPATIENT

2 DRUGS.

3 (a) IN GENERAL.—Part B of title XVIII of the Social

4 Security Act is amended by adding at the end the follow5 ing new section:

6 ‘‘REBATES FOR COVERED OUTPATIENT DRUGS

7 ‘‘Sec. 1849. (a) REQUIREMENT FOR REBATE AGREE8 MENT.—

9 ‘‘(1) IN GENERAL.—In order for payment to be

10 available under this part for covered outpatient

11 drugs of a manufacturer dispensed or provided on or

12 after January 1, 2002, subject to paragraph (2), the

13 manufacturer must have entered into and have in ef14 fect a rebate agreement with the Secretary meeting

15 the requirements of subsection (b) and an agreement

16 to give equal access to discounts in accordance with

17 subsection (e).

18 ‘‘(2) DEMONSTRATIONS.—The Secretary may

19 conduct demonstrations with different forms of pur20 chasing, such a competitive bidding, exclusive long21 term contracts resulting in lower prices, and other

22 devices to obtain the lowest possible price for quality

23 pharmaceutical products. If the Secretary deter24 mines that a demonstration results in lower costs to

25 the program and beneficiaries under this title than

26 the rebate program under paragraph (1) while main-
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1 taining quality and access to needed products, the

2 Secretary may implement use of the demonstration

3 regionally or nationally as an alternative to the re4 bate program. The Secretary shall from time to time

5 report to Congress on such demonstrations.

6 ‘‘(b) TERMS, IMPLEMENTATION, AND ENFORCEMENT

7 OF REBATE AGREEMENT.—

8 ‘‘(1) PERIODIC REBATES.—

9 ‘‘(A) IN GENERAL.—A rebate agreement

10 under this section shall require the manufac11 turer to pay to the Secretary for each calendar

12 quarter, not later than 30 days after the date

13 of receipt of the information described in para14 graph (2) for such quarter, a rebate in an

15 amount determined under subsection (c) for all

16 covered outpatient drugs of the manufacturer

17 described in subparagraph (B).

18 ‘‘(B) DRUGS INCLUDED IN QUARTERLY

19 REBATE CALCULATION.—Drugs subject to a re20 bate with respect to a calendar quarter are cov21 ered outpatient drugs which are single source

22 and innovator multiple source drugs which are

23 dispensed or provided during such quarter to

24 individuals (other than individuals enrolled with

25 a Medicare+Choice organization under part C)
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1 eligible for benefits under this part, as reported

2 to the Secretary.

3 ‘‘(2) INFORMATION FURNISHED TO MANUFAC4 TURERS.—The Secretary shall report to each manu5 facturer, not later than 60 days after the end of

6 each calendar quarter, information on the total num7 ber, for each covered outpatient drug described in

8 paragraph (1)(B), of units of each dosage form,

9 strength, and package size dispensed or provided

10 under the plan during the quarter, on the basis of

11 the data reported to the Secretary described in para12 graph (1)(B).

13 ‘‘(3) PROVISION OF PRICE INFORMATION BY

14 MANUFACTURER.—

15 ‘‘(A) QUARTERLY PRICING INFORMA16 TION.—Each manufacturer with an agreement

17 in effect under this section shall report to the

18 Secretary, not later than 30 days after the last

19 day of each calendar quarter, on the average

20 manufacturer retail price and the average man21 ufacturer non-retail price for each dosage form

22 and strength of each covered outpatient drug

23 described in paragraph (1)(B) for the quarter.

24 ‘‘(B) BASE QUARTER PRICES.—Each man25 ufacturer of a covered outpatient drug with an
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1 agreement under this section shall report to the

2 Secretary, by not later than 30 days after the

3 effective date of such agreement (or, if later, 30

4 days after the end of the base quarter), the av5 erage manufacturer retail price, for such base

6 quarter, for each dosage form and strength of

7 each such covered drug.

8 ‘‘(C) VERIFICATION OF AVERAGE MANU9 FACTURER PRICE.—The Secretary may inspect

10 the records of manufacturers, and survey whole11 salers, pharmacies, and institutional purchasers

12 of drugs, as necessary to verify prices reported

13 under subparagraph (A).

14 ‘‘(D) PENALTIES.—

15 ‘‘(i) CIVIL MONEY PENALTIES.—The

16 Secretary may impose a civil money pen17 alty on a manufacturer with an agreement

18 under this section—

19 ‘‘(I) for failure to provide infor20 mation required under subparagraph

21 (A) on a timely basis, in an amount

22 up to $10,000 per day of delay;

23 ‘‘(II) for refusal to provide infor24 mation about charges or prices re25 quested by the Secretary for purposes
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1 of verification pursuant to subpara2 graph (C), in an amount up to

3 $100,000; and

4 ‘‘(III) for provision, pursuant to

5 subparagraph (A) or (B), of informa6 tion that the manufacturer knows or

7 should know is false, in an amount up

8 to $100,000 per item of information.

9 Such civil money penalties are in addition

10 to any other penalties prescribed by law.

11 The provisions of section 1128A (other

12 than subsections (a) (with respect to

13 amounts of penalties or additional assess14 ments) and (b)) shall apply to a civil

15 money penalty under this subparagraph in

16 the same manner as such provisions apply

17 to a penalty or proceeding under section

18 1128A(a).

19 ‘‘(ii) TERMINATION OF AGREE20 MENT.—If a manufacturer with an agree21 ment under this section has not provided

22 information required under subparagraph

23 (A) or (B) within 90 days of the deadline

24 imposed, the Secretary may suspend the

25 agreement with respect to covered out-
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1 patient drugs dispensed after the end of

2 such 90-day period and until the date such

3 information is reported (but in no case

4 shall a suspension be for less than 30

5 days).

6 ‘‘(4) LENGTH OF AGREEMENT.—

7 ‘‘(A) IN GENERAL.—A rebate agreement

8 shall be effective for an initial period of not less

9 than one year and shall be automatically re10 newed for a period of not less than one year un11 less terminated under subparagraph (B).

12 ‘‘(B) TERMINATION.—

13 ‘‘(i) BY THE SECRETARY.—The Sec14 retary may provide for termination of a re15 bate agreement for violation of the require16 ments of the agreement or other good

17 cause shown. Such termination shall not be

18 effective earlier than 60 days after the

19 date of notice of such termination. The

20 Secretary shall afford a manufacturer an

21 opportunity for a hearing concerning such

22 termination, but such hearing shall not

23 delay the effective date of the termination.

24 ‘‘(ii) BY A MANUFACTURER.—A man25 ufacturer may terminate a rebate agree-
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1 ment under this section for any reason.

2 Any such termination shall not be effective

3 until the calendar quarter beginning at

4 least 60 days after the date the manufac5 turer provides notice to the Secretary.

6 ‘‘(iii) EFFECTIVE DATE OF TERMI7 NATION.—Any termination under this sub8 paragraph shall not affect rebates due

9 under the agreement before the effective

10 date of its termination.

11 ‘‘(iv) NOTICE TO PHARMACIES.—In

12 the case of a termination under this sub13 paragraph, the Secretary shall notify phar14 macies and physician organizations not less

15 than 30 days before the effective date of

16 such termination.

17 ‘‘(c) AMOUNT OF REBATE.—

18 ‘‘(1) BASE REBATE.—Each manufacturer shall

19 remit a basic rebate to the Secretary for each cal20 endar quarter in an amount, with respect to each

21 dosage form and strength of a covered outpatient

22 drug equal to the product of—

23 ‘‘(A) the total number of units subject to

24 rebate for such quarter, as described in sub25 section (b)(1)(B); and
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1 ‘‘(B)(i) in the case of a single-source drug

2 or an innovator-multiple source drug (other

3 than insulin furnished over-the-counter), 15

4 percent of the average manufacturer retail

5 price, or

6 ‘‘(ii) in the case of insulin furnished over7 the-counter, 10 percent of the average manufac8 turer retail price.

9 ‘‘(2) ADDITIONAL REBATE.—Each manufac10 turer shall remit to the Secretary, for each calendar

11 quarter, an additional rebate for each dosage form

12 and strength of a single-source drug or an innova13 tor-multiple source drug, in an amount equal to—

14 ‘‘(A) the total number of units subject to

15 rebate for such quarter, as described in sub16 section (b)(1)(B), multiplied by

17 ‘‘(B) the amount, if any, by which the av18 erage manufacturer retail price for such drugs

19 of the manufacturer exceeds the average manu20 facturer retail price for the base quarter, in21 creased by the percentage increase in the Con22 sumer Price Index for all urban consumers

23 (U.S. average) from the end of such base quar24 ter to the month before the beginning of such

25 calendar quarter.
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1 ‘‘(3) DEPOSIT OF REBATES.—The Secretary

2 shall deposit rebates under this section in the Fed3 eral Supplementary Medical Insurance Trust Fund

4 established under section 1841.

5 ‘‘(d) CONFIDENTIALITY OF INFORMATION.—Notwith6 standing any other provision of law, information disclosed

7 by a manufacturer under this section is confidential and

8 shall not be disclosed by the Secretary (or a carrier), ex9 cept—

10 ‘‘(1) as the Secretary determines to be nec11 essary to carry out this section,

12 ‘‘(2) to permit the Comptroller General to re13 view the information provided, and

14 ‘‘(3) to permit the Director of the Congres15 sional Budget Office to review the information pro16 vided.

17 ‘‘(e) AGREEMENT TO GIVE EQUAL ACCESS TO DIS18 COUNTS.—An agreement under this subsection by a man19 ufacturer of covered outpatient drugs shall guarantee that

20 the manufacturer will offer, to each wholesaler or retailer

21 (or other purchaser representing a group of such whole22 salers or retailers) that purchases such drugs on substan23 tially the same terms (including such terms as prompt

24 payment, cash payment, volume purchase, single-site de25 livery, the use of formularies by purchasers, and any other
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1 terms effectively reducing the manufacturer’s costs) as

2 any other purchaser (including any institutional pur3 chaser) the same price for such drugs as is offered to such

4 other purchaser. In determining a manufacturer’s compli5 ance with the previous sentence, there shall not be taken

6 into account prices that are merely nominal in amount or

7 prices excluded under section 1927(c)(1)(C)(i).

8 ‘‘(f) DEFINITIONS.—For purposes of this section—

9 ‘‘(1) AVERAGE MANUFACTURER RETAIL

10 PRICE.—The term ‘average manufacturer retail

11 price’ means, with respect to a covered outpatient

12 drug of a manufacturer for a calendar quarter, the

13 average price (inclusive of discounts for cash pay14 ment, prompt payment, volume purchases, and re15 bates (other than rebates under this section), but ex16 clusive of nominal prices) paid to the manufacturer

17 for the drug in the United States for drugs distrib18 uted to the retail pharmacy class of trade.

19 ‘‘(2) AVERAGE MANUFACTURER NON-RETAIL

20 PRICE.—The term ‘average manufacturer non-retail

21 price’ means, with respect to a covered outpatient

22 drug of a manufacturer for a calendar quarter, the

23 weighted average price (inclusive of discounts for

24 cash payment, prompt payment, volume purchases,

25 and rebates (other than rebates under this section),
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1 but exclusive of nominal prices) paid to the manu2 facturer for the drug in the United States by hos3 pitals and other institutional purchasers that pur4 chase drugs for institutional use and not for resale.

5 ‘‘(3) BASE QUARTER.—The term ‘base quarter’

6 means, with respect to a covered outpatient drug of

7 a manufacturer, the calendar quarter beginning

8 April 1, 2002, or (if later) the first full calendar

9 quarter during which the drug was marketed in the

10 United States.

11 ‘‘(4) DRUG.—The terms ‘innovator multiple

12 source drug’, ‘noninnovator multiple source drug’,

13 and ‘single source drug’ have the meanings of those

14 terms under section 1927(k)(7), except that the ref15 erence in such section to a ‘covered outpatient drug’

16 shall be considered a reference to a covered out17 patient drug under this part.

18 ‘‘(5) MANUFACTURER.—The term ‘manufac19 turer’ means, with respect to a covered outpatient

20 drug—

21 ‘‘(A) the entity whose National Drug Code

22 number (as issued pursuant to section 510(e) of

23 the Federal Food, Drug, and Cosmetic Act) ap24 pears on the labeling of the drug; or
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1 ‘‘(B) if the number described in subpara2 graph (A) does not appear on the labeling of

3 the drug, the person named as the applicant in

4 a human drug application (in the case of a new

5 drug) or the product license application (in the

6 case of a biological product) for such drug ap7 proved by the Food and Drug Administration.’’.

8 (b) EXCLUSIONS FROM COVERAGE.—Section

9 1862(a) of such Act (42 U.S.C. 1395y(a)) is amended—

10 (1) by striking ‘‘and’’ at the end of paragraph

11 (20),

12 (2) by striking the period at the end of para13 graph (21) and inserting ‘‘; or’’, and

14 (3) by inserting after paragraph (21) the fol15 lowing new paragraph:

16 ‘‘(22) consisting of a covered outpatient drug

17 (as described in section 1861(t)) furnished during a

18 year for which the drug’s manufacturer does not

19 have in effect a rebate agreement with the Secretary

20 that meets the requirements of section 1849 for the

21 year.’’.

22 SEC. 5. EXPANSION OF MEDICARE PAYMENT ADVISORY

23 COMMISSION.

24 (a) IN GENERAL.—Effective January 1, 2000, the

25 membership of the Medicare Payment Advisory Commis-
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1 sion (established under section 1805 of the Social Security

2 Act, (42 U.S.C. 1395b–6)) shall be expanded to include

3 2 additional members, appointed by the Comptroller Gen4 eral of the United States, with expertise in the area of

5 pharmacology and prescription drug benefit programs.

6 (b) APPLICATION OF PROVISIONS.—The provisions of

7 paragraphs (2)(D), (3), and (4) of subsection (c) of such

8 section (relating to ethical disclosure, terms, and com9 pensation) shall apply to the additional members ap10 pointed under subsection (a) in the same manner as they

11 apply to other members of the Commission.

12 SEC. 6. COVERAGE OF HOME INFUSION DRUG THERAPY

13 SERVICES.

14 (a) IN GENERAL.—Section 1832(a)(2)(A) of the So15 cial Security Act (42 U.S.C. 1395k(a)(2)(A)) is amended

16 by inserting ‘‘and home infusion drug therapy services’’

17 before the semicolon.

18 (b) HOME INFUSION DRUG THERAPY SERVICES DE19 FINED.—Section 1861 of such Act (42 U.S.C. 1395x) is

20 amended by adding at the end the following new sub21 section:

22 ‘‘Home Infusion Drug Therapy Services

23 ‘‘(uu)(1) The term ‘home infusion drug therapy serv24 ices’ means the items and services described in paragraph
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1 (2) furnished to an individual who is under the care of

2 a physician—

3 ‘‘(A) in a setting described in section

4 1861(t)(5)(A)(ii),

5 ‘‘(B) by a qualified home infusion drug therapy

6 provider (as defined in paragraph (3)) or by others

7 under arrangements with them made by that pro8 vider, and

9 ‘‘(C) under a plan established and periodically

10 reviewed by a physician.

11 ‘‘(2) The items and services described in this para12 graph are such nursing, pharmacy, and related services

13 (including medical supplies, intravenous fluids, delivery,

14 and equipment) as are necessary to conduct safely and ef15 fectively a drug regimen through use of a covered home

16 infusion drug (as defined in subsection (t)(5)), but do not

17 include such covered home infusion drugs.

18 ‘‘(3) The term ‘qualified home infusion drug therapy

19 provider’ means any entity that the Secretary determines

20 meets the following requirements (or, in the case of a

21 home health agency or an entity with respect to which the

22 only items and services described in paragraph (2) fur23 nished by the entity are enteral nutrition therapy services,

24 meets any of the following requirements which the Sec25 retary considers appropriate):
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1 ‘‘(A) The entity is capable of providing or ar2 ranging for the items and services described in para3 graph (2) and covered home infusion drugs.

4 ‘‘(B) The entity maintains clinical records on

5 all patients.

6 ‘‘(C) The entity adheres to written protocols

7 and policies with respect to the provision of items

8 and services.

9 ‘‘(D) The entity makes services available (as

10 needed) seven days a week on a 24-hour basis.

11 ‘‘(E) The entity coordinates all service with the

12 patient’s physician.

13 ‘‘(F) The entity conducts a quality assessment

14 and assurance program, including drug regimen re15 view and coordination of patient care.

16 ‘‘(G) The entity assures that only trained per17 sonnel provide covered home infusion drugs (and any

18 other service for which training is required to pro19 vide the service safely).

20 ‘‘(H) The entity assumes responsibility for the

21 quality of services provided by others under arrange22 ments with the entity.

23 ‘‘(I) In the case of an entity in any State in

24 which State or applicable local law provides for the

25 licensing of entities of this nature, the entity (i) is
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1 licensed pursuant to such law, or (ii) is approved, by

2 the agency of such State or locality responsible for

3 licensing entities of this nature, as meeting the

4 standards established for such licensing.

5 ‘‘(J) The entity meets such other requirements

6 as the Secretary may determine are necessary to as7 sure the safe and effective provision of home infu8 sion drug therapy services and the efficient adminis9 tration of the home infusion drug therapy benefit.’’.

10 (c) PAYMENT.—

11 (1) IN GENERAL.—Section 1833 of such Act

12 (42 U.S.C. 1395l) is amended—

13 (A) in subsection (a)(2)(B), by striking ‘‘or

14 (E)’’ and inserting ‘‘(E), or (H)’’,

15 (B) in subsection (a)(2)(F), by striking

16 ‘‘and’’ at the end,

17 (C) in subsection (a)(2)(G), by striking the

18 semicolon and inserting ‘‘; and’’,

19 (D) by inserting after subsection (a)(2)(G)

20 the following new subparagraph:

21 ‘‘(H) with respect to home infusion drug

22 therapy services, the amounts described in sec23 tion 1834(m);’’, and
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1 (E) in the first sentence of subsection (b),

2 by inserting ‘‘and home infusion drug therapy

3 services’’ after ‘‘1861(kk)))’’.

4 (2) AMOUNT DESCRIBED.—Section 1834 of

5 such Act is amended by adding at the end the fol6 lowing new subsection:

7 ‘‘(m) HOME INFUSION DRUG THERAPY SERVICES.—

8 ‘‘(1) IN GENERAL.—With respect to home infu9 sion drug therapy services, payment under this part

10 shall be made in an amount equal to the lesser of

11 the actual charges for such services or the fee sched12 ule established under paragraph (2).

13 ‘‘(2) ESTABLISHMENT OF FEE SCHEDULE.—

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

15 establish by regulation before the beginning of

16 2002 and each succeeding year a fee schedule

17 for home infusion drug therapy services for

18 which payment is made under this part. A fee

19 schedule established under this subsection shall

20 be on a per diem basis.

21 ‘‘(B) ADJUSTMENT FOR SERVICES FUR22 NISHED BY INSTITUTIONS.—The fee schedule

23 established by the Secretary under subpara24 graph (A) shall provide for adjustments in the

25 case of home infusion drug therapy services for
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1 which payment is made under this part that are

2 furnished by a provider of services to avoid du3 plicative payments under this title for the serv4 ice costs associated with such services.’’.

5 (d) CERTIFICATION.—Section 1835(a)(2) of such Act

6 (42 U.S.C. 1395n(a)(2)) is amended—

7 (1) by striking ‘‘and’’ at the end of subpara8 graph (E),

9 (2) by striking the period at the end of sub10 paragraph (F) and inserting ‘‘; and’’, and

11 (3) by inserting after subparagraph (F) the fol12 lowing:

13 ‘‘(G) in the case of home infusion drug

14 therapy services, (i) such services are or were

15 required because the individual needed such

16 services for the administration of a covered

17 home infusion drug, (ii) a plan for furnishing

18 such services has been established and is re19 viewed periodically by a physician, and (iii)

20 such services are or were furnished while the in21 dividual is or was under the care of a physi22 cian.’’.

23 (e) CERTIFICATION OF HOME INFUSION DRUG

24 THERAPY PROVIDERS; INTERMEDIATE SANCTIONS FOR

25 NONCOMPLIANCE.—
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1 (1) TREATMENT AS PROVIDER OF SERVICES.—

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

3 is amended by inserting ‘‘home infusion drug ther4 apy provider,’’ after ‘‘hospice program,’’.

5 (2) CONSULTATION WITH STATE AGENCIES AND

6 OTHER ORGANIZATIONS.—Section 1863 of such Act

7 (42 U.S.C. 1395z) is amended by striking ‘‘and

8 (dd)(2)’’ and inserting ‘‘(dd)(2), and (uu)(3)’’.

9 (3) USE OF STATE AGENCIES IN DETERMINING

10 COMPLIANCE.—Section 1864(a) of such Act (42

11 U.S.C. 1395aa(a)) is amended—

12 (A) in the first sentence, by striking ‘‘an

13 agency is a hospice program’’ and inserting ‘‘an

14 agency or entity is a hospice program or a

15 home infusion drug therapy provider,’’; and

16 (B) in the second sentence—

17 (i) by striking ‘‘institution or agency’’

18 and inserting ‘‘institution, agency, or en19 tity’’, and

20 (ii) by striking ‘‘or hospice program’’

21 and inserting ‘‘hospice program, or home

22 infusion drug therapy provider’’.

23 (4) APPLICATION OF INTERMEDIATE SANC24 TIONS.—Section 1846 of such Act (42 U.S.C.

25 1395w–2) is amended—
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1 (A) in the heading, by adding ‘‘AND FOR

2 QUALIFIED HOME INFUSION DRUG THERAPY

3 PROVIDERS’’ at the end,

4 (B) in subsection (a), by inserting ‘‘or that

5 a qualified home infusion drug therapy provider

6 that is certified for participation under this title

7 no longer substantially meets the requirements

8 of section 1861(uu)(3)’’ after ‘‘under this

9 part’’, and

10 (C) in subsection (b)(2)(A)(iv), by insert11 ing ‘‘or home infusion drug therapy services’’

12 after ‘‘clinical diagnostic laboratory tests’’.

13 (f) USE OF INTERMEDIARIES IN ADMINISTRATION OF

14 BENEFIT.—Section 1816 of such Act (42 U.S.C. 1395h)

15 is amended by adding at the end the following new sub16 section:

17 ‘‘(l) With respect to carrying out functions relating

18 to payment for home infusion drug therapy services and

19 covered home infusion drugs, the Secretary may enter into

20 contracts with agencies or organizations under this section

21 to perform such functions on a regional or national

22 basis.’’.

23 (g) CONFORMING AMENDMENTS.—(1) Section

24 1834(h)(4)(B) of such Act (42 U.S.C. 1395m(h)(4)(B))
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1 is amended by striking ‘‘, except that’’ and all that follows

2 through ‘‘equipment’’.

3 (2) Section 1861(n) of such Act (42 U.S.C.

4 1395x(n)) is amended by adding at the end the following:

5 ‘‘Such term does not include any home infusion drug ther6 apy services described in section 1861(uu) or any covered

7 outpatient drug used as a supply related to the furnishing

8 of an item of durable medical equipment.’’.

9 (3) Section 1861(s)(8) of such Act (42 U.S.C.

10 1395x(s)(8)) is amended by inserting after ‘‘dental’’ the

11 following: ‘‘devices or enteral and parenteral nutrients,

12 supplies, and equipment’’.

13 SEC. 7. NO MARK-UP FOR DRUGS, BIOLOGICALS, OR PAREN14 TERAL NUTRIENTS.

15 (a) IN GENERAL.—Section 1842(o) of the Social Se16 curity Act (42 U.S.C. 1395u(o)) is amended to read as

17 follows:

18 ‘‘(o)(1) If a physician’s, supplier’s, or any other per19 son’s bill or request for payment for services includes a

20 charge for a drug, biological, or parenteral nutrient for

21 which payment may be made under this part and the drug,

22 biological, or parenteral nutrient is not paid on a cost or

23 prospective payment basis as otherwise provided in this

24 part, the payment amount established in this subsection
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1 for the drug, biological, or parenteral nutrient shall be the

2 lowest of the following:

3 ‘‘(A) The actual acquisition cost, as defined in

4 paragraph (2), to the person submitting the claim

5 for payment for the drug, biological, or parenteral

6 nutrient.

7 ‘‘(B) 95 percent of the average wholesale price

8 of such drug, biological, or parenteral nutrient, as

9 determined by the Secretary.

10 ‘‘(C) For payments for drugs, biologicals, or

11 parenteral nutrients furnished on or after January

12 1, 2000, the median actual acquisition cost of all

13 claims for payment for such drugs, biologicals, or

14 parenteral nutrients for the 12-month period begin15 ning July 1, 1998 (and adjusted, as the Secretary

16 determines appropriate, to reflect changes in the

17 cost of such drugs, biologicals, or parenteral nutri18 ents due to inflation, and such other factors as the

19 Secretary determines appropriate).

20 ‘‘(D) The amount otherwise determined under

21 this part.

22 ‘‘(2) For purposes of paragraph (1)(A), the term ‘ac23 tual acquisition cost’ means, with respect to such drugs,

24 biologicals, or parenteral nutrients the cost of the drugs,

25 biologicals, or parenteral nutrients based on the most eco-
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1 nomical case size in inventory on the date of dispensing

2 or, if less, the most economical case size purchased within

3 six months of the date of dispensing whether or not that

4 specific drug, biological, or nutrient was furnished to an

5 individual whether or not enrolled under this part. Such

6 term includes appropriate adjustments, as determined by

7 the Secretary, for all discounts, rebates, or any other bene8 fit in cash or in kind (including travel, equipment, or free

9 products). The Secretary shall include an additional pay10 ment to cover costs reasonably incurred for administrative,

11 storage, and handling. The Secretary shall consult with

12 the provider community to simplify the accounting and re13 porting requirements used in calculating actual acquisition

14 cost and may accept various averaging procedures, tax

15 documents, and tax accounting procedures (such as last16 in-first-out (LIFO) and first-in-first-out (FIFO)) instead

17 of new reporting requirements.

18 ‘‘(3)(A) No payment shall be made under this part

19 for drugs, biologicals, or parenteral nutrients to a person

20 whose bill or request for payment for such drugs,

21 biologicals, or parenteral nutrients does not include a

22 statement of the person’s actual acquisition cost.

23 ‘‘(B) A person may not bill an individual enrolled

24 under this part—
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1 ‘‘(i) any amount other than the payment

2 amount specified in paragraph (1), (4), or (5) (plus

3 any applicable deductible and coinsurance amounts),

4 or

5 ‘‘(ii) any amount for such drugs, biologicals, or

6 parenteral nutrients for which payment may not be

7 made pursuant to subparagraph (A).

8 ‘‘(C) If a person knowingly and willfully in repeated

9 cases bills one or more individuals in violation of subpara10 graph (B), the Secretary may apply sanctions against that

11 person in accordance with subsection (j)(2).

12 ‘‘(4) The Secretary may pay a reasonable dispensing

13 fee (less the applicable deductible and coinsurance

14 amounts) for drugs or biologicals to a licensed pharmacy

15 approved to dispense drugs or biologicals under this part,

16 if payment for such drugs or biologicals is made to the

17 pharmacy.

18 ‘‘(5) The Secretary shall pay a reasonable amount

19 (less the applicable deductible and coinsurance amounts)

20 for the services associated with the furnishing of paren21 teral nutrients for which payment is determined under this

22 subsection.’’.

23 (b) EFFECTIVE DATE.—The amendments made by

24 subsection (a) apply to drugs, biologicals, and parenteral

25 nutrients furnished on or after January 1, 2001.
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1 (c) ELIMINATION OF REPORT ON AVERAGE WHOLE2 SALE PRICE.—Section 4556 of the Balanced Budget Act

3 of 1997 is amended—

4 (1) by striking subsection (c); and

5 (2) by redesignating subsection (d) as sub6 section (c).

7 SEC. 8. TREATMENT OF PART B PREMIUM INCREASES RE8 SULTING FROM ENACTMENT.

9 (a) ADDITIONAL PART B PREMIUM COVERED UNDER

10 QMB AND SLMB PROGRAMS.—Any increase in the pre11 mium under part B of title XVIII of the Social Security

12 Act resulting from the amendments made by this Act is

13 covered for qualified Medicare beneficiaries and for special

14 low income Medicare beneficiaries under the medicaid pro15 gram under clauses (i) and (iii) of section 1902(a)(10)(A)

16 of such Act.

17 (b) SEPARATE LISTING OF PORTION OF PREMIUM

18 COVERING PRESCRIPTION DRUG BENEFIT.—The Sec19 retary of Health and Human Services shall provide, in any

20 statement of premiums established under section 1839 of

21 the Social Security Act, for a separate statement of the

22 portion of such premiums which is attributable to the

23 amendments made by this Act.

24 (c) WAIVER OF ADDITIONAL PORTION FOR MEDI25 CARE BENEFICIARIES HAVING ACTUARIALLY EQUIVA-
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1 LENT COVERAGE.—The Secretary of Health and Human

2 Services shall establish a method under which the portion

3 of the premium described in subsection (b) is waived (and

4 not collected) for any individual enrolled under part B of

5 title XVIII of the Social Security Act who demonstrates

6 that the individual has coverage (through a group health

7 plan, Medicare supplemental policy, under the medicaid

8 program under title XIX of the Social Security Act,

9 through the Department of Veterans Affairs, or otherwise)

10 that is actuarially equivalent to the coverage provided

11 under such part.

12 SEC. 9. EFFECTIVE DATE.

13 Except as otherwise provided, the amendments made

14 by this Act apply to items and services furnished on or

15 after January 1, 2002.

Æ