I
107TH CONGRESS
2D SESSION
H. R. 5219
To amend part B of title XVIII of the Social Security Act to provide
for a chronic disease prescription drug benefit and for coverage of disease
management services under the Medicare Program.
IN THE HOUSE OF REPRESENTATIVES
JULY 25, 2002
Mr. CARDIN (for himself, Mrs. MORELLA, and Ms. HOOLEY of Oregon) intro-
duced 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 provisions as fall within the jurisdiction of the
committee concerned
A BILL
To amend part B of title XVIII of the Social Security
Act to provide for a chronic disease prescription drug
benefit and for coverage of disease management services
under the Medicare Program.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Essential Medicines
for Medicare Act of 2002’’.
SEC. 2. MEDICARE CHRONIC DISEASE PRESCRIPTION
DRUG BENEFIT.
(a) COVERAGE.—
(1) IN GENERAL.—Section 1832(a)(2) of the
Social Security Act (42 U.S.C. 1395k(a)(2)) is
amended—
(A) by striking ‘‘and’’ at the end of sub-
paragraph (I);
(B) by striking the period at the end of
subparagraph (J) and inserting ‘‘; and’’; and
(C) by adding at the end the following new
subparagraph:
‘‘(K) subject to subsection (b), prescription
drugs for treatment of certain chronic condi-
tions (as defined in section 1861(uu)(1)).’’.
(2) PROVISION OF BENEFITS THROUGH EXIST-
ING
NON-MEDICAID
STATE
PRESCRIPTION
DRUG
BENEFIT PROGRAMS.—Section 1832 of such Act (42
U.S.C. 1395k) is further amended—
(1) by redesignating subsection (b) as sub-
section (c); and
(2) by inserting after subsection (a) the
following new subsection:
‘‘(b)(1) Prescription drug benefits shall not be avail-
able under subsection (a)(2)(K) to an individual to the ex-
tent that the individual receives benefits for the prescrip-
tion drugs under a State non-medicaid prescription drug
benefit program if the following requirements are met:
‘‘(A) The program is sponsored or financially
underwritten by a State, but Federal financial as-
sistance under title XIX is not available for expendi-
tures under the program.
‘‘(B) The program is in operation as of May 1,
2002.
‘‘(C) The State elects to receive payment (de-
scribed in paragraph (2)) for providing benefits
under this subsection.
‘‘(D) The deductible and coinsurance applicable
do not exceed the deductible and coinsurance other-
wise applicable to the prescription drug benefit de-
scribed in subsection (a)(2)(K).
‘‘(2) The Secretary shall provide for payment to a
State that operates a program that meets the require-
ments of paragraph (1) of an amount (agreed to by the
State) that does not exceed the Secretary’s estimate of the
amount of payment that would have been made under this
part (taking into account the application of a deductible
and coinsurance) for prescription drugs for which coverage
is provided under such program, if this subsection did not
apply.’’.
(b) DEFINITION OF BENEFIT.—
(1) IN GENERAL.—Section 1861 of such Act
(42 U.S.C. 1395x) is amended by adding at the end
the following new subsection:
‘‘Prescription Drugs for Treatment of Certain Chronic
Conditions
‘‘(uu)(1) The term ‘prescription drugs for treatment
of certain chronic conditions’ means, subject to paragraph
(3), prescription drugs described in paragraph (2) that
have been shown to have a demonstrable effect in treating
any of the following conditions (in the case of an individual
who has been diagnosed by a physician as having that con-
dition):
‘‘(A) Hypertension.
‘‘(B) Diabetes.
‘‘(C) Congestive or ischemic heart disease.
‘‘(D) Major depression.
‘‘(E) Rheumatoid arthritis.
‘‘(2) Prescription drugs described in this paragraph
are—
‘‘(A) a prescription drug that meets the require-
ment of clause (i), (ii), or (iii) of section
1927(k)(2)(A);
‘‘(B) a biological product described in section
1927(k)(2)(B); or
‘‘(C) insulin described in section 1927(k)(2)(C).
‘‘(3) The term ‘prescription drugs for treatment of
certain chronic conditions’ does not include any product—
‘‘(A) which may be distributed to individuals
without a prescription;
‘‘(B) when furnished as part of, or as incident
to, a diagnostic service or any other item or service
for which payment may be made under this title;
‘‘(C) that was covered under this title on the
day before the date of enactment of the Essential
Medicines for Medicare Act of 2002; or
‘‘(D) that is a therapeutically equivalent re-
placement for a product described in subparagraph
(B) or (C), as determined by the Secretary.’’.
(2) PROCESS FOR IDENTIFICATION OF COVERED
DRUGS.—The Secretary of Health and Human Serv-
ices shall implement a process for the timely identi-
fication of prescription drugs for treatment of cer-
tain chronic conditions that should be covered under
section 1861(uu) of the Social Security Act, as
added by paragraph (1). Under such process—
(A) within 60 days after the date of the
enactment 
of 
this 
Act, 
the 
Agency 
for
Healthcare Research and Quality shall complete
an initial review of the available data on the
prevalence of conditions described in such sec-
tion in the population of medicare beneficiaries,
the adequacy of data demonstrating the effec-
tiveness of different prescription drugs in treat-
ing such conditions, and the severity of poten-
tial complications in using such drugs;
(B) within 6 months after the date of the
enactment of this Act, the Secretary shall speci-
fy by rule the initial prescription drugs that
shall be covered under such section;
(C) thereafter the Secretary, taking into
consideration recommendations made under
subsection (e), may by rule change the prescrip-
tion drugs that are so covered; and
(D) the Secretary may, on an emergency
basis, provide for the replacement of a prescrip-
tion drug on the list if another drug (for the
treatment of the same condition) is recalled.
(3) CONSTRUCTION.—Nothing in this section
(or the amendments made by this section) shall be
construed—
(A) as preventing medicare beneficiaries
from purchasing prescription drugs not identi-
fied under paragraph (2), including through
coverage under a group health plan or medicare
supplemental policy; and
(B) the coverage under a medicare supple-
mental policy of prescription drugs for condi-
tions not specified on the list compiled under
paragraph (2) shall not be considered to dupli-
cate benefits under title XVIII of such Act, for
purposes of applying section 1882(d)(3) of such
Act (42 U.S.C. 1395ss(d)(3)).
(c) SELECTION OF ENTITIES TO PROVIDE DRUG
BENEFIT; PAYMENT.—
(1) IN GENERAL.—Part B of title XVIII of the
Social Security Act is amended by adding at the end
the following new section:
‘‘SEC. 1849. SELECTION OF ENTITIES TO PROVIDE OUT-
PATIENT DRUG BENEFIT; PAYMENT.
‘‘(a) ESTABLISHMENT OF BIDDING PROCESS.—
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish procedures under which the Secretary accepts
bids from eligible entities and awards contracts to
such entities in order to provide covered outpatient
drugs to eligible beneficiaries in an area. Such con-
tracts may be awarded based on shared risk, capita-
tion, or performance.
‘‘(2) AREA.—
‘‘(A) REGIONAL BASIS.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), the contract entered into between the
Secretary and an eligible entity shall re-
quire the eligible entity to provide covered
outpatient drugs on a regional basis.
‘‘(ii) PARTIAL REGIONAL BASIS.—
‘‘(I) IN
GENERAL.—If deter-
mined appropriate by the Secretary,
the Secretary may permit such to be
provided in a partial region deter-
mined appropriate by the Secretary.
‘‘(II) 
REQUIREMENTS.—If 
the
Secretary permits coverage pursuant
to subclause (I), the Secretary shall
ensure that the partial region in
which coverage is provided is at least
the size of the commercial service area
of the eligible entity for that area and
is not smaller than a State.
‘‘(B) DETERMINATION.—In determining
coverage areas under this section, the Secretary
shall—
‘‘(i) take into account the number of
eligible beneficiaries in an area in order to
encourage participation by eligible entities;
and
‘‘(ii) ensure that there are at least 10
different regions in the United States.
‘‘(C) NO
ADMINISTRATIVE
OR
JUDICIAL
REVIEW.—The determination of coverage areas
under this part shall not be subject to adminis-
trative or judicial review.
‘‘(3) SUBMISSION OF BIDS.—
‘‘(A) SUBMISSION.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), each eligible entity desiring to offer a
plan under this part in an area shall sub-
mit a bid with respect to such plan to the
Secretary at such time, in such manner,
and accompanied by such information as
the Secretary may reasonably require.
‘‘(ii) BID
THAT
COVERS
MULTIPLE
AREAS.—The Secretary shall permit an eli-
gible entity to submit a single bid for mul-
tiple areas if the bid is applicable to all
such areas.
‘‘(B) REQUIRED INFORMATION.—The bids
described in subparagraph (A) shall include—
‘‘(i) a proposal for the estimated
prices of covered outpatient drugs and the
projected annual increases in such prices,
including differentials between formulary
and nonformulary prices, if applicable;
‘‘(ii) 
a 
statement 
regarding 
the
amount that the entity will charge the Sec-
retary for administering and delivering the
benefits under the contract;
‘‘(iii) a detailed description of access
to pharmacy services provided under the
plan; and
‘‘(iv) such other information that the
Secretary determines is necessary in order
to carry out this part, including informa-
tion relating to the bidding process under
this part.
‘‘(4) ACCESS.—The Secretary shall ensure
that—
‘‘(A) an eligible entity complies with the
access requirements described in subsection
(f)(5);
‘‘(B) 
if 
an 
eligible 
entity 
employs
formularies pursuant to subsection (f)(6)(A),
such entity complies with the requirements of
subsection (f)(6)(B);
‘‘(C) an eligible entity makes available to
each beneficiary covered under the contract at
least one drug in each therapeutic class from
those approved by the Secretary for the treat-
ment of certain chronic conditions and at least
one generic equivalent for each drug, if avail-
able; and
‘‘(D) an eligible entity makes available to
each such beneficiary alternative prescription
drugs for the treatment of certain chronic con-
ditions when a physician certifies that, because
of a drug allergy or other documented medical
condition, that none of the drugs approved by
the Secretary for the treatment of these condi-
tions can adequately treat the patient and that
these drugs are medically necessary.
‘‘(5) DURATION
OF
CONTRACTS.—Each con-
tract under this section shall be for a term of at
least 2 years but not more than 5 years, as deter-
mined by the Secretary.
‘‘(b) ENROLLMENT.—
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish a process through which an eligible beneficiary
shall make an election to enroll with any eligible en-
tity that has been awarded a contract under this sec-
tion and serves the geographic area in which the
beneficiary resides. In establishing such process, the
Secretary shall use rules similar to the rules for en-
rollment and disenrollment with a Medicare+Choice
plan under section 1851.
‘‘(2) REQUIREMENT OF ENROLLMENT.—An eli-
gible beneficiary not enrolled in a Medicare+Choice
plan under part C must enroll with an eligible entity
under this section in order to be eligible to receive
covered outpatient drugs under this title.
‘‘(3) ENROLLMENT IN ABSENCE OF ELECTION
BY ELIGIBLE BENEFICIARY.—In the case of an eligi-
ble beneficiary that fails to make an election pursu-
ant to paragraph (1), the Secretary shall provide,
pursuant to procedures developed by the Secretary,
for the enrollment of such beneficiary with an eligi-
ble entity that has a contract under this section that
covers the area in which such beneficiary resides.
‘‘(4) AREAS NOT COVERED BY CONTRACTS.—
The Secretary shall develop procedures for the provi-
sion of covered outpatient drugs under this title to
eligible beneficiaries that reside in an area that is
not covered by any contract under this section.
‘‘(5) BENEFICIARIES RESIDING IN DIFFERENT
LOCATIONS.—The Secretary shall develop procedures
to ensure that an eligible beneficiary that resides in
different regions in a year is provided benefits under
this section throughout the entire year.
‘‘(c) AWARDING OF CONTRACTS.—
‘‘(1) NUMBER OF CONTRACTS.—The Secretary
shall, consistent with the requirements of this part
and the goal of containing costs under this title,
award in a competitive manner at least 2 contracts
to offer a plan in an area, unless only 1 bidding en-
tity (and the plan offered by the entity) meet the
minimum standards specified under this part and by
the Secretary.
‘‘(2) DETERMINATION.—In determining which
of the eligible entities that submitted bids that meet
the minimum standards specified under this part
and by the Secretary to award a contract, the Sec-
retary shall consider the comparative merits of each
bid, as determined on the basis of the past perform-
ance of the entity and other relevant factors, with
respect to—
‘‘(A) how well the entity (and the plan of-
fered by the entity) meet such minimum stand-
ards;
‘‘(B) the amount that the entity will
charge the Secretary for administering and de-
livering the benefits under the contract;
‘‘(C) the proposed negotiated prices of cov-
ered outpatient drugs and annual increases in
such prices;
‘‘(D) prior experience of the entity in ad-
ministering a prescription drug benefit pro-
gram;
‘‘(E) effectiveness of the entity and plan in
containing costs through pricing incentives and
utilization management; and
‘‘(F) such other factors as the Secretary
deems necessary to evaluate the merits of each
bid.
‘‘(3) EXCEPTION TO CONFLICT OF INTEREST
RULES.—In awarding contracts under this part, the
Secretary may waive conflict of interest laws gen-
erally applicable to Federal acquisitions (subject to
such safeguards as the Secretary may find necessary
to impose) in circumstances where the Secretary
finds that such waiver—
‘‘(A) is not inconsistent with the—
‘‘(i) purposes of the programs under
this title; or
‘‘(ii) best interests of beneficiaries en-
rolled under this part; and
‘‘(B) permits a sufficient level of competi-
tion for such contracts, promotes efficiency of
benefits administration, or otherwise serves the
objectives of the program under this part.
‘‘(4) NO
ADMINISTRATIVE
OR
JUDICIAL
RE-
VIEW.—The determination of the Secretary to award
or not award a contract to an eligible entity with re-
spect to a plan under this part shall not be subject
to administrative or judicial review.
‘‘(d) APPROVAL OF MARKETING MATERIAL AND AP-
PLICATION FORMS.—The provisions of section 1851(h)
shall apply to marketing material and application forms
under this part in the same manner as such provisions
apply to marketing material and application forms under
part C.
‘‘(e) 
PROVIDING
INFORMATION
TO
BENE-
FICIARIES.—The Secretary shall provide for activities
under this section to broadly disseminate information to
medicare beneficiaries on the coverage provided under this
section. Such activities shall be similar to the activities
performed by the Secretary under section 1851(d).
‘‘(f) PAYMENTS TO ELIGIBLE ENTITIES.—