II 

108TH CONGRESS 

2D SESSION S. 2880 

To amend title XI of the Social Security Act to ensure full and free 

competition in the medical device and hospital supply industries. 

IN THE SENATE OF THE UNITED STATES 

OCTOBER 1, 2004 

Mr. KOHL (for himself and Mr. DEWINE) introduced the following bill; which 

was read twice and referred to the Committee on Finance 

A BILL 

To amend title XI of the Social Security Act to ensure 

full and free competition in the medical device and hospital supply industries. 

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Medical Device Com5 petition Act of 2004’’. 

6 SEC. 2. FINDINGS. 

7 Congress finds the following: 

8 (1) Given the increasing costs of health care in 

9 the United States, there is a compelling public inter10 est in ensuring that there is full and free competi-
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1 tion in the medical device and hospital supply indus2 tries so that the best and safest products are avail3 able to physicians and patients at a competitive 

4 price. 

5 (2) By aggregating purchases, hospital group 

6 purchasing can reduce the cost of acquiring medical 

7 equipment and hospital supplies so long as such pur8 chasing is done in a manner consistent with anti9 trust law and free competition. 

10 (3) Some practices engaged in by certain hos11 pital group purchasing organizations have had the 

12 effect of reducing competition in the medical device 

13 and hospital supply industries by denying some sup14 pliers and device makers access to the hospital mar15 ketplace. 

16 (4) There is a compelling public interest in hav17 ing the Secretary of Health and Human Services, in 

18 consultation with the Attorney General and Federal 

19 Trade Commission, engage in oversight and super20 vision of the current Federal health care program 

21 anti-kickback exemption (also known as the safe 

22 harbor) provided to group purchasing organizations 

23 under subparagraphs (C) and (E) of section 

24 1128B(b)(3) of the Social Security Act (42 U.S.C. 

25 1320a–7b(b)(3)). This oversight and supervision 
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1 should ensure that the safe harbor does not shield 

2 conduct that harms competition in the hospital sup3 ply and medical device industries. 

4 SEC. 3. ENSURING FULL AND FREE COMPETITION. 

5 (a) IN GENERAL.—Section 1128B(b)(3)(C) of the 

6 Social Security Act (42 U.S.C. 1320a–7b(b)(3)(C)) is 

7 amended— 

8 (1) in clause (i), by striking ‘‘, and’’ at the end 

9 and inserting a semicolon; and 

10 (2) by adding at the end the following new 

11 clauses: 

12 ‘‘(iii) the contracting, business, and 

13 ethical practices of the person are not in14 consistent with regulations promulgated by 

15 the Secretary pursuant to subsection 

16 (g)(1); 

17 ‘‘(iv) the person has been certified by 

18 the Secretary under subsection (g)(2) to be 

19 in compliance with the regulations promul20 gated pursuant to subsection (g)(1); and 

21 ‘‘(v) the amount to be paid the person 

22 does not exceed a total of 3 percent of the 

23 purchase price of the goods or services pro24 vided by that vendor;’’. 
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1 (b) REGULATIONS.—Section 1128B of the Social Se2 curity Act (42 U.S.C. 1320a–7b) is amended by adding 

3 at the end the following new subsection: 

4 ‘‘(g)(1)(A) The Secretary, in consultation with the 

5 Attorney General and the Federal Trade Commission, 

6 shall, not later than 1 year after the date of enactment 

7 of the Medical Device Competition Act of 2004, issue pro8 posed regulations, and shall, not later than 2 years after 

9 such date of enactment, promulgate final regulations, 

10 specifying contracting, business, and ethical practices of 

11 persons described in paragraph (4) that are contrary to 

12 antitrust law and competitive principles, to ethical stand13 ards, or to the goal of ensuring that products necessary 

14 for proper patient care or worker safety are readily avail15 able to physicians, health care workers, and patients. 

16 ‘‘(B) In issuing and promulgating regulations under 

17 subparagraph (A), the Secretary shall take into account— 

18 ‘‘(i) the compelling public policy goals of— 

19 ‘‘(I) encouraging competition and innova20 tion in the hospital supply and medical device 

21 markets; and 

22 ‘‘(II) reducing the cost of health care as a 

23 result of aggregating buying power; 

24 ‘‘(ii) the potentially detrimental impact of cer25 tain anticompetitive contracting practices; and 
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1 ‘‘(iii) the need to avoid conflicts of interests and 

2 other unethical practices by persons described in 

3 paragraph (4). 

4 ‘‘(2) The Secretary, in consultation with the Attorney 

5 General and the Federal Trade Commission, shall estab6 lish procedures for annually certifying that persons de7 scribed in paragraph (4) are in compliance with the final 

8 regulations promulgated pursuant to paragraph (1). 

9 ‘‘(3) The Secretary, in consultation with the Attorney 

10 General and Federal Trade Commission, shall, not less 

11 than 6 months after the date of enactment of the Medical 

12 Device Competition Act of 2004, issue proposed regula13 tions, and shall, not later than 1 year after such date of 

14 enactment, promulgate final regulations, to clarify its reg15 ulations promulgated pursuant to section 14(a) of the 

16 Medicare and Medicaid Patient and Program Protection 

17 Act of 1987 to specify that the definition of ‘remuneration’ 

18 under this section with respect to persons described in 

19 paragraph (4)— 

20 ‘‘(A) includes only those reasonable costs asso21 ciated with the procurement of products and the ad22 ministration of valid contracts; and 

23 ‘‘(B) does not include marketing costs, any ex24 traneous fees, or any other payment intended to un25 duly or improperly influence the award of a contract 
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1 based on factors other than the cost, quality, safety, 

2 or efficacy of the product. 

3 ‘‘(4) A person described in this paragraph is a person 

4 authorized to act as a purchasing agent for a group of 

5 individuals or entities who are furnishing services reim6 bursable under a Federal health care program.’’. 

7 (c) DEFINITION OF PURCHASING AGENT.—Section 

8 1128B of the Social Security Act (42 U.S.C. 1320a–7b), 

9 as amended by subsection (b), is amended by adding at 

10 the end the following new subsection: 

11 ‘‘(h) For purposes of this section, the term ‘pur12 chasing agent’ means any individual, organization, or 

13 other entity that negotiates and implements contracts to 

14 purchase hospital supplies or medical equipment, devices, 

15 products, or goods or services of any kind for any group 

16 of individuals or entities who are furnishing services reim17 bursable under a Federal health care program, including 

18 organizations commonly known as ‘group purchasing or19 ganizations’.’’. 

20 (d) EFFECTIVE DATE.—Clause (v) of section 

21 1128B(b)(3)(C) of the Social Security Act (42 U.S.C. 

22 1320a–7b(b)(3)(C)), as added by subsection (a), shall take 

23 effect 1 year after the date of enactment of this Act. 

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