ning with 2020, prior to the first plan year 
of the applicable period. 
‘‘(2) ESTABLISHMENT
AND
APPLICATION
OF 
FORMULARY BY THE SECRETARY OR CHANGES IN 
FORMULARIES TO BE REQUIRED BY SECRETARY.— 
‘‘(A) IN GENERAL.—The Secretary shall, 
for plan years beginning with plan year 2020— 
‘‘(i) subject to subparagraphs (B) and 
(C), establish and apply a formulary for 
required use by sponsors of prescription 
drug plans and organizations offering MA– 
PD plans under this part; or 
‘‘(ii) require changes, as necessary, in 
the covered part D drugs included on 
formularies of PDP sponsors of prescrip-
tion drug plans (including changes, as nec-
essary, in the preferred or tiered cost-shar-
ing status of such a drug) to take into ac-
count negotiations carried out by the Sec-
retary pursuant to paragraph (1), regard-
less of whether such a covered part D drug 
is the subject of such negotiations. 
‘‘(B) REQUIRED INCLUSION OF DRUGS IN 
ALL THERAPEUTIC CATEGORIES.—A formulary 
established and applied under subparagraph 
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(A)(i) shall include at least two covered part D 
drugs in each category and class of covered part 
D 
drugs 
as 
described 
in 
section 
423.120(b)(2)(i) of title 42, Code of Federal 
Regulations (as in effect on January 1, 2017). 
‘‘(C) APPLICATION OF DEVELOPMENT AND 
REVISION REQUIREMENTS AND REQUIRED IN-
CLUSION
OF
ALL
DRUGS
IN
CERTAIN
CAT-
EGORIES AND CLASSES.—The requirements de-
scribed in subparagraphs (A) and (B) of section 
1860D–4(b)(3) (relating to development and re-
vision requirements of the formulary) and sub-
paragraph (G) of such section (relating to re-
quired inclusion of all drugs in certain cat-
egories and classes) shall apply to a formulary 
established and applied under subparagraph 
(A)(i) of this paragraph. 
‘‘(3) PLAN FLEXIBILITY TO NEGOTIATE GREAT-
ER DISCOUNTS.—Nothing in this subsection shall be 
construed as preventing the sponsor of a prescrip-
tion drug plan, or an organization offering an MA– 
PD plan, from obtaining a discount or reduction of 
the price for a covered part D drug below the price 
negotiated under paragraph (1), if applicable, in-
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cluding through the use of preferred or tiered cost- 
sharing status. 
‘‘(4) ENSURING
BENEFICIARY
ACCESS
TO 
NEEDED DRUGS.—Beginning with plan year 2020, 
each PDP sponsor of a prescription drug plan and 
organization offering an MA–PD plan shall have in 
place a process under which an enrollee in the plan 
may request coverage under the plan for a covered 
part D drug that is not on the formulary, or is sub-
ject to utilization management controls, such as 
tiered pricing, prior authorization, or step therapy.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) IN GENERAL.—Section 1860D–4 of the So-
cial Security Act (42 U.S.C. 1395w–104) is amend-
ed— 
(A) in subsection (b)(3), in the matter pre-
ceding subparagraph (A), by striking ‘‘If a 
PDP’’ and inserting ‘‘Subject to section 
1860D–11(i)(2), if a PDP’’; 
(B) in subsection (g)— 
(i) in paragraph (1), by inserting be-
fore the period at the end the following: ‘‘, 
except that the PDP sponsor of a prescrip-
tion drug plan shall treat the presentation 
of a prescription to a participating phar-
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macy, which is transmitted to the plan by 
the pharmacy, as a request for a coverage 
determination (including with respect to 
prior authorization, step therapy, or quan-
tity limits) and, in applying such para-
graphs of section 1852(g), the response to 
such transmittal shall be treated as a de-
termination by the sponsor’’; and 
(ii) in paragraph (2), in the first sen-
tence, by inserting ‘‘(or a participating 
pharmacy, on behalf of such individual, 
through transmission of a prescription as 
described in paragraph (1))’’ after ‘‘a part 
D eligible individual who is enrolled in the 
plan’’; and 
(C) in subsection (h)— 
(i) in paragraph (1), in the second 
sentence, by inserting ‘‘(or a participating 
pharmacy, on behalf of such individual)’’ 
after ‘‘the part D eligible individual’’; and 
(ii) in paragraph (2), by inserting 
‘‘(or a participating pharmacy, on behalf of 
such individual)’’ after ‘‘A part D eligible 
individual who is enrolled in a prescription 
drug plan offered by a PDP sponsor’’. 
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(2) EFFECTIVE DATE.—The amendments made 
by subparagraphs (B) and (C) of paragraph (1) 
shall apply to plans years beginning on or after Jan-
uary 1, 2020. 
SEC. 3. REQUIRING DRUG MANUFACTURERS TO PROVIDE 
DRUG REBATES FOR DRUGS DISPENSED TO 
LOW-INCOME INDIVIDUALS. 
(a) IN GENERAL.—Section 1860D–2 of the Social 
Security Act (42 U.S.C. 1395w–102) is amended— 
(1) in subsection (e)(1), in the matter preceding 
subparagraph (A), by inserting ‘‘and subsection (f)’’ 
after ‘‘this subsection’’; and 
(2) by adding at the end the following new sub-
section: 
‘‘(f) PRESCRIPTION DRUG REBATE AGREEMENT FOR 
REBATE ELIGIBLE INDIVIDUALS.— 
‘‘(1) REQUIREMENT.— 
‘‘(A) IN GENERAL.—For plan years begin-
ning on or after January 1, 2020, in this part, 
the term ‘covered part D drug’ does not include 
any drug or biological product that is manufac-
tured by a manufacturer that has not entered 
into and have in effect a rebate agreement de-
scribed in paragraph (2). 
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‘‘(B) 2020 PLAN YEAR REQUIREMENT.— 
Any drug or biological product manufactured by 
a manufacturer that declines to enter into a re-
bate agreement described in paragraph (2) for 
the period beginning on January 1, 2020, and 
ending on December 31, 2020, shall not be in-
cluded as a ‘covered part D drug’ for the subse-
quent plan year. 
‘‘(2) REBATE
AGREEMENT.—A rebate agree-
ment under this subsection shall require the manu-
facturer to provide to the Secretary a rebate for 
each rebate period (as defined in paragraph (6)(B)) 
ending after December 31, 2019, in the amount 
specified in paragraph (3) for any covered part D 
drug of the manufacturer dispensed after December 
31, 2019, to any rebate eligible individual (as de-
fined in paragraph (6)(A)) for which payment was 
made by a PDP sponsor or MA organization under 
this part for such period, including payments passed 
through the low-income and reinsurance subsidies 
under sections 1860D–14 and 1860D–15(b), respec-
tively. Such rebate shall be paid by the manufac-
turer to the Secretary not later than 30 days after 
the date of receipt of the information described in 
section 1860D–12(b)(8), including as such section is 
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applied under section 1857(f)(3), or 30 days after 
the receipt of information under subparagraph (D) 
of paragraph (3), as determined by the Secretary. 
Insofar as not inconsistent with this subsection, the 
Secretary shall establish terms and conditions of 
such agreement relating to compliance, penalties, 
and program evaluations, investigations, and audits 
that are similar to the terms and conditions for re-
bate agreements under paragraphs (3) and (4) of 
section 1927(b). 
‘‘(3) REBATE FOR REBATE ELIGIBLE MEDICARE 
DRUG PLAN ENROLLEES.— 
‘‘(A) IN GENERAL.—The amount of the re-
bate specified under this paragraph for a manu-
facturer for a rebate period, with respect to 
each dosage form and strength of any covered 
part D drug provided by such manufacturer 
and dispensed to a rebate eligible individual, 
shall be equal to the product of— 
‘‘(i) the total number of units of such 
dosage form and strength of the drug so 
provided and dispensed for which payment 
was made by a PDP sponsor or an MA or-
ganization under this part for the rebate 
period, including payments passed through 
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the low-income and reinsurance subsidies 
under sections 1860D–14 and 1860D– 
15(b), respectively; and 
‘‘(ii) the amount (if any) by which— 
‘‘(I) the Medicaid rebate amount 
(as defined in subparagraph (B)) for 
such form, strength, and period, ex-
ceeds 
‘‘(II) the average Medicare drug 
program rebate eligible rebate amount 
(as defined in subparagraph (C)) for 
such form, strength, and period. 
‘‘(B) MEDICAID
REBATE
AMOUNT.—For 
purposes of this paragraph, the term ‘Medicaid 
rebate amount’ means, with respect to each 
dosage form and strength of a covered part D 
drug provided by the manufacturer for a rebate 
period— 
‘‘(i) in the case of a single source 
drug or an innovator multiple source drug, 
the 
amount 
specified 
in 
paragraph 
(1)(A)(ii)(II) or (2)(C) of section 1927(c) 
plus the amount, if any, specified in sub-
paragraph (A)(ii) of paragraph (2) of such 
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section, for such form, strength, and pe-
riod; or 
‘‘(ii) in the case of any other covered 
outpatient drug, the amount specified in 
paragraph (3)(A)(i) of such section for 
such form, strength, and period. 
‘‘(C) AVERAGE MEDICARE DRUG PROGRAM 
REBATE ELIGIBLE REBATE AMOUNT.—For pur-
poses of this subsection, the term ‘average 
Medicare drug program rebate eligible rebate 
amount’ means, with respect to each dosage 
form and strength of a covered part D drug 
provided by a manufacturer for a rebate period, 
the sum, for all PDP sponsors under part D 
and MA organizations administering an MA– 
PD plan under part C, of— 
‘‘(i) the product, for each such spon-
sor or organization, of— 
‘‘(I) the sum of all rebates, dis-
counts, or other price concessions (not 
taking into account any rebate pro-
vided under paragraph (2) or any dis-
counts under the program under sec-
tion 1860D–14A) for such dosage 
form and strength of the drug dis-
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pensed, calculated on a per-unit basis, 
but only to the extent that any such 
rebate, discount, or other price con-
cession applies equally to drugs dis-
pensed to rebate eligible Medicare 
drug plan enrollees and drugs dis-
pensed to PDP and MA–PD enrollees 
who are not rebate eligible individuals; 
and 
‘‘(II) the number of the units of 
such dosage and strength of the drug 
dispensed during the rebate period to 
rebate eligible individuals enrolled in 
the prescription drug plans adminis-
tered by the PDP sponsor or the MA– 
PD plans administered by the MA or-
ganization; divided by 
‘‘(ii) the total number of units of such 
dosage and strength of the drug dispensed 
during the rebate period to rebate eligible 
individuals enrolled in all prescription drug 
plans administered by PDP sponsors and 
all MA–PD plans administered by MA or-
ganizations. 
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‘‘(D) USE OF ESTIMATES.—The Secretary 
may establish a methodology for estimating the 
average Medicare drug program rebate eligible 
rebate amounts for each rebate period based on 
bid and utilization information under this part 
and may use these estimates as the basis for 
determining the rebates under this section. If 
the Secretary elects to estimate the average 
Medicare drug program rebate eligible rebate 
amounts, the Secretary shall establish a rec-
onciliation process for adjusting manufacturer 
rebate payments not later than 3 months after 
the date that manufacturers receive the infor-
mation 
collected 
under 
section 
1860D– 
12(b)(8)(B). 
‘‘(4) LENGTH OF AGREEMENT.—The provisions 
of paragraph (4) of section 1927(b) (other than 
clauses (iv) and (v) of subparagraph (B)) shall apply 
to rebate agreements under this subsection in the 
same manner as such paragraph applies to a rebate 
agreement under such section. 
‘‘(5) OTHER
TERMS
AND
CONDITIONS.—The 
Secretary shall establish other terms and conditions 
of the rebate agreement under this subsection, in-
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