I 
114TH CONGRESS 
1ST SESSION H. R. 4185 
To make adjustments, including by amending title XVIII of the Social Secu-
rity Act, relating to competitive bidding program and durable medical 
equipment under the Medicare program, to amend such title to establish 
a DMEPOS market pricing program demonstration project, and for 
other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
DECEMBER 8, 2015 
Mr. TOM PRICE of Georgia (for himself, Mrs. MCMORRIS RODGERS, Mrs. 
BLACKBURN, Ms. DUCKWORTH, Mr. LOEBSACK, Mr. RYAN of Ohio, Mr. 
ROE of Tennessee, Mrs. NOEM, Mr. KING of New York, Mr. ZINKE, Mr. 
TIPTON, Mr. BLUM, Mr. CRAMER, Mr. MCCLINTOCK, Mr. KEATING, Mr. 
DUNCAN of Tennessee, Mrs. ELLMERS of North Carolina, Mr. HARPER, 
and Mr. AUSTIN SCOTT of Georgia) introduced the following bill; which 
was referred to the Committee on Energy and Commerce, and in addition 
to the Committee on Ways and Means, for a period to be subsequently 
determined by the Speaker, in each case for consideration of such provi-
sions as fall within the jurisdiction of the committee concerned 
A BILL 
To make adjustments, including by amending title XVIII 
of the Social Security Act, relating to competitive bidding 
program and durable medical equipment under the Medi-
care program, to amend such title to establish a 
DMEPOS 
market 
pricing 
program 
demonstration 
project, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
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SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Protecting Access 
through Competitive-pricing Transition Act of 2015’’ or 
as the ‘‘PACT Act of 2015’’. 
SEC. 2. REVISION OF PAYMENTS FOR DURABLE MEDICAL 
EQUIPMENT UNDER THE MEDICARE PRO-
GRAM. 
(a) TRANSITION
TO
IMPLEMENTATION
OF
FEE 
SCHEDULE PAYMENT ADJUSTMENTS USING INFORMA-
TION FROM COMPETITIVE BIDDING PROGRAMS.—Section 
1834(a)(1) of the Social Security Act (42 U.S.C. 
1395m(a)(1)) is amended by adding at the end the fol-
lowing new subparagraph: 
‘‘(J) TRANSITION TO IMPLEMENTATION OF 
PAYMENT ADJUSTMENTS USING INFORMATION 
FROM COMPETITIVE BIDDING PROGRAMS.— 
‘‘(i) IN
GENERAL.—In implementing 
subparagraph (F) and paragraphs (1) and 
(2) of section 414.210(g) of title 42, Code 
of Federal Regulations, with respect to 
items and services furnished on or after 
January 1, 2016, and before January 1, 
2019, the fee schedule amount that would 
otherwise be determined for each area 
under this section shall be adjusted to the 
lesser of— 
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‘‘(I) 130 percent of the regional 
price determined under clause (i) of 
such paragraph (1) for the State in 
which such area is located (or, in the 
case of an area located within the Dis-
trict of Columbia, for such District); 
or 
‘‘(II) the fee schedule amount 
that would otherwise be determined 
for such area under this section (with-
out the application of subsection 
(a)(1)(F) of such section) on January 
1, 2015, updated by the covered item 
update 
described 
in 
paragraph 
(14)(L) for the year in which the 
items and services to which such fee 
schedule applies are furnished. 
‘‘(ii) PHASE-IN.—The adjustment de-
scribed in clause (i) shall be implemented 
over a two-year period and in a manner 
that phases in such adjustment in equal 
increments in each year of such two-year 
period, with such adjustment being fully 
implemented with respect to items and 
services furnished in 2017.’’. 
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(b) BID CEILING FOR COMPETITIVE ACQUISITION 
FOR DURABLE MEDICAL EQUIPMENT UNDER THE MEDI-
CARE PROGRAM.—Section 1847(b)(5) of the Social Secu-
rity Act (42 U.S.C. 1395w–3(b)(5)) is amended— 
(1) in subparagraph (A)— 
(A) by inserting ‘‘, subject to subpara-
graph (E),’’ after ‘‘subsection (a)(2)’’; and 
(B) by inserting ‘‘, subject to subpara-
graph (E),’’ after ‘‘Based on such bids’’; and 
(2) by adding at the end the following new sub-
paragraph: 
‘‘(E) BID CEILING FOR DURABLE MEDICAL 
EQUIPMENT.— 
‘‘(i) IN
GENERAL.—Payment under 
this section for applicable covered items 
may not exceed the amount that would 
otherwise be paid for such items under sec-
tion 1834 (without the application of sub-
section (a)(1)(F) of such section) on Janu-
ary 1, 2015, updated by the covered item 
update described in section 1834(a)(14)(L) 
for the year in which such covered item is 
furnished. 
‘‘(ii) APPLICATION TO NEW COVERED 
ITEMS.—The Secretary shall establish a 
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process for purposes of applying clause (i) 
with respect to applicable covered items for 
which no amount would otherwise be paid 
under section 1834 (without the applica-
tion of subsection (a)(1)(F) of such sec-
tion) on January 1, 2015. 
‘‘(iii) APPLICABLE
COVERED
ITEMS 
DEFINED.—For purposes of this subpara-
graph, the term ‘applicable covered items’ 
means covered items (as defined in section 
1834(a)(13)) for which payment would 
otherwise be made under section 1834(a) 
that are furnished with respect to competi-
tive bid contracts that begin on or after 
January 1, 2017.’’. 
(c) REQUIREMENT IN DETERMINING ADJUSTMENTS 
USING INFORMATION FROM COMPETITIVE BIDDING PRO-
GRAMS.—Section 1834(a)(1)(G) of the Social Security Act 
(42 U.S.C. 1395m(a)(1)(G)) is amended by adding at the 
end the following new sentence: ‘‘In the case of items and 
services furnished on or after January 1, 2019, in making 
any adjustments under clause (ii) or (iii) of subparagraph 
(F), the Secretary shall take into account the average 
travel distance and cost associated with furnishing items 
and services in a competitive acquisition area, the average 
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volume of items and services furnished by providers in 
such an area, the clearing price of items and services, and 
the number of providers in competitive acquisition areas 
compared to the number of providers in noncompetitive 
acquisition areas. In implementing the preceding sentence, 
the Secretary shall solicit and take into account stake-
holder input.’’. 
SEC. 3. ESTABLISHMENT OF DMEPOS MARKET PRICING 
PROGRAM DEMONSTRATION PROJECT. 
(a) IN GENERAL.—Part B of title XVIII of the Social 
Security Act is amended by inserting after section 1847B 
(42 U.S.C. 1395w–3b) the following new section: 
‘‘DMEPOS MARKET PRICING PROGRAM DEMONSTRATION 
PROJECT 
‘‘SEC. 1847C. 
‘‘(a) ESTABLISHMENT.— 
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish and implement a six-year market pricing pro-
gram demonstration project (in this section referred 
to as the ‘demonstration project’) under which three 
auctions are conducted in eligible auction areas (as 
defined in paragraph (3)) throughout the United 
States for the furnishing of market-priced items and 
services (as defined in subsection (b)) for which pay-
ment is made under this part. Each such auction 
shall, 
in 
accordance 
with 
subsection 
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(c)(3)(D)(ii)(IV), be with respect to a contract pe-
riod of two years for each lead product. 
‘‘(2) IMPLEMENTATION TIMELINE.—The dem-
onstration project shall be carried out in accordance 
with the following timeline: 
‘‘(A) CONTRACTING
WITH
AUCTION
EX-
PERT AND MARKET MONITOR.—Not later than 
3 months after the date of the enactment of 
this section, the Secretary shall contract with 
the auction expert contracted with under sub-
section (f)(1) (hereinafter referred to as the 
‘auction expert’) and market monitor contracted 
with under such subsection (hereinafter referred 
to as the ‘market monitor’). 
‘‘(B) INITIAL DESIGN OF AUCTION.—Not 
later than 5 months after such date of enact-
ment, the development of the initial auction de-
sign under subsection (c)(2)(B)(i) shall be com-
pleted. 
‘‘(C) AUCTION
DESIGN
CONFERENCE.— 
Not later than 6 months after such date of en-
actment, the Secretary shall hold the auction 
design conference under subsection (c)(2)(C). 
‘‘(D) FINALIZING AUCTION DETAILS.—Not 
later than 71⁄2 months after such date of enact-
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ment, the Secretary shall promulgate, through 
the expedited rulemaking process under sub-
section (c)(2)(D), the procedures to be used for 
auctions under the demonstration project. 
‘‘(E) CONDUCT OF FIRST AUCTION.—Not 
later than 11 months after such date of enact-
ment, the first auction under the demonstration 
project shall occur under subsection (c)(3). 
‘‘(F) AWARDING CONTRACTS UNDER FIRST 
AUCTION.—Not later than 1 year after such 
date of enactment, contracts under such first 
auction shall be awarded. 
‘‘(3) ELIGIBLE AUCTION AREAS.— 
‘‘(A) DEFINITION.— 
‘‘(i) IN
GENERAL.—In this section, 
subject to clause (ii), the term ‘eligible 
auction area’ means, with respect to an 
auction under this section, a county, aggre-
gation of counties, or part of one or more 
counties specified by the Secretary for pur-
poses of such auction, in accordance with 
this paragraph. 
‘‘(ii) SPECIAL
RULE
FOR
DIABETIC 
SUPPLIES.—In applying this section with 
respect to the product category described 
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in subsection (b)(11), the term ‘eligible 
auction area’ means, with respect to an 
auction under this section, a State speci-
fied by the Secretary for purposes of such 
auction, in accordance with subparagraph 
(B)(iii). 
‘‘(B) SPECIFICATION
OF
ELIGIBLE
AUC-
TION AREAS.—For purposes of this section, the 
Secretary shall specify eligible auction areas in 
accordance with the following: 
‘‘(i) MARKET AREAS MUST REFLECT 
ECONOMIC INTERDEPENDENCY.—The Sec-
retary shall choose counties, aggregations 
of counties, or parts of counties in such a 
manner as to provide for auction areas 
that form economically interdependent 
areas (as reflected in standard econometric 
market models). For purposes of specifying 
eligible auction areas in accordance with 
the preceding sentence, the Secretary may 
subdivide a large county to take into ac-
count population and geographic size. 
‘‘(ii) ROUND 2 RECOMPETE COMPETI-
TIVE
BIDDING
AREAS.—The 
Secretary 
shall specify at least 10 eligible auction 
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areas that constituted Round 2 Recompete 
competitive bidding areas under section 
1847. To the extent possible, areas se-
lected for the demonstration project should 
represent a variety of economic markets 
(as reflected in standard econometric mar-
ket models). 
‘‘(iii) MAIL
ORDER
DIABETIC
SUP-
PLIES.—For purposes of subparagraph 
(A)(ii), with respect to the product cat-
egory described in subsection (b)(11), the 
Secretary shall specify two States as eligi-
ble auction areas for mail order diabetic 
supplies. Such two States, combined, shall 
represent at least 7 percent of the total 
population of individuals who are either en-
titled to benefits under part A or enrolled 
under part B (as determined based upon 
the most recent available data). 
‘‘(4) APPLICATION OF CERTAIN POLICIES AP-
PLICABLE
TO
COMPETITIVE
ACQUISITION
PRO-
GRAMS.—The following provisions of subsection 
(a)(1) of section 1847 shall apply to the demonstra-
tion project in the same manner as such provisions 
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apply to competitive acquisition programs under 
such section except as otherwise provided: 
‘‘(A) Subparagraph (C) (relating to waiver 
of certain provisions). 
‘‘(B) 
Subparagraph 
(E) 
(relating 
to 
verification by OIG), except that the assessment 
shall be of market pricing and subsequent pric-
ing determinations that are the basis for auc-
tion prices and single payment amounts for 
items and services in eligible auction areas and 
shall be conducted in the first two years of the 
demonstration project and may continue in sub-
sequent years of the project. 
‘‘(C) Subparagraph (F) (relating to feed-
back on missing financial documentation), ex-
cept that any reference to a round of a program 
is deemed a reference to a year of the dem-
onstration project. 
‘‘(b) MARKET-PRICED ITEMS
AND SERVICES DE-
FINED.—In this section, the term ‘market-priced items 
and services’ means items and services in each of the fol-
lowing categories (each of which in this section referred 
to as a ‘product category’): 
‘‘(1) Oxygen supplies and equipment. 
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‘‘(2) Standard power wheelchairs, power scoot-
ers, and related accessories. 
‘‘(3) Manual wheelchairs. 
‘‘(4) Enteral nutrients, equipment, and sup-
plies. 
‘‘(5) Continuous positive airway pressure de-
vices, respiratory assistive devices, and related sup-
plies. 
‘‘(6) Hospital beds and related accessories. 
‘‘(7) Walkers and related accessories. 
‘‘(8) Support services (Group 2 mattresses and 
overlays). 
‘‘(9) Negative pressure wound therapy pumps 
and related supplies and accessories. 
‘‘(10) Off-the-shelf orthotics described in sub-
paragraph (C) of section 1847(a)(2) to the extent 
they are included pursuant to such subparagraph in 
items and services described under such section and 
included in a competitive bidding program in a com-
petitive acquisition area under section 1847(a). 
‘‘(11) Mail order diabetic supplies. 
‘‘(12) Other items and services (other than 
those items and services specified in paragraph (2)) 
that could have been subject to participation in com-
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petitive 
acquisition 
programs 
under 
section 
1847(a)(1). 
‘‘(c) DEMONSTRATION PRICING PROJECT REQUIRE-
MENTS.— 
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish, through the process described in paragraph (2), 
an auction design for each auction that meets the 
requirements of paragraph (3), and shall ensure that 
the first auction under the demonstration project 
will be conducted for all eligible auction areas speci-
fied under subsection (a)(3) not later than the date 
specified in subsection (a)(2)(E). 
‘‘(2) AUCTION DESIGN PROCESS; STAKEHOLDER 
INPUT.— 
‘‘(A) 
TRANSPARENT
PROCESS
RE-
QUIRED.—In establishing the auction design de-
scribed in paragraph (1), the Secretary shall 
utilize an open and transparent process that in-
volves all eligible participants described in sub-
paragraph (C)(ii), including through the auc-
tion design conference and other outreach ef-
forts. 
‘‘(B) INITIAL AUCTION DESIGN.—The auc-
tion expert shall, with respect to an auction and 
consistent with subsection (a)(2)(B), develop an 
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auction design (referred to in this section as the 
‘initial auction design’) that shall propose for 
such auction eligible auction areas, lead prod-
ucts for each product category, weights to be 
assigned 
to 
products 
under 
paragraph 
(3)(B)(iv), and proposed rules for the conduct 
of the auction. 
‘‘(C) AUCTION DESIGN CONFERENCE.— 
‘‘(i) IN
GENERAL.—The Secretary 
shall, consistent with subsection (a)(2)(C), 
convene a design conference (in this para-
graph referred to as the ‘design con-
ference’) for the auction process for each 
auction under this section. The auction ex-
pert shall chair the conference and the 
market monitor shall participate in the 
conference (including as described in 
clause (v)). 
‘‘(ii) 
PARTICIPANTS.—The 
partici-
pants at the design conference shall in-
clude at least the following: 
‘‘(I) 
MANUFACTURERS, 
SUP-
PLIERS AND TRADE ASSOCIATIONS OF 
DMEPOS.—Representatives of manu-
facturers, suppliers, and trade asso-
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ciations of market-priced items and 
services. 
‘‘(II) 
BENEFICIARIES.—Rep-
resentatives of individuals enrolled 
under this part. 
‘‘(III) CMS.—The Administrator 
of the Centers for Medicare & Med-
icaid Services and other appropriate 
Federal personnel. 
‘‘(iii) PURPOSE
OF
CONFERENCE.— 
The purpose of the design conference shall 
be to review the initial auction design for 
the establishment of an efficient auction 
consistent with best practices and actuarial 
science and to provide stakeholders the op-
portunity to provide feedback on the initial 
auction design. 
‘‘(iv) AUCTION EXPERT RESPONSIBIL-
ITIES AT CONFERENCE.—With respect to 
the design conference, the auction expert 
shall— 
‘‘(I) provide a demonstration of 
the initial auction design; 
‘‘(II) lead a mock auction based 
upon such initial auction design in 
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which the attendees will participate 
and offer comments and suggestions 
for improvement; 
‘‘(III) invite input from suppliers 
as to the relationship between, with 
respect to a product category, the lead 
product in such product category and 
the value of other products in the 
same product category as such lead 
product (and may establish working 
committees on major issues related to 
such relationship); and 
‘‘(IV) invite input from small 
suppliers as to the ways in which such 
initial auction design can be improved 
to ensure that small suppliers have 
the opportunity to participate in the 
auction. 
‘‘(v) MARKET MONITOR RESPONSIBIL-
ITIES AT CONFERENCE.—With respect to 
the design conference, the market monitor 
shall provide a presentation on the respon-
sibilities of the market monitor throughout 
the year and comment on key aspects of 
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the initial auction design and their pur-
pose. 
‘‘(vi) INTERNET
ACCESSIBILITY
OF 
CONFERENCE.—The 
design 
conference 
shall be recorded and made available on an 
Internet Web site (through simultaneous 
Web cast or otherwise). 
‘‘(D) 
AUCTION
DESIGN
PROPOSED 
THROUGH EXPEDITED RULEMAKING.— 
‘‘(i) SUBMISSION
TO
SECRETARY.— 
The auction expert shall, with respect to 
an auction and in accordance with the 
timeline described in subsection (a)(2), 
submit to the Secretary an auction design 
for the auction (referred to in this section 
as the ‘revised auction design’) that takes 
into account the feedback on the initial 
auction design provided at the auction con-
ference for such auction. 
‘‘(ii) PUBLICATION AND PROPOSAL.— 
Upon receiving the submission of the re-
vised auction design for an auction by the 
auction expert pursuant to clause (i), the 
Secretary shall— 
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‘‘(I) make such modifications to 
such revised auction design as are 
necessary to ensure that the such auc-
tion design meets the requirements 
described in clause (viii); 
‘‘(II) make such other modifica-
tions to such revised auction design as 
the Secretary determines appropriate; 
and 
‘‘(III) publish and propose a rule 
for implementing such auction design 
for such auction, as modified pursu-
ant to subclauses (I) and (II), 
through 
an 
expedited 
rulemaking 
process. 
‘‘(iii) SUBMISSION OF COMMENTS TO 
AUCTION
EXPERT
AND
MARKET
MON-
ITOR.—The Secretary shall submit com-
ments received on an auction design pub-
lished under clause (ii)(III) to the auction 
expert and the market monitor to consider 
for modification of such auction design. 
‘‘(iv) REVIEW OF COMMENTS BY AUC-
TION
EXPERT
AND
MARKET
MONITOR.— 
The market monitor and auction expert 
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shall review such comments and, within 
one month of the receipt of such comments 
pursuant to clause (iii), shall each provide 
public comment on such comments. 
‘‘(v) DETERMINATION
OF
CHANGES 
TO AUCTION DESIGN.—Taking into consid-
eration the comments submitted to the 
auction expert and market monitor pursu-
ant to clause (iii), such auction expert shall 
determine if any changes should be made 
in the auction design published under 
clause (ii)(III) for an auction in response 
to such comments. If the auction expert 
determines that changes should be made in 
such design in response to such comments, 
the auction expert shall submit to the Sec-
retary an auction design (referred to in 
this section as the ‘further revised auction 
design’) for such auction. 
‘‘(vi) ADOPTION AND PUBLICATION OF 
AUCTION
DESIGN.—The Secretary shall 
adopt as the auction design to be used for 
purposes of an auction conducted under 
the demonstration project either— 
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‘‘(I) the further revised auction 
design for such auction, modified as 
necessary by the Secretary to ensure 
that such auction design meets the re-
quirements described in clause (viii) 
(and, if such design is so established, 
shall publish by rule such design); or 
‘‘(II) the auction design pub-
lished under clause (ii)(III) for such 
auction (and, if such design is so se-
lected despite a further revised auc-
tion design having been submitted to 
the Secretary under clause (v), shall 
notify the auction expert and market 
monitor of, and publish in the Federal 
Register, the reasons for electing to 
establish the revised auction design 
instead of the further revised auction 
design). 
‘‘(vii) 
EXPEDITED
RULEMAKING 
PROCESS DEFINED.—In this subparagraph, 
the term ‘expedited rulemaking process’ 
means a process of publication of the re-
vised auction design (and, as applicable, 
the further revised auction design) and so-
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licitation of public comments on such de-
sign. The provisions of section 1871(b)(1) 
shall not apply to such process. 
‘‘(viii) REQUIREMENTS DESCRIBED.— 
For purposes of this paragraph, the re-
quirements described in this clause are re-
quirements that, with respect to an auction 
design— 
‘‘(I) the rates of payment under 
such auction design do not result in a 
diminution of access to market-priced 
items and services for individuals enti-
tled to benefits under part A or en-
rolled under part B in the eligible 
auction areas in which the demonstra-
tion project is conducted or of the 
quality of such items and services that 
are furnished to such individuals in 
such areas; 
‘‘(II) the lead product proposed 
in such auction design for each prod-
uct category has been selected to be 
so proposed based upon the historical 
price and utilization of the product 
under this part; and 
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‘‘(III) the weights assigned under 
paragraph (3)(B)(iv) to products that 
are not lead products take into consid-
eration 
input 
provided 
on 
such 
weights by providers at the design 
conference for the applicable auction. 
‘‘(3) CONDUCT OF AUCTION.— 
‘‘(A) IN GENERAL.—The market monitor 
shall, consistent with subsection (a)(2)(E) and 
in accordance with the auction design adopted 
under paragraph (2)(D), conduct auctions (each 
in this section referred to as a ‘market-priced 
auction’) among potential bidders that are iden-
tified as eligible bidders under subparagraph 
(B)(ii) by carrying out the activities described 
in subparagraph (B) and subparagraph (C)(i) 
and such other activities as specified by the 
Secretary. 
‘‘(B) MARKET MONITOR ACTIONS BEFORE 
AUCTION DATE.—In conducting a market-priced 
auction, the market monitor shall (subject, as 
appropriate, to review by the Secretary), on a 
date that is prior to the date of such auction, 
carry out the following: 
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‘‘(i) DETAIL AUCTION RULES.—Detail 
auction rules and processes that are con-
sistent with the auction design adopted 
under paragraph (2)(D). The rules and 
processes described in the preceding sen-
tence shall, with respect to an auction, in-
clude the following: 
‘‘(I) The requirements that an 
entity must meet in order to be con-
sidered an eligible bidder under sub-
paragraph (E)(ii) for purposes of such 
auction. 
‘‘(II) Processes through which it 
will be determined for such auction, 
as a function of bids submitted by eli-
gible bidders at such auction, the eli-
gible bidders for lead products that 
are to be awarded contracts under 
this section and the prices for all 
products that are in the same product 
category as such lead product. 
‘‘(III) Performance obligations of 
such eligible bidders that are awarded 
such contracts, guarantee require-
ments applied under the demonstra-
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tion program, and penalties that will 
apply in the case of such an eligible 
bidder that is awarded such a con-
tract and that fails satisfy the terms 
of such contract or such requirements. 
‘‘(ii) IDENTIFY ELIGIBLE BIDDERS.— 
Review all applications for potential bid-
ders seeking to be eligible bidders in the 
auction and identify, for purposes of such 
auction, the eligible bidders (as defined in 
subparagraph (E)(ii)) by eligible auction 
area. 
‘‘(iii) SPECIFY TARGET CAPACITY FOR 
ELIGIBLE BIDDERS.—Specify, with respect 
to each eligible bidder for such auction, a 
target percentage for a product category 
that represents the percentage of the pro-
jected market for such product in an eligi-
ble auction area and contract period that it 
is estimated that the eligible bidder would 
have the capacity to serve. Each such tar-
get percentage shall be determined as fol-
lows: 
‘‘(I) In the case of an eligible 
bidder with historic capacity in an 
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auction area with respect to the lead 
product in such product category, the 
target percentage shall be determined 
based on the historic capacity for such 
bidder for such product. 
‘‘(II) In the case of an eligible 
bidder that has no historic capacity in 
an auction area with respect to such 
lead product, the target percentage 
shall be 1 percent of the projected 
market for such product. 
‘‘(iv) SET PRODUCT WEIGHTS.— 
‘‘(I) IN
GENERAL.—Assign to 
each product (categorized by the 
health care common procedure coding 
system code) that is in the same prod-
uct category as a lead product a 
weight that is expressed as a number. 
‘‘(II) 
WEIGHT
AMOUNT
FOR 
LEAD
PRODUCT.—With respect to a 
product category described in clause 
(i), the lead product in such product 
category shall, for purposes of such 
clause, be assigned a weight of 1.0. 
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‘‘(C) AUCTION.—In conducting a market- 
priced auction, the market monitor or Secretary 
(as applicable) shall, during such auction, carry 
out the following: 
‘‘(i) ESTABLISHMENT
OF
CLEARING 
PRICE.—The market monitor (subject, as 
appropriate, to review by the Secretary) 
shall establish a clearing price for each 
lead product selected under subparagraph 
(A) for each eligible area. Such clearing 
price shall, subject to clause (iii) and with 
respect to a lead product, be equal to the 
price (referred to in this clause as the ‘tar-
get price’) specified in the bid submitted 
by an eligible bidder with respect to such 
product and such area that, in conjunction 
with all bids submitted by eligible bidders 
for such product and such area that speci-
fy prices that are less than such target 
price, will provide for the total projected 
volume determined by the Secretary to be 
needed to fulfill demand for such product 
under this title in such area (as deter-
mined through the use of target percent-
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ages 
specified 
under 
subparagraph 
(B)(iii)). 
‘‘(ii) AWARDING OF CONTRACTS.— 
‘‘(I) IN
GENERAL.—The Sec-
retary shall award, pursuant to an 
auction for a contract period and eli-
gible auction area, a contract for 
products in a product category to each 
eligible bidder whose bid submitted for 
the lead product in such product cat-
egory for such area is at or below the 
clearing price established for such 
lead product and area pursuant to 
clause (i). 
‘‘(II) MANDATORY
ACCEPTANCE 
OF
CONTRACT.—An eligible bidder 
that has been awarded a contract 
under subclause (I) based on a bid de-
scribed in such subclause by such bid-
der shall be treated, upon the conclu-
sion of the auction with respect to 
which such contract is awarded, as 
having agreed to and accepted the 
contract, including the requirements 
described in subclauses (III) and (IV), 
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based on the price of items included 
in such bid. 
‘‘(III) VOLUME
OF
PRODUCTS 
UNDER
CONTRACT.—A 
contract 
awarded to an eligible bidder under 
subclause (I) with respect to market- 
priced items and services in a product 
category for an eligible auction area 
and contract period shall include a re-
quirement that such bidder will fur-
nish such items and services in suffi-
cient quantities to meet the needs of 
individuals for such items and services 
in the eligible auction area during 
such period. An eligible bidder shall 
not satisfy the sufficient quantities re-
quirement described in the preceding 
sentence unless the bidder furnishes 
the percentage of the market for such 
item or service in such area that is 
equal to the target percentage speci-
fied for such bidder for the lead prod-
uct for such category under subpara-
graph (B)(iii) or, if lesser, the per-
centage of such market in such area 
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and period that seeks such item or 
service from such bidder. 
‘‘(IV) 
DURATION
OF
CON-
TRACT.—A contract awarded under 
subclause (I) shall be valid for 2 
years. 
‘‘(iii) RULE
IF
TOTAL
BIDS
INAD-
EQUATE
TO
FULFILL
DEMAND.—In the 
case that the capacity represented by all 
bids submitted by eligible bidders for a 
lead product for an eligible area does not 
provide for the total projected volume de-
termined by the Secretary to be needed to 
fulfill demand for such product under this 
title in such area, the Secretary shall— 
‘‘(I) establish a clearing price for 
such lead product and area that is 
equal to the initial bid price estab-
lished at such auction by the market 
monitor for such product and area 
and, pursuant to clause (ii)(I), award 
contracts to all eligible bidders for 
such lead product and area whose bid 
submitted for such product and area 
is at or below such price; 
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‘‘(II) announce the remaining ag-
gregate supply needed for such prod-
uct and area in order to fulfill de-
mand for such product under this title 
in such area; and 
‘‘(III) conduct among eligible 
bidders an additional auction round, 
in such manner as is specified by the 
Secretary, to fulfill such remaining 
supply. 
‘‘(D) ANNOUNCEMENT
OF
INFORMATION 
AFTER AUCTION.—Immediately after a market- 
priced auction is completed, the Secretary shall 
publish on the Internet Web site of the Centers 
for Medicare & Medicaid Services and in the 
Federal Register the following: 
‘‘(i) A list of eligible bidders awarded 
contracts under such auction. 
‘‘(ii) The price determined at such 
auction for each product in a product cat-
egory that is subject to the auction. 
‘‘(E) BID-RELATED TERMS DEFINED.—For 
purposes of this section: 
‘‘(i) The term ‘bid’ means, with re-
spect to a lead product in a product cat-
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egory that is subject to a market-priced 
auction under the demonstration project, 
an offer made at the auction by an eligible 
bidder to furnish a lead product in a vol-
ume specified in such bid for a particular 
price and time period for one or more eligi-
ble auction areas. 
‘‘(ii) The term ‘eligible bidder’ means, 
with respect to an auction and an eligible 
auction area and lead product, a supplier 
that— 
‘‘(I) applies to the Secretary to 
participate in such auction with re-
spect to such area and lead product; 
‘‘(II) is identified by the Sec-
retary as a supplier of a market- 
priced item or service that is the sub-
ject of a market-priced auction in an 
eligible auction area; 
‘‘(III) would meet the licensure 
and performance guarantee require-
ments under section 1847(a)(1)(G) if 
such requirements applied for pur-
poses of auctions conducted under the 
demonstration project in the same 
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manner that they apply with respect 
to such section; and 
‘‘(IV) meets such other licensure, 
bid-bond, and other requirements as 
the Secretary may specify. 
‘‘(4) MONITORING ACCESS AND QUALITY.— 
‘‘(A) IN GENERAL.—The Secretary, in con-
sultation with the market monitor, shall mon-
itor the performance of eligible bidders that are 
awarded contracts under paragraph (3)(C)(ii) 
and the effects of the demonstration project to 
ensure compliance with the requirements of this 
section, including the requirements and obliga-
tions established in the auction design adopted 
under paragraph (2)(D)(v). 
‘‘(B) PROVIDE TRANSPARENCY OF INFOR-
MATION.—The market monitor shall make pub-
licly available the number of suppliers providing 
market-priced items and services in an eligible 
auction area during each year of the operation 
of the demonstration project. 
‘‘(C) ENFORCEMENT.—If the Secretary, 
after consultation with the market monitor, de-
termines that there has been a material failure 
of an eligible bidder that has been awarded a 
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contract under paragraph (3)(C)(ii) to comply 
with such requirements, the Secretary, after 
consultation with the market monitor, shall im-
plement, consistent with subparagraph (D), en-
forcement measures, which may include the ter-
mination of a contract awarded under para-
graph (3)(C)(ii). 
‘‘(D) ENFORCEMENT MEASURES.— 
‘‘(i) WARNING LETTERS AND OPPOR-
TUNITY
FOR
CORRECTIVE
ACTION.—The 
Secretary shall provide for the following 
before terminating, pursuant to subpara-
graph (B), a contract awarded under para-
graph (3)(C)(ii): 
‘‘(I) 
WARNING
LETTER.—The 
Secretary shall issue a formal warning 
letter at least 90 days before the date 
on which the Secretary terminates 
such contract. The warning letter 
shall describe the reason (or reasons) 
for the termination. 
‘‘(II) OPPORTUNITY
FOR
COR-
RECTIVE
ACTION.—The 
Secretary 
shall provide an opportunity for the 
supplier to take corrective action to 
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come into compliance with the con-
tract and avoid termination of the 
contract. 
‘‘(ii) ADDITIONAL CONSEQUENCES OF 
TERMINATION.—In the case of a termi-
nation of such a contract with an eligible 
bidder, the Secretary may require for-
feiture of amounts submitted as a bid and 
performance bond pursuant to section 
1847(a)(1)(G)(ii). 
‘‘(d) APPLICATION
OF COMPETITIVE ACQUISITION 
PROGRAM PROVISIONS.—In implementing the demonstra-
tion project under this section, the provisions of section 
1847(b) shall be applied as follows: 
‘‘(1) Paragraph (3) shall apply, except that, for 
purposes of contracts awarded under the demonstra-
tion project, subparagraph (B) of such paragraph 
shall be applied by substituting ‘2 years’ for ‘3 
years’. 
‘‘(2) Paragraph (4) shall apply. 
‘‘(3) Paragraph (5) shall apply, except that— 
‘‘(A) the reference in subparagraph (A) of 
such paragraph to subsection (a)(2) is deemed 
a reference to subsection (b) of this section; and 
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‘‘(B) the reference in subparagraph (B)(i) 
of such paragraph to subparagraph (A) is 
deemed a reference to subsection (a) of this sec-
tion. 
‘‘(4) Paragraph (7) shall not apply. 
‘‘(5) Paragraph (8) shall apply. 
‘‘(6) Paragraph (9) shall apply, except that 
such paragraph shall be applied as if a reference to 
a bidding program includes a reference to the dem-
onstration project. 
‘‘(7) Paragraph (10) shall apply, except that 
such paragraph shall be applied as if a reference to 
a competitive acquisition program includes a ref-
erence to the demonstration project. 
‘‘(8) Paragraph (11) shall not apply, except 
that— 
‘‘(A) the pendency of any claim for review 
under this section shall not delay any auction 
conducted pursuant to this section; and 
‘‘(B) there shall be no administrative or ju-
dicial review of any claim to enjoin the oper-
ation of a market-priced auction conducted dur-
ing the first round of the demonstration 
project. 
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‘‘(e) TRANSPARENCY
REQUIREMENTS
FOR
DEM-
ONSTRATION PROJECT.—In implementing the demonstra-
tion project, the Secretary shall provide for the publica-
tion, on an Internet Web site operated by the Secretary, 
of the following information with respect to an auction: 
‘‘(1) The qualifications necessary to be an eligi-
ble bidder. 
‘‘(2) The standards developed for purposes of 
subsection (c)(2)(B)(ii)(II). 
‘‘(3) The calculation of the total market capac-
ity of an eligible auction area for purposes of speci-
fying the target percentage under subsection 
(c)(3)(B)(iii) for eligible bidders in the auction for 
such area. 
‘‘(4) The process for soliciting and accepting 
bids for purposes of subsection (c)(3)(D)(ii). 
‘‘(5) For purposes of such subsection— 
‘‘(A) the number of eligible bidders at the 
auction; 
‘‘(B) the number of eligible bidders at the 
auction that were awarded a contract under 
such subsection at the auction; and 
‘‘(C) with respect to prospective bidders at 
the auction that were determined by the Sec-
retary not to be eligible bidders— 
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‘‘(i) the specific reasons for such de-
termination; and 
‘‘(ii) a means and process by which 
such prospective bidders may appeal, or 
otherwise obtain a review of, such deter-
mination. 
‘‘(6) The calculation of and compliance with the 
requirement of section 1847(b)(6)(D), as made ap-
plicable to the demonstration project by subsection 
(d). 
‘‘(f) RELIANCE ON AUCTION EXPERT AND MARKET 
MONITOR IN ESTABLISHING AND OPERATING MARKET- 
PRICING DEMONSTRATION PROJECT; ADVISORY COM-
MITTEE REPORT AND MONITORING.— 
‘‘(1) AUCTION
EXPERT
AND
MARKET
MON-
ITOR.— 
‘‘(A) IN GENERAL.—The Secretary shall, 
consistent 
with 
subsection 
(a)(2)(A) 
and 
through the Office of the Assistant Secretary 
for Planning and Evaluation, enter into a con-
tract with an individual to serve as the auction 
expert and a contract with an individual to 
serve as a market monitor to assist in the de-
sign, development, implementation and func-
tioning of the auctions to be conducted pursu-
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ant to subsection (c). Under each such contract, 
the auction expert and market monitor shall re-
port and be accountable to the Secretary in the 
manner described in this section. 
‘‘(B) SELECTION
OF
AUCTION
EXPERT 
AND MARKET MONITOR; TERM; ACCESS TO IN-
FORMATION.— 
‘‘(i) COMPETITIVE PROCESS.—The se-
lection of the individual to serve as the 
auction expert and as a market monitor 
under subparagraph (A) shall be under-
taken through a competitive process. 
‘‘(ii) DISQUALIFICATIONS.—An indi-
vidual may not be selected as the auction 
expert if such individual— 
‘‘(I) is a current or former em-
ployee of the Centers for Medicare & 
Medicaid Services; 
‘‘(II) is a current or former con-
tractor for the Centers for Medicare & 
Medicaid Services that participated in 
the implementation of the competitive 
acquisition program under section 
1847(a); 
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‘‘(III) does not have significant 
experience in implementing auctions 
of similar complexity in Government 
programs; or 
‘‘(IV) does not have appropriate 
educational credentials. 
‘‘(iii) ACCESS TO INFORMATION.—The 
Secretary shall make available to the auc-
tion expert and the market monitor all ap-
plicable information (including confidential 
information) on the relevant markets 
throughout the duration of the demonstra-
tion project. 
‘‘(iv) TERM OF CONTRACT.—The con-
tract for the auction expert and for the 
market monitor under this paragraph shall 
be for a period of 6 years. 
‘‘(2) REPORTS.— 
‘‘(A) SEMIANNUAL
REPORTS
TO
SEC-
RETARY.—The market monitor shall provide to 
the Secretary semiannual reports in the initial 
two years of the demonstration project and an-
nual reports in each subsequent year of the 
demonstration project on the development and 
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operations of the demonstration project. In each 
report, the market monitor shall— 
‘‘(i) identify potential problems with 
the demonstration project; and 
‘‘(ii) recommend solutions to potential 
problems so identified. 
‘‘(B) ANNUAL REPORT.—The market mon-
itor shall submit to the Committees on Ways 
and Means and Energy and Commerce of the 
House of Representatives and the Committee 
on Finance of the Senate an annual report on 
the operation and functioning of the demonstra-
tion project. Each such report shall include in-
formation on— 
‘‘(i) potential problems with the 
project; 
‘‘(ii) recommended solutions to prob-
lems identified pursuant to clause (i); 
‘‘(iii) the appropriateness of HCPCS 
codes selected for auctions; 
‘‘(iv) an evaluation on the ability of 
individuals eligible for benefits under this 
part to obtain items and services subject to 
the demonstration project; 
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‘‘(v) any adverse health effects result-
ing from implementation of the project; 
‘‘(vi) any material deterioration in the 
quality of items and services provided 
under the project; 
‘‘(vii) the costs of any preventable or 
prolonged hospitalizations due to lack of 
timely access to market-priced items and 
services; and 
‘‘(viii) any negative business con-
sequences to the supplier of any market- 
priced items and services occurring as a re-
sult of errors made in the conduct of the 
project.’’. 
(b) LICENSURE REQUIREMENTS AND FINANCIAL AS-
SURANCES
UNDER
COMPETITIVE
BIDDING.—Section 
1847(a)(1) of the Social Security Act (42 U.S.C. 1395w– 
3(a)(1)) is amended by adding at the end the following 
new subparagraphs: 
‘‘(G) REQUIRING STATE LICENSURE AND 
PERFORMANCE GUARANTEES FOR BIDDING EN-
TITIES.—With respect to rounds of competi-
tions beginning under this subsection on or 
after the date of enactment of this subpara-
graph, the Secretary may not accept a bid from 
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an entity for an area unless, as of the deadline 
for bid submission— 
‘‘(i) the entity meets applicable State 
licensure requirements for such area for all 
items in such bid for a product category; 
and 
‘‘(ii) the entity has submitted a cash 
deposit as a bid and performance bond in 
an amount determined by the Secretary 
after consultation with the auction expert, 
except that the Secretary may, in the Sec-
retary’s sole discretion, accept a letter of 
credit from a financial institution accept-
able to the Secretary in lieu of the cash de-
posit required to be submitted under this 
clause. 
‘‘(H) TREATMENT OF BID AND PERFORM-
ANCE BONDS SUBMITTED.— 
‘‘(i) FOR SUCCESSFUL BIDDERS.—The 
Secretary shall retain as a performance 
guarantee the deposit submitted by a sup-
plier that is selected at an auction con-
ducted pursuant to subparagraph (G)(ii) 
and such deposit— 
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‘‘(I) shall be returned to the enti-
ty within 90 days of the date of com-
pletion of the contract; or 
‘‘(II) shall be retained by the 
Secretary if the contract is terminated 
before the expiration of the contract. 
‘‘(ii) UNSUCCESSFUL BIDDERS.—If a 
bidding entity submits a bid that is not ac-
cepted for an area, the bid and perform-
ance deposit submitted for the entity for 
such area shall be returned within 90 days 
of the date of notice of nonacceptance.’’. 
(c) CLARIFICATION ABOUT INDIVIDUAL SELF-AD-
JUSTMENT FOR OFF-THE-SHELF ORTHOTICS.— 
(1) IN GENERAL.—Section 1847(a)(2)(C) of the 
Social Security Act (42 U.S.C. 1395w–3(a)(2)(C)) is 
amended— 
(A) by inserting ‘‘furnished to an indi-
vidual’’ after ‘‘section 1861(s)(9)’’; 
(B) by inserting after ‘‘minimal self-adjust-
ment’’ the following: ‘‘by that individual (and 
not by another person)’’; and 
(C) by striking ‘‘to fit to the individual’’ 
and inserting ‘‘to fit to that individual’’. 
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(2) EFFECTIVE DATE.—The amendments made 
by paragraph (1) shall apply to off-the-shelf 
orthotics (as defined in section 1847(a)(2)(C) of the 
Social Security Act (42 U.S.C. 1395w–3(a)(2)(C)), 
as amended by paragraph (1)) furnished in rounds 
of competitive bidding under section 1847 of such 
Act (42 U.S.C. 1395w–3) initiated on or after such 
date, as soon as practicable after the date of the en-
actment of this Act, as the Secretary of Health and 
Human Services determines appropriate. Such 
amendments only apply to the demonstration project 
under section 1847C of such Act, as added by sub-
section (a), if the Secretary implements competitive 
bidding for such off-the-shelf orthotics under the 
competitive bidding program under such section 
1847. 
Æ 
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