I

103D CONGRESS

1ST SESSION H. R. 2673

To amend title XVIII of the Social Security Act to provide for coverage

of expanded nursing facility and in-home services for dependent individuals under the medicare program, to provide for coverage of outpatient

prescription drugs under part B of such program, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

JULY 20, 1993

Mr. ENGEL introduced the following bill; which was referred jointly to the

Committees on Ways and Means and Energy and Commerce

A BILL

To amend title XVIII of the Social Security Act to provide

for coverage of expanded nursing facility and in-home

services for dependent individuals under the medicare

program, to provide for coverage of outpatient prescription drugs under part B of such program, and for other

purposes.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Comprehensive Long5 Term Care Act of 1993’’.
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1 SEC. 2. EXPANDED LONG-TERM CARE SERVICES UNDER

2 MEDICARE PROGRAM FOR DEPENDENT INDI3 VIDUALS.

4 (a) IN GENERAL.—

5 (1) PART A.—Section 1812 of the Social Secu6 rity Act (42 U.S.C. 1395d) is amended—

7 (A) in subsection (a)—

8 (i) in paragraph (2)(B), by striking

9 ‘‘subsection (f),’’ and inserting ‘‘subsection

10 (f) and section 1821,’’,

11 (ii) by striking ‘‘and’’ at the end of

12 paragraph (3),

13 (iii) by striking the period at the end

14 of paragraph (4) and inserting ‘‘; and’’,

15 and

16 (iv) by adding at the end the following

17 new paragraph:

18 ‘‘(5) long-term care services consisting of ex19 tended care services (in accordance with section

20 1890).’’; and

21 (B) in subsection (b)(2), by striking ‘‘post22 hospital’’ and inserting ‘‘except as provided in

23 section 1821, post-hospital’’.

24 (2) PART B.—Section 1861(s)(2) of such Act

25 (42 U.S.C. 1395x(s)(2)) is amended—
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1 (A) in subparagraph (O), by striking

2 ‘‘and’’ at the end;

3 (B) in subparagraph (P), by adding ‘‘and’’

4 at the end and moving such subparagraph 2

5 ems to the left; and

6 (C) by adding at the end the following new

7 subparagraph:

8 ‘‘(Q) long-term care services consisting of in9 home care (in accordance with section 1890);’’.

10 (b) DESCRIPTION OF SERVICES; ELIGIBILITY.—Title

11 XVIII of the Social Security Act is amended by inserting

12 after section 1889 the following new section:

13 ‘‘LONG-TERM CARE SERVICES FOR DEPENDENT

14 INDIVIDUALS

15 ‘‘SEC. 1890. (a) IN GENERAL.—An individual enti16 tled to benefits under this part shall be entitled to have

17 payments made on the individual’s behalf for long-term

18 care services if—

19 ‘‘(1) the individual is a dependent individual;

20 and

21 ‘‘(2) such services are provided in accordance

22 with a case management plan developed by a case

23 management agency.

24 ‘‘(b) SERVICES PROVIDED.—In this section, the term

25 ‘long-term care services’ means—
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1 ‘‘(1) in-home care (as defined in subsection (e));

2 and

3 ‘‘(2) extended care services (as defined in sec4 tion 1861(h)), but only with respect to a chronically

5 dependent individual.

6 ‘‘(c) PAYMENT FOR SERVICES.—

7 ‘‘(1) IN GENERAL.—Subject to paragraph (2),

8 the amount payable for long-term care services

9 under this section shall be determined in accordance

10 with a fee schedule for such services established by

11 the Secretary.

12 ‘‘(2) IMPOSITION OF DEDUCTIBLE.—The

13 amount otherwise payable for long-term care services

14 under this section furnished during a calendar year

15 shall be reduced by a deduction equal to the deduct16 ible imposed for inpatient hospital services for the

17 year under section 1813(a)(1).

18 ‘‘(d) DEPENDENT INDIVIDUAL DEFINED.—

19 ‘‘(1) IN GENERAL.—In this section, the term

20 ‘dependent individual’ means an individual who—

21 ‘‘(A) is unable to perform (without sub22 stantial assistance from another individual) be23 cause of physical or cognitive impairment at

24 least 2 of the following activities of daily living:
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1 bathing, dressing, toileting, transferring, and

2 eating; or

3 ‘‘(B) has a similar level of disability due to

4 cognitive impairment that requires substantial

5 direction, instruction, or supervision of another

6 individual in order—

7 ‘‘(i) to perform 2 or more of the ac8 tivities of daily living described in subpara9 graph (A), or

10 ‘‘(ii) to remain in the community

11 without causing harm to self or others be12 cause of inappropriate behavioral patterns.

13 ‘‘(2) CHRONICALLY DEPENDENT INDIVIDUAL.—

14 In this section, the term ‘chronically dependent indi15 vidual’ means an individual described in paragraph

16 (1) who—

17 ‘‘(A) for purposes of subparagraph (A) of

18 such paragraph, is unable to perform at least 3

19 of the activities of daily living described in such

20 subparagraph; or

21 ‘‘(B) for purposes of subparagraph (B)(i)

22 of such paragraph, has a level of disability that

23 requires direction, instruction, or supervision of

24 another individual to perform 3 or more of such

25 activities of daily living.
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1 ‘‘(3) ACTIVITIES OF DAILY LIVING DEFINED.—

2 The ‘activities of daily living’ referred to in this sub3 section are as follows:

4 ‘‘(A) Eating.

5 ‘‘(B) Bathing.

6 ‘‘(C) Dressing.

7 ‘‘(D) Toileting.

8 ‘‘(E) Transferring in and out of a bed or

9 in and out of a chair.

10 ‘‘(e) IN-HOME CARE.—

11 ‘‘(1) IN GENERAL.—For purposes of this sec12 tion, the term ‘in-home care’ means the items and

13 services described in paragraph (2) furnished to an

14 individual by a home care agency (as defined in sec15 tion 1861(mm)) or by others under arrangements

16 with them made by the agency provided in a place

17 of residence used as such individual’s home (other

18 than services described in paragraph (2)(H)).

19 ‘‘(2) SERVICES DESCRIBED.—The items and

20 services described in this paragraph are as follows:

21 ‘‘(A) Nursing care provided by or under

22 the supervision of a registered professional

23 nurse.

24 ‘‘(B) Services of a homemaker/home health

25 aide who has successfully completed a training
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1 and competency evaluation program approved

2 by the Secretary.

3 ‘‘(C) Personal care services.

4 ‘‘(D) Medical social services.

5 ‘‘(E) Physical, occupational, or respiratory

6 therapy or speech-language pathology.

7 ‘‘(F) Medical supplies (other than drugs

8 and biologicals) and durable medical equipment,

9 while under such a plan.

10 ‘‘(G) Patient and caregiver (including fam11 ily caregiver) education and training to develop

12 skills necessary to permit the individual to re13 main in the home setting.

14 ‘‘(H) Community care services furnished

15 outside of the place of residence.

16 ‘‘(I) Such other home-based items and

17 services (other than room and board) as the

18 Secretary may approve.

19 ‘‘(f) CASE MANAGEMENT REQUIREMENTS.—

20 ‘‘(1) REQUESTS FOR ASSESSMENT.—Each indi21 vidual entitled to benefits under this title (or

22 another person on such individual’s behalf) may re23 quest a case management agency to conduct an as24 sessment under this section to determine whether
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1 the individual is a dependent individual or a chron2 ically dependent individual.

3 ‘‘(2) DESCRIPTION OF PLANS.—For purposes of

4 this section, a ‘case management plan’ means, with

5 respect to an individual, a written plan of care

6 which—

7 ‘‘(A) is established and periodically re8 viewed and revised by a case management agen9 cy; and

10 ‘‘(B) reflects the individual’s needs identi11 fied in the assessment under paragraph (1).

12 ‘‘(3) CASE MANAGEMENT AGENCY DEFINED.—

13 In this section, the term ‘case management agency’

14 means a nonprofit or public agency or organization

15 (or a nonprofit or public subdivision of such an

16 agency or organization) certified by the Secretary to

17 conduct assessments and establish case management

18 plans under this subsection which—

19 ‘‘(A) is experienced in conducting assess20 ments, in establishing and periodically reviewing

21 and revising case management plans for nurs22 ing facility services and in-home care, and in

23 coordinating and reviewing the quality of the

24 provision of such services and care;
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1 ‘‘(B) is capable of efficiently and effectively

2 performing directly or through contracts under

3 paragraph (4) such duties; and

4 ‘‘(C) does not provide nursing facility serv5 ices or in-home care and does not have a direct

6 or indirect ownership or control interest in, or

7 direct or indirect affiliation or relationship with,

8 an entity that provides, such services or care.

9 ‘‘(4) CONTRACTING OUT CERTAIN FUNC10 TIONS.—The Secretary shall permit a case manage11 ment agency, to the extent necessary to carry out

12 functions under this section, to provide for assess13 ments and case management plans through con14 tracts with nonprofit or public organizations which

15 do not provide nursing facility services or in-home

16 care and do not have a direct or indirect ownership

17 or control interest in, or direct or indirect affiliation

18 or relationship with, an entity that provides, such

19 services or care.’’.

20 (c) CONFORMING AMENDMENTS.—(1) Section

21 1833(a)(1) of such Act (42 U.S.C. 1395l(a)(1)) is amend22 ed—

23 (A) by striking ‘‘1834(h)(1), (M)’’ and inserting

24 ‘‘1834(h)(1), (N)’’;
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1 (B) by striking ‘‘subsection (r)(2)) and (N)’’

2 and inserting ‘‘subsection (r)(2)), (O)’’; and

3 (C) by striking ‘‘1848(a)(1);’’ and inserting the

4 following: ‘‘1848(a)(1), and (P) with respect to ex5 penses incurred for services described in section

6 1861(s)(2)(Q), the amounts paid shall be the

7 amounts determined under section 1890(c);’’.

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

9 amended by adding at the end the following new sub10 section:

11 ‘‘HOME CARE AGENCY

12 ‘‘(oo) The term ‘home care agency’ means a public

13 agency or private organization, or a subdivision of such

14 an agency or organization, which is a home health agency

15 (as defined in subsection (m)) or—

16 ‘‘(1) is primarily engaged in providing services

17 of homemaker/home health aides and personal care

18 aides;

19 ‘‘(2) maintains clinical records on all patients;

20 ‘‘(3) in the case of an agency or organization in

21 any State in which State or applicable local law pro22 vides for the licensing of agencies or organizations of

23 this nature, (A) is licensed pursuant to such law, or

24 (B) is approved, by the agency of such State or lo25 cality, responsible for licensing agencies or organiza-
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1 tions of this nature, as meeting the standards estab2 lished for such licensing; and

3 ‘‘(4) meets such other requirements as the Sec4 retary may find necessary in the interest of the

5 health and safety of individuals who are furnished

6 services by such agency or organization and for the

7 effective and efficient operation of the program.’’.

8 (d) EFFECTIVE DATE.—The amendments made by

9 this section shall apply to items and services furnished on

10 or after January 1, 1994.

11 SEC. 3. MEDICARE COVERAGE OF OUTPATIENT PRESCRIP12 TION DRUGS.

13 (a) DESCRIPTION OF COVERED OUTPATIENT

14 DRUGS.—Section 1861 of the Social Security Act (42

15 U.S.C. 1395x) is amended—

16 (1) in subsection (s)(2), by amending subpara17 graph (J) to read as follows:

18 ‘‘(J) covered outpatient drugs (as defined in

19 subsection (t)); and’’; and

20 (2) in subsection (t)—

21 (A) by inserting ‘‘and paragraph (2)’’ after

22 ‘‘subsection (m)(5)’’,

23 (B) by striking ‘‘(t)’’ and inserting

24 ‘‘(t)(1)’’, and
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1 (C) by adding at the end the following new

2 paragraphs:

3 ‘‘(2) Subject to paragraph (3), the term ‘covered out4 patient drug’ means—

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; and
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1 ‘‘(C) insulin certified under section 506 of the

2 Federal Food, Drug, and Cosmetic Act.

3 ‘‘(3)(A) The term ‘covered outpatient drug’ does not

4 include any drug, biological product, or insulin provided

5 as, as part of, or as incident to, any of the following (and

6 for which payment may be included under this title):

7 ‘‘(i) Inpatient hospital services (described in

8 subsection (b)(2)).

9 ‘‘(ii) Extended care services (described in sub10 section (h)(5)).

11 ‘‘(iii) Physicians’ services under subparagraph

12 (A) or (B) of subsection (s)(2).

13 ‘‘(iv) Dialysis supplies under subsection

14 (s)(2)(F).

15 ‘‘(v) Antigens under subsection (s)(2)(G).

16 ‘‘(vi) Blood clotting factors for hemophiliacs

17 under subsection (s)(2)(I).

18 ‘‘(vii) Services of a physician assistant, nurse

19 practitioner, or clinical nurse specialist under sub20 section (s)(2)(K).

21 ‘‘(viii) Pneumococcal, hepatitis B, or influenza

22 vaccines under subsection (s)(10).

23 ‘‘(ix) Rural health clinic services (under sub24 section (aa)(1)).
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1 ‘‘(x) Comprehensive outpatient rehabilitation fa2 cility services (under subsection (cc)(1)).

3 ‘‘(xi) Hospice care (as defined in subsection

4 (dd)(1)).

5 ‘‘(xii) Certified nurse-midwife services (as de6 fined in subsection (gg)(1)).

7 ‘‘(xiii) Inpatient or outpatient rural primary

8 care hospital services (as defined in subsection

9 (mm)).

10 ‘‘(xiv) A covered surgical procedure in an ambu11 latory surgical center (under section

12 1832(a)(2)(F)(i)).

13 ‘‘(B) The term ‘covered outpatient drug’ does not in14 clude any drug that is intravenously administered in a

15 home setting.’’.

16 (b) DEDUCTIBLE AND PAYMENT AMOUNTS.—(1)

17 Section 1833(a)(1) of such Act (42 U.S.C. 1395l(a)(1)),

18 as amended by section 2(c)(1), is amended—

19 (A) by striking ‘‘and (P)’’ and inserting ‘‘(P)’’;

20 and

21 (B) by striking the semicolon at the end and in22 serting the following ‘‘, and (Q) with respect to ex23 penses incurred for covered outpatient drugs, the

24 amounts paid shall be the amounts determined

25 under section 1834(d)(2);’’.
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1 (2) Section 1833(a)(2) of such Act (42 U.S.C.

2 1395l(a)(2)) is amended by inserting ‘‘(other than covered

3 outpatient drugs)’’ after ‘‘(2) in the case of services’’.

4 (3) Section 1833(b) of such Act (42 U.S.C. 1395l(b))

5 is amended—

6 (A) in clause (1), by inserting ‘‘or for covered

7 outpatient drugs’’ after ‘‘1861(s)(10)(A)’’, and

8 (B) in clause (2), by inserting ‘‘or with respect

9 to covered outpatient drugs’’ after ‘‘home health

10 services’’.

11 (4) Section 1834 of such Act (42 U.S.C. 1395m) is

12 amended by inserting after subsection (c) the following

13 new subsection:

14 ‘‘(d) PAYMENT FOR COVERED OUTPATIENT

15 DRUGS.—

16 ‘‘(1) DEDUCTIBLE.—

17 ‘‘(A) APPLICATION.—

18 ‘‘(i) IN GENERAL.—Except as pro19 vided in clauses (ii) and (iii), payment

20 shall be made under paragraph (2) only

21 with respect to expenses incurred by an in22 dividual for covered outpatient drugs dur23 ing a calendar year on or after such date

24 in the year as the Secretary determines

25 that the individual has incurred expenses
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1 in the year for covered outpatient drugs

2 (during a period in which the individual is

3 entitled to benefits under this part) equal

4 to the amount of the prescription drug de5 ductible specified in subparagraph (C) for

6 that year.

7 ‘‘(ii) DEDUCTIBLE NOT APPLIED TO

8 1ST YEAR IMMUNOSUPPRESSIVES.—The

9 prescription drug deductible established

10 under this paragraph shall not apply to

11 drugs described in section 1861(t)(2)(A)

12 used in immunosuppressive therapy and

13 furnished, to an individual who receives an

14 organ transplant for which payment is

15 made under this title, within 1 year after

16 the date of the transplant.

17 ‘‘(B) RESPONSE TO APPLICATION.—If the

18 system described in section 1842(o)(4) has not

19 been established and an individual applies to

20 the Secretary to establish that the individual

21 has met the requirement of subparagraph (A),

22 the Secretary shall promptly notify the individ23 ual (and, if the application was submitted by or

24 through a participating pharmacy, the phar-
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1 macy) as to the date (if any) as of which the

2 individual has met such requirement.

3 ‘‘(C) PRESCRIPTION DRUG DEDUCTIBLE

4 AMOUNT.—The prescription drug deductible

5 specified in this subparagraph for—

6 ‘‘(i) 1995 is $250, and

7 ‘‘(ii) any succeeding year, is the pre8 scription drug deductible for the preceding

9 year, increased by the percentage by which

10 the monthly premium under section 1839

11 for months during the year exceeds the

12 monthly premium under such section for

13 months during the preceding year.

14 ‘‘(2) PAYMENT AMOUNT.—

15 ‘‘(A) IN GENERAL.—Subject to the pre16 scription drug deductible established under

17 paragraph (1)(A) and except as provided in

18 subparagraph (B), the amounts payable under

19 this part with respect to a covered outpatient

20 drug is equal to 80 percent of the lesser of—

21 ‘‘(i) the actual charge for the drug, or

22 ‘‘(ii) the applicable payment limit es23 tablished under paragraph (3).

24 ‘‘(B) TREATMENT OF CERTAIN COST25 BASED PREPAID ORGANIZATIONS.—In applying
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1 subparagraph (A) in the case of an organization

2 under a reasonable cost reimbursement contract

3 under section 1876 and in the case of an orga4 nization receiving payment under section

5 1833(a)(1)(A) and providing coverage of cov6 ered outpatient drugs, the Secretary shall pro7 vide for an appropriate adjustment in the pay8 ment amounts otherwise made to reflect the ag9 gregate increase in payments that would other10 wise be made with respect to enrollees in such

11 an organization if payments were made other

12 than under such clause or such a contract on

13 an individual-by-individual basis.

14 ‘‘(3) PAYMENT LIMITS.—

15 ‘‘(A) PAYMENT LIMIT FOR NON-MULTIPLE

16 SOURCE DRUGS AND MULTIPLE-SOURCE DRUGS

17 WITH RESTRICTIVE PRESCRIPTIONS.—In the

18 case of a drug that either is not a multiple

19 source drug (as defined in paragraph (9)(A)) or

20 is a multiple source drug and has a restrictive

21 prescription (as defined in paragraph (9)(B)),

22 the payment limit for the drug under this para23 graph for a payment calculation period is equal

24 to the lesser of—
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1 ‘‘(i) the 90th percentile of the actual

2 charges (computed on a statewide basis,

3 carrier-wide basis, or other appropriate ge4 ographic area basis, as specified by the

5 Secretary) for the drug for the second pre6 vious payment calculation period, adjusted

7 (as the Secretary determines to be appro8 priate) to reflect the number of tablets (or

9 other dosage units) dispensed; or

10 ‘‘(ii) the amount of the administrative

11 allowance (established under paragraph

12 (4)) plus the product of—

13 ‘‘(I) the number of tablets (or

14 other dosage units) dispensed, and

15 ‘‘(II) the per tablet or unit aver16 age wholesale price for such drug (as

17 determined under subparagraph (C)

18 for the period for purposes of this

19 subparagraph).

20 ‘‘(B) PAYMENT LIMIT FOR MULTIPLE

21 SOURCE DRUGS WITHOUT RESTRICTIVE PRE22 SCRIPTIONS.—In the case of a drug that is a

23 multiple source drug but does not have a re24 strictive prescription, the payment limit for the

25 drug under this paragraph for a payment cal-
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1 culation period is equal to the amount of the

2 administrative allowance (established under

3 paragraph (4)) plus the product of—

4 ‘‘(i) the number of tablets (or other

5 dosage units) dispensed, and

6 ‘‘(ii) the unweighted median of the

7 per tablet or unit average wholesale prices

8 (determined under subparagraph (C) for

9 purposes of this subparagraph) for such

10 drug for the period.

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

12 ‘‘(i) IN GENERAL.—For purposes of

13 this paragraph, the Secretary shall deter14 mine, with respect to the dispensing of a

15 covered outpatient drug in a payment cal16 culation period (beginning on or after Jan17 uary 1, 1995), the per tablet or unit aver18 age wholesale price for the drug.

19 ‘‘(ii) BASIS FOR DETERMINATIONS.—

20 ‘‘(I) DETERMINATION FOR NON21 MULTIPLE-SOURCE DRUGS.—For pur22 poses of subparagraph (A), such de23 termination shall be based on a bian24 nual survey conducted by the Sec25 retary of a representative sample of
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1 direct sellers, wholesalers, or phar2 macies (as appropriate) of wholesale

3 (or comparable direct) prices (exclud4 ing discounts to pharmacies); except

5 that if, because of low volume of sales

6 for the drug or other appropriate rea7 sons or in the case of covered out8 patient drugs during 1995, the Sec9 retary determines that such a survey

10 is not appropriate with respect to a

11 specific drug, such determination shall

12 be based on published average whole13 sale (or comparable direct) prices for

14 the drug.

15 ‘‘(II) DETERMINATION FOR MUL16 TIPLE-SOURCE DRUGS.—For purposes

17 of subparagraph (B), the Secretary

18 may base the determination under

19 this subparagraph on the published

20 average wholesale (or comparable di21 rect) prices for the drug or on a bian22 nual survey conducted by the Sec23 retary of a representative sample of

24 direct sellers, wholesalers, or phar25 macists (as appropriate) of wholesale
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1 (or comparable direct) prices (exclud2 ing discounts to pharmacies).

3 ‘‘(III) COMPLIANCE WITH SUR4 VEY REQUIRED.—If a wholesaler or

5 direct seller of a covered outpatient

6 drug refuses, after being requested by

7 the Secretary, to provide the informa8 tion required in a survey under this

9 clause, or deliberately provides infor10 mation that is false, the Secretary

11 may impose a civil money penalty of

12 not to exceed $10,000 for each such

13 refusal or provision of false informa14 tion. The provisions of section 1128A

15 (other than subsections (a) and (b))

16 shall apply to civil money penalties

17 under the previous sentence in the

18 same manner as such provisions apply

19 to a penalty or proceeding under sec20 tion 1128A(a). Information gathered

21 pursuant to the survey shall not be

22 disclosed except as the Secretary de23 termines to be necessary to carry out

24 the purposes of this part.
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1 ‘‘(iii) QUANTITY AND TIMING.—Such

2 determination shall be based on the price

3 or prices for purchases in reasonable quan4 tities and shall be made for a payment cal5 culation period based on prices for the first

6 day of the first month of the previous pay7 ment calculation period.

8 ‘‘(iv) GEOGRAPHIC BASIS.—The Sec9 retary shall make such determination, and

10 calculate the payment limits under this

11 paragraph, on a national basis; except that

12 the Secretary may make such determina13 tion, and calculate such payment limits, on

14 a regional basis to take account of limita15 tions on the availability of drug products

16 and variations among regions in the aver17 age wholesale prices for a drug product.

18 ‘‘(4) ADMINISTRATIVE ALLOWANCE FOR PUR19 POSES OF PAYMENT LIMITS.—

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

21 subparagraph (B), for drugs dispensed in—

22 ‘‘(i) 1995, the administrative allow23 ance under this paragraph is—

24 ‘‘(I) $5.00 for drugs dispensed by

25 a participating pharmacy, or
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1 ‘‘(II) $3.00 for drugs dispensed

2 by another pharmacy; or

3 ‘‘(ii) a subsequent year, the adminis4 trative allowance under this paragraph is

5 the administrative allowance under this

6 paragraph for the preceding year increased

7 by the percentage increase (if any) in the

8 implicit price deflator for gross national

9 product (as published by the Department

10 of Commerce in its ‘Survey of Current

11 Business’) over the 12-month period end12 ing with August of such preceding year.

13 Any allowance determined under the clause (ii)

14 which is not a multiple of 1 cent shall be round15 ed to the nearest multiple of 1 cent.

16 ‘‘(B) ADJUSTMENT IN ALLOWANCE FOR

17 MAIL SERVICE PHARMACIES.—The Secretary

18 may, by regulation and after consultation with

19 pharmacists, elderly groups, and private insur20 ers, reduce the administrative allowances estab21 lished under subparagraph (A) for any drug

22 dispensed by a mail service pharmacy (as de23 fined by the Secretary) based on differences be24 tween such pharmacies and other pharmacies
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1 with respect to operating costs and other econo2 mies.

3 ‘‘(5) ASSURING APPROPRIATE PRESCRIBING

4 AND DISPENSING PRACTICES.—

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

6 establish a program to identify (and to educate

7 physicians and pharmacists concerning)—

8 ‘‘(i) instances or patterns of unneces9 sary or inappropriate prescribing or dis10 pensing practices for covered outpatient

11 drugs;

12 ‘‘(ii) instances or patterns of sub13 standard care with respect to such drugs;

14 and

15 ‘‘(iii) potential adverse reactions.

16 ‘‘(B) STANDARDS.—In carrying out the

17 program under subparagraph (A), the Secretary

18 shall establish for each covered outpatient drug

19 standards for the prescribing of the drug which

20 are based on accepted medical practice. In es21 tablishing such standards, the Secretary shall

22 incorporate standards from such current au23 thoritative compendia as the Secretary may se24 lect; except that the Secretary may modify such

25 a standard by regulation on the basis of sci-
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1 entific and medical information that such

2 standard is not consistent with the safe and ef3 fective use of the drug.

4 ‘‘(C) PROHIBITION OF FORMULARY.—

5 Nothing in this title (other than section

6 1862(c)) shall be construed as authorizing the

7 Secretary to exclude from coverage or to deny

8 payment—

9 ‘‘(i) for any specific covered out10 patient drug, or specific class of covered

11 outpatient drug; or

12 ‘‘(ii) for any specific use of such a

13 drug for a specific indication unless such

14 exclusion is pursuant to section 1862(a)(1)

15 based on a finding by the Secretary that

16 such use is not safe or is not effective.

17 ‘‘(6) TREATMENT OF CERTAIN PREPAID ORGA18 NIZATIONS.—

19 ‘‘(A) GENERAL RULE COUNTING PREPAID

20 PLAN EXPENSES TOWARDS THE PRESCRIPTION

21 DRUG DEDUCTIBLE.—Except as provided in

22 subparagraph (B), expenses incurred by (or on

23 behalf of) a medicare beneficiary for covered

24 outpatient drugs shall be counted (consistent

25 with subparagraph (C)) toward the prescription
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1 drug deductible established under paragraph

2 (1) whether or not, at the time the expenses

3 were incurred, the beneficiary was enrolled in a

4 plan under section 1833(a)(1)(A) or under sec5 tion 1876.

6 ‘‘(B) TREATMENT OF DRUG BUY-OUT PLAN

7 EXPENSES.—In the case of a medicare bene8 ficiary enrolled in a month in a drug buy-out

9 plan (as defined in subparagraph (D))—

10 ‘‘(i) expenses incurred by the bene11 ficiary for covered outpatient drugs reim12 bursed under the plan shall not be counted

13 towards the prescription drug deductible,

14 but

15 ‘‘(ii) if the individual disenrolls from

16 the plan during the year, the beneficiary is

17 deemed to have incurred, for each month

18 of such enrollment, expenses for covered

19 outpatient drugs in an amount equal to the

20 actuarial value (with respect to such

21 month) of the deductible for covered out22 patient drugs (as computed by the Sec23 retary for purposes of section 1876(e)(1))

24 applicable on the average to individuals in

25 the United States.
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1 ‘‘(C) TREATMENT OF EXPENSES FOR COV2 ERED OUTPATIENT DRUGS INCURRED WHILE

3 ENROLLED IN A PREPAID PLAN OTHER THAN A

4 DRUG BUY-OUT PLAN.—The Secretary may not

5 enter into a contract with an organization

6 under section 1876, or provide for payment

7 under section 1833(a)(1)(A) with respect to an

8 organization which provides reimbursement for

9 covered outpatient drugs, with respect to a plan

10 that is not a drug buy-out plan, unless the or11 ganization provides assurances, satisfactory to

12 the Secretary, that—

13 ‘‘(i) the organization will maintain

14 and make available, for its enrollees and in

15 coordination with the appropriate carriers

16 under this part, an accounting of expenses

17 incurred by (or on behalf of) enrollees

18 under the plan for covered outpatient

19 drugs; and

20 ‘‘(ii) the organization will take into

21 account, in any deductibles established

22 under the plan in a year with respect to

23 covered outpatient drugs under this part,

24 the amounts of expenses for covered out25 patient drugs incurred in the year by (or
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1 on behalf of) the beneficiary and otherwise

2 counted towards the prescription drug de3 ductible in the year.

4 ‘‘(D) DRUG BUY-OUT PLAN DEFINED.—In

5 this paragraph, the term ‘drug buy-out plan’

6 means a plan under section 1833(a)(1)(A) or

7 offered by an organization under section 1876

8 and with respect to which—

9 ‘‘(i) the amount of any deductible

10 under the plan with respect to covered out11 patient drugs under this title,

12 is less than 50 percent of—

13 ‘‘(ii) the prescription drug deductible

14 specified in paragraph (1)(C).

15 ‘‘(E) MEDICARE BENEFICIARY DEFINED.—

16 In this subsection, the term ‘medicare bene17 ficiary’ means, with respect to a month, an in18 dividual covered for benefits under this part for

19 the month.

20 ‘‘(F) TREATMENT OF PLAN CHARGES.—In

21 the case of covered outpatient drugs furnished

22 by an eligible organization under section

23 1876(b) or an organization described in section

24 1833(a)(1)(A) which does not impose charges

25 on covered outpatient drugs dispensed to its
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1 members, for purposes of this subsection the

2 actual charges of the organization shall be the

3 organization’s standard charges to members,

4 and other individuals, not entitled to benefits

5 with respect to such drugs.

6 ‘‘(7) PHYSICIAN GUIDE.—

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

8 develop, and update annually, an information

9 guide for physicians concerning the comparative

10 average wholesale prices of at least 500 of the

11 most commonly prescribed covered outpatient

12 drugs. Such guide shall, to the extent prac13 ticable, group covered outpatient drugs (includ14 ing multiple source drugs) in a manner useful

15 to physicians by therapeutic category or with

16 respect to the conditions for which they are pre17 scribed. Such guide shall specify the average

18 wholesale prices on the basis of the amount of

19 the drug required for a typical daily therapeutic

20 regimen.

21 ‘‘(B) MAILING GUIDE.—The Secretary

22 shall provide for mailing, in January of each

23 year (beginning with 1995), a copy of the guide

24 developed and updated under subparagraph

25 (A)—
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1 ‘‘(i) to each hospital with an agree2 ment in effect under section 1866;

3 ‘‘(ii) to each physician (as defined in

4 section 1861(r)(1)) who routinely provides

5 services under this part; and

6 ‘‘(iii) to Social Security offices, senior

7 citizen centers, and other appropriate

8 places.

9 ‘‘(8) REPORTS ON UTILIZATION AND EFFECTS

10 ON PRICES.—

11 ‘‘(A) COMPILATION OF INFORMATION.—

12 The Secretary shall compile information on—

13 ‘‘(i) manufacturers’ prices for covered

14 outpatient drugs, and on charges of phar15 macists for covered outpatient drugs, and

16 ‘‘(ii) the use of covered outpatient

17 drugs by individuals entitled to benefits

18 under this part.

19 The information compiled under clause (i) shall

20 include a comparison of the increases in prices

21 and charges for covered outpatient drugs dur22 ing each 6 month period (beginning with Janu23 ary 1993) with the semiannual average increase

24 in such prices and charges during the 5 years

25 beginning with 1987.
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1 ‘‘(B) REPORTS.—The Secretary shall sub2 mit to the Committees on Ways and Means and

3 Energy and Commerce of the House of Rep4 resentatives and the Committee on Finance of

5 the Senate a report, in May and November of

6 1994 and 1995 and in May of each succeeding

7 year, providing the information compiled under

8 subparagraph (A). For each such report sub9 mitted after 1996, the report shall include an

10 explanation of the extent to which the increases

11 in outlays for covered outpatient drugs under

12 this part are due to the factors described in

13 subparagraphs (A)(i) and (A)(ii).

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

15 ‘‘(A) MULTIPLE SOURCE DRUG.—

16 ‘‘(i) IN GENERAL.—The term ‘mul17 tiple source drug’ means, with respect to a

18 payment calculation period, a covered out19 patient drug for which there are 2 or more

20 drug products which—

21 ‘‘(I) are rated as therapeutically

22 equivalent (under the Food and Drug

23 Administration’s most recent publica24 tion of ‘Approved Drug Products with
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•HR 2673 IH

1 Therapeutic Equivalence Evalua2 tions’);

3 ‘‘(II) except as provided in clause

4 (ii), are pharmaceutically equivalent

5 and bioequivalent, as defined in clause

6 (iii) and as determined by the Food

7 and Drug Administration; and

8 ‘‘(III) are sold or marketed dur9 ing the period.

10 ‘‘(ii) EXCEPTION.—Subclause (II) of

11 clause (i) shall not apply if the Food and

12 Drug Administration changes by regulation

13 (after an opportunity for public comment

14 of 90 days) the requirement that, for pur15 poses of the publication described in clause

16 (i)(I), in order for drug products to be

17 rated as therapeutically equivalent, they

18 must be pharmaceutically equivalent and

19 bioequivalent, as defined in clause (iii).

20 ‘‘(iii) DEFINITIONS.—For purposes of

21 this subparagraph:

22 ‘‘(I) PHARMACEUTICALLY EQUIV23 ALENT.—Drug products are pharma24 ceutically equivalent if the products

25 contain identical amounts of the same
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•HR 2673 IH

1 active drug ingredient in the same

2 dosage form and meet compendial or

3 other applicable standards of strength,

4 quality, purity, and identity.

5 ‘‘(II) BIOEQUIVALENT.—Drugs

6 are bioequivalent if they do not

7 present a known or potential

8 bioequivalence problem or, if they do

9 present such a problem, are shown to

10 meet an appropriate standard of

11 bioequivalence.

12 ‘‘(III) SOLD OR MARKETED.—A

13 drug is considered to be sold or mar14 keted during a period if it is listed in

15 the publications referred to in clause

16 (i)(I), unless the Secretary determines

17 that such sale or marketing is not ac18 tually taking place.

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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•HR 2673 IH

1 medically necessary’) recognized by the

2 Secretary, that the particular drug must be

3 dispensed; or

4 ‘‘(ii) in the case of a prescription is5 sued by telephone—

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

8 of such an appropriate phrase) states

9 that the particular drug must be dis10 pensed, 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 was required to have

20 been dispensed.

21 ‘‘(C) PAYMENT CALCULATION PERIOD.—

22 The term ‘payment calculation period’ means

23 the 6-month period beginning with January of

24 each year and the 6-month period beginning

25 with July of each year.’’.
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•HR 2673 IH

1 (c) PARTICIPATING PHARMACIES; CIVIL MONEY

2 PENALTIES.—

3 (1) PARTICIPATING PHARMACIES.—Section

4 1842 of such Act (42 U.S.C. 1395t) is amended—

5 (A) in subsection (h)(1), by inserting be6 fore the period at the end of the second sen7 tence the following: ‘‘, except that, with respect

8 to a supplier of covered outpatient drugs, the

9 term ‘participating supplier’ means a participat10 ing pharmacy (as defined in subsection

11 (o)(1))’’;

12 (B) in subsection (h)(4), is amended by

13 adding at the end the following: ‘‘In publishing

14 directories under this paragraph, the Secretary

15 shall provide for separate directories (wherever

16 appropriate) for participating pharmacies.’’;

17 and

18 (C) by inserting after subsection (n) the

19 following new subsection:

20 ‘‘(o)(1) For purposes of this section, the term ‘par21 ticipating pharmacy’ means, with respect to covered out22 patient drugs dispensed on or after January 1, 1995, an

23 entity which is authorized under a State law to dispense

24 covered outpatient drugs and which has entered into an
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•HR 2673 IH

1 agreement with the Secretary, providing at least the fol2 lowing:

3 ‘‘(A) The entity agrees to accept payment under

4 this part on an assignment-related basis for all cov5 ered outpatient drugs dispensed to an individual en6 titled to benefits under this part (in this subsection

7 referred to as a ‘medicare beneficiary’) during a year

8 after—

9 ‘‘(i) the Secretary has notified the entity,

10 through the electronic system described in para11 graph (4); or

12 ‘‘(ii) in the absence of such a system, the

13 entity is otherwise notified that the Secretary

14 has determined,

15 that the individual has met the prescription drug de16 ductible with respect to such drugs under section

17 1834(d)(1) for the year.

18 ‘‘(B) The entity agrees—

19 ‘‘(i) not to refuse to dispense covered out20 patient drugs stocked by the entity to any medi21 care beneficiary; and

22 ‘‘(ii) not to charge medicare beneficiaries

23 (regardless of whether or not the beneficiaries

24 are enrolled under a prepaid health plan or with

25 eligible organization under section 1876) more
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1 for such drugs than the amount it charges to

2 the general public (as determined by the Sec3 retary in regulations).

4 ‘‘(C) The entity agrees to keep patient records

5 (including records on expenses) for all covered out6 patient drugs dispensed to all medicare beneficiaries.

7 ‘‘(D) The entity agrees to submit information

8 (in a manner specified by the Secretary to be nec9 essary to administer this title) on all purchases of

10 covered outpatient drugs dispensed to medicare

11 beneficiaries.

12 ‘‘(E) The entity agrees—

13 ‘‘(i) to offer to counsel, or to offer to pro14 vide information (consistent with State law re15 specting the provision of such information) to,

16 each medicare beneficiary on the appropriate

17 use of a drug to be dispensed and whether there

18 are potential interactions between the drug and

19 other drugs dispensed to the beneficiary; and

20 ‘‘(ii) to advise the beneficiary on the avail21 ability (consistent with State laws respecting

22 substitution of drugs) of therapeutically equiva23 lent covered outpatient drugs.
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•HR 2673 IH

1 ‘‘(F) The entity agrees to provide the informa2 tion requested by the Secretary in surveys under sec3 tion 1834(d)(3)(C)(ii).

4 Nothing in this paragraph shall be construed as requiring

5 a pharmacy operated by an eligible organization (described

6 in section 1876(b)) or an organization described in section

7 1833(a)(1)(A) for the exclusive benefit of its members to

8 dispense covered outpatient drugs to individuals who are

9 not members of the organization.

10 ‘‘(2) The Secretary shall provide to each participating

11 pharmacy—

12 ‘‘(A) a distinctive emblem (suitable for display

13 to the public) indicating that the pharmacy is a par14 ticipating pharmacy; and

15 ‘‘(B) upon request, such electronic equipment

16 and technical assistance (other than the costs of ob17 taining, maintaining, or expanding telephone service)

18 as the Secretary determines may be necessary for

19 the pharmacy to submit claims using the electronic

20 system established under paragraph (4).

21 ‘‘(3) The Secretary shall provide for periodic audits

22 of participating pharmacies to assure—

23 ‘‘(A) compliance with the requirements for par24 ticipation under this title; and
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•HR 2673 IH

1 ‘‘(B) the accuracy of information submitted by

2 the pharmacies under this title.

3 ‘‘(4) The Secretary shall establish, by not later than

4 January 1, 1995, a point-of-sale electronic system for use

5 by carriers and participating pharmacies in the submission

6 of information respecting covered outpatient drugs dis7 pensed to medicare beneficiaries under this part.

8 ‘‘(5) Notwithstanding subsection (b)(3)(B), payment

9 for covered outpatient drugs may be made on the basis

10 of an assignment described in clause (ii) of that subsection

11 only to a participating pharmacy.’’.

12 (2) CIVIL MONEY PENALTIES FOR VIOLATION

13 OF PARTICIPATION AGREEMENT, FOR EXCESSIVE

14 CHARGES FOR NONPARTICIPATING PHARMACIES AND

15 FOR FAILURE TO PROVIDE SURVEY INFORMATION.—

16 Section 1128A(a) of such Act (42 U.S.C. 1320a–

17 7a(a)) is amended—

18 (A) by striking ‘‘or’’ at the end of para19 graph (1);

20 (B) in paragraph (2)(C), by inserting ‘‘or

21 to be a participating pharmacy under section

22 1842(o)’’ after ‘‘1842(h)(1)’’;

23 (C) by striking ‘‘, or’’ at the end of para24 graph (2) and inserting a semicolon;
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1 (D) by adding ‘‘or’’ at the end of para2 graph (3); and

3 (E) by inserting after paragraph (3) the

4 following new paragraph:

5 ‘‘(4) in the case of a participating or

6 nonparticipating pharmacy (as defined for purposes

7 of part B of title XVIII)—

8 ‘‘(A) presents or causes to be presented to

9 any person a request for payment for covered

10 outpatient drugs dispensed to an individual en11 titled to benefits under part B of title XVIII

12 and for which the amount charged by the phar13 macy is greater than the amount the pharmacy

14 charges the general public (as determined by

15 the Secretary in regulations), or

16 ‘‘(B) fails to provide the information re17 quested by the Secretary in a survey under sec18 tion 1834(d)(3)(C)(ii);’’.

19 (d) LIMITATION ON LENGTH OF PRESCRIPTION.—

20 Section 1862(c) of such Act (42 U.S.C. 1395y(c)) is

21 amended—

22 (1) by redesignating subparagraphs (A) through

23 (D) of paragraph (1) as clauses (i) through (iv);

24 (2) in paragraph (2)(A), by striking ‘‘paragraph

25 (1)’’ and inserting ‘‘subparagraph (A)’’;
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1 (3) by redesignating subparagraphs (A) and

2 (B) of paragraph (2) as clauses (i) and (ii);

3 (4) by redesignating paragraphs (1) and (2) as

4 subparagraphs (A) and (B);

5 (5) by inserting ‘‘(1)’’ after ‘‘(c)’’; and

6 (6) by adding at the end the following new

7 paragraph:

8 ‘‘(2) No payment may be made under part B for any

9 expense incurred for a covered outpatient drug if the drug

10 is dispensed in a quantity exceeding a supply of 30 days

11 or such longer period of time (not to exceed 90 days, ex12 cept in exceptional circumstances) as the Secretary may

13 authorize.’’.

14 (e) USE OF CARRIERS, FISCAL INTERMEDIARIES,

15 AND OTHER ENTITIES IN ADMINISTRATION.—

16 (1) AUTHORIZING USE OF OTHER ENTITIES IN

17 ELECTRONIC CLAIMS SYSTEM.—Section 1842(f) of

18 such Act (42 U.S.C. 1395u(f)) is amended—

19 (A) by striking ‘‘and’’ at the end of para20 graph (1);

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

22 paragraph (2) and inserting ‘‘; and’’; and

23 (C) by adding at the end the following new

24 paragraph:
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1 ‘‘(3) with respect to implementation and oper2 ation (and related functions) of the electronic system

3 established under subsection (o)(4), a voluntary as4 sociation, corporation, partnership, or other non5 governmental organization, which the Secretary de6 termines to be qualified to conduct such activities.’’.

7 (2) ADDITIONAL FUNCTIONS OF CARRIERS.—

8 Section 1842(b)(3) of such Act (42 U.S.C.

9 1395u(b)(3)) is amended—

10 (A) by striking ‘‘and’’ at the end of sub11 paragraph (H);

12 (B) by adding ‘‘and’’ at the end of sub13 paragraph (L);

14 (C) by redesignating subparagraph (L) as

15 subparagraph (I); and

16 (D) by inserting after subparagraph (I) (as

17 so redesignated) the following new subpara18 graphs:

19 ‘‘(J) if it makes determinations or payments

20 with respect to covered outpatient drugs, will—

21 ‘‘(i) receive information transmitted under

22 the electronic system established under sub23 section (o)(4), and

24 ‘‘(ii) respond to requests by participating

25 pharmacies (and individuals entitled to benefits
45

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1 under this part) as to whether or not such an

2 individual has met the prescription drug de3 ductible established under section

4 1834(d)(1)(A) for a year; and

5 ‘‘(K) will enter into such contracts with organi6 zations described in subsection (f)(3) as the Sec7 retary determines may be necessary to implement

8 and operate (and for related functions with respect

9 to) the electronic system established under sub10 section (o)(4) for covered outpatient drugs under

11 this part;’’.

12 (3) SPECIAL CONTRACT PROVISIONS FOR ELEC13 TRONIC CLAIMS SYSTEM.—

14 (A) PAYMENT ON OTHER THAN A COST

15 BASIS.—Section 1842(c)(1)(A) of such Act (42

16 U.S.C. 1395u(c)(1)(A)) is amended—

17 (i) by inserting ‘‘(i)’’ after

18 ‘‘(c)(1)(A)’’;

19 (ii) in the first sentence, by inserting

20 ‘‘, except as provided in clause (ii),’’ after

21 ‘‘under this part, and’’; and

22 (iii) by adding at the end the follow23 ing new clause:

24 ‘‘(ii) To the extent that a contract under this section

25 provides for implementation and operation (and related
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1 functions) of the electronic system established under sub2 section (o)(4) for covered outpatient drugs, the Secretary

3 may provide for payment for such activities based on any

4 method of payment determined by the Secretary to be ap5 propriate.’’.

6 (B) APPLICATION OF DIFFERENT PER7 FORMANCE STANDARDS.—The Secretary of

8 Health and Human Services, before entering

9 into contracts under section 1842 of the Social

10 Security Act with respect to the implementation

11 and operation (and related functions) of the

12 electronic system for covered outpatient drugs,

13 shall establish standards with respect to per14 formance with respect to such activities. The

15 provisions of section 1153(e)(2) and paragraphs

16 (1) and (2) of section 1153(h) of such Act shall

17 apply to such activities in the same manner as

18 they apply to contracts with peer review organi19 zations, instead of the requirements of the last

20 2 sentences of section 1842(b)(2) of such Act.

21 (C) USE OF REGIONAL CARRIERS.—Section

22 1842(b)(2)(A) of such Act (42 U.S.C.

23 1395u(b)(2)(A)) is amended by adding at the

24 end the following new sentence: ‘‘With respect

25 to activities relating to implementation and op-
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1 eration (and related functions) of the electronic

2 system established under subsection (o)(4), the

3 Secretary may enter into contracts with carriers

4 under this section to perform such activities on

5 a regional basis.’’.

6 (4) DELAY IN APPLICATION OF COORDINATED

7 BENEFITS WITH MEDIGAP.—The provisions of sub8 paragraph (B) of section 1842(h)(3) of the Social

9 Security Act shall not apply to covered outpatient

10 drugs (other than drugs described in section

11 1861(s)(2)(J) of such Act as of the date of the en12 actment of this Act) dispensed before January 1,

13 1996.

14 (5) BATCH PROMPT PROCESSING OF CLAIMS.—

15 Section 1842(c) (42 U.S.C. 1395u(c)) is amended—

16 (A) in paragraphs (2)(A) and (3)(A), by

17 striking ‘‘Each’’ and inserting ‘‘Except as pro18 vided in paragraph (3), each’’;

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

20 paragraph:

21 ‘‘(4)(A) Each contract under this section which pro22 vides for the disbursement of funds, as described in sub23 section (a)(1)(B), with respect to claims for payment for

24 covered outpatient drugs shall provide for a payment cycle

25 under which each carrier will, on a monthly basis, make
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1 a payment with respect to all claims which were received

2 and approved for payment in the period since the most

3 recent date on which such a payment was made with re4 spect to the participating pharmacy or individual submit5 ting the claim.

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

7 transmitted within 5 days of when such a payment is re8 quired to be made under subparagraph (A), interest shall

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

10 of title 31, United States Code (relating to interest pen11 alties for failure to make prompt payments) for the period

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

13 on the date on which payment is made.’’.

14 (f) MODIFICATION OF HMO/CMP CONTRACTS.—

15 (1) SEPARATE ACTUARIAL DETERMINATION

16 FOR COVERED OUTPATIENT DRUG BENEFIT.—Sec17 tion 1876(e)(1) of such Act (42 U.S.C.

18 1395mm(e)(1)) is amended by adding at the end

19 thereof the following new sentence: ‘‘The preceding

20 sentence shall be applied separately with respect to

21 covered outpatient drugs.’’.

22 (2) ADDITIONAL OPTIONAL BENEFITS.—Section

23 1876(g)(3)(A) of such Act (42 U.S.C.

24 1395mm(g)(3)(A)) is amended by striking ‘‘rate’’

25 and inserting ‘‘rates’’.
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1 (g) CONFORMING AMENDMENTS.—

2 (1) The first sentence of section 1866(a)(2)(A)

3 (42 U.S.C. 1395cc(a)(2)(A)) is amended—

4 (A) by inserting ‘‘1834(d),’’ after

5 ‘‘1833(b),’’; and

6 (B) by inserting ‘‘and in the case of cov7 ered outpatient drugs, applicable coinsurance

8 percent (specified in section 1834(d)(2)(C)) of

9 the lesser of the actual charges for the drugs or

10 the payment limit (established under section

11 1834(d)(3))’’ after ‘‘established by the Sec12 retary’’.

13 (2) Section 1903(i)(5) (42 U.S.C. 1396b(i)(5))

14 is amended by striking ‘‘section 1862(c)’’ and insert15 ing ‘‘section 1862(c)(1)’’.

16 (h) PRESCRIPTION DRUG PAYMENT REVIEW COM17 MISSION.—Part B is amended by inserting after section

18 1846 the following new section:

19 ‘‘PRESCRIPTION DRUG PAYMENT REVIEW COMMISSION

20 ‘‘SEC. 1847. (a)(1) The Director of the Congressional

21 Office of Technology Assessment (in this section referred

22 to as the ‘Director’ and the ‘Office’, respectively) shall

23 provide for the appointment of a Prescription Drug Pay24 ment Review Commission (in this section referred to as

25 the ‘Commission’), to be composed of individuals with ex26 pertise in the provision and financing of covered out-
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1 patient drugs appointed by the Director (without regard

2 to the provisions of title 5, United States Code, governing

3 appointments in the competitive service).

4 ‘‘(2) The Commission shall consist of 11 individuals.

5 Members of the Commission shall first be appointed by

6 no later than January 1, 1994, for a term of 3 years, ex7 cept that the Director may provide initially for such short8 er terms as will insure that (on a continuing basis) the

9 terms of no more than 4 members expire in any one year.

10 ‘‘(3) The membership of the Commission shall in11 clude recognized experts in the fields of health care eco12 nomics, medicine, pharmacology, pharmacy, and prescrip13 tion drug reimbursement, as well as at least one individual

14 who is a medicare beneficiary.

15 ‘‘(b)(1) The Commission shall submit to Congress an

16 annual report no later than May 1 of each year, beginning

17 with 1995, concerning methods of determining payment

18 for covered outpatient drugs under this part.

19 ‘‘(2) Such report, in 1996 and thereafter, shall in20 clude, with respect to the previous year, information on—

21 ‘‘(A) increases in manufacturers’ prices for cov22 ered outpatient drugs and in charges of pharmacists

23 for covered outpatient drugs,

24 ‘‘(B) the level of utilization of covered out25 patient drugs by medicare beneficiaries, and
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1 ‘‘(C) administrative costs relating to covered

2 outpatient drugs.

3 ‘‘(c) Section 1845(c)(1) shall apply to the Commis4 sion in the same manner as it applies to the Physician

5 Payment Review Commission.

6 ‘‘(d) There are authorized to be appropriated such

7 sums as may be necessary to carry out the provisions of

8 this section. Such sums shall be payable from the Federal

9 Supplementary Medical Insurance Trust Fund.’’.

10 (i) DEVELOPMENT OF STANDARD MEDICARE CLAIMS

11 FORM.—

12 (1) The Secretary shall develop, in consultation

13 with representatives of pharmacies and other inter14 ested individuals, a standard claims form (and a

15 standard electronic claims format) to be used in re16 quests for payment for covered outpatient drugs

17 under the medicare program and other third-party

18 payors.

19 (2) Not later than October 1, 1994, the Sec20 retary shall distribute official sample copies of the

21 format developed under paragraph (1) to pharmacies

22 and other interested parties and by not later than

23 October 1, 1994, shall distribute official sample cop24 ies of the form developed under paragraph (1) to

25 pharmacies and other interested parties.
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1 (j) EFFECTIVE DATES.—

2 (1) IN GENERAL.—Except as otherwise pro3 vided in this subsection, the amendments made by

4 this section shall apply to items dispensed on or

5 after January 1, 1995.

6 (2) CARRIERS.—The amendments made by sub7 section (e) shall take effect on the date of the enact8 ment of this Act; except that the amendments made

9 by subsection (e)(5) shall take effect on January 1,

10 1996, but shall not be construed as requiring pay11 ment before February 1, 1996.

12 (3) HMO/CMP ENROLLMENTS.—The amend13 ment made by subsection (f) shall apply to enroll14 ments effected on or after January 1, 1995.

Æ

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