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‘‘(2) COOPERATION.—The Secretary shall act in
a cooperative manner with the States in carrying out
this title. In the event of a dispute between a State
and the Secretary, the Secretary shall, whenever
practicable, engage in informal dispute resolution ac-
tivities in lieu of formal enforcement or sanctions
under section 2154.
‘‘(b) LIMITATIONS ON DELEGATION OF DECISION-
MAKING AUTHORITY.—The Secretary may not delegate
(other than to the Administrator of the Health Care Fi-
nancing Administration) the authority to make determina-
tions or reconsiderations respecting the approval of
MediGrant plans (or amendments to such plans) or the
compliance of a MediGrant plan (including its administra-
tion) with requirements of this title. Such Administrator
may not further delegate such authority to any individual,
including any regional official of such Administration.
‘‘(c) 
REQUIRING
FORMAL
RULEMAKING
FOR
CHANGES IN SECRETARIAL ADMINISTRATION.—The Sec-
retary shall carry out the administration of the program
under this title only through a prospective formal rule-
making process, including issuing notices of proposed rule
making, publishing proposed rules or modifications to
rules in the Federal Register, and soliciting public com-
ment.
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‘‘PART F—GENERAL PROVISIONS
‘‘SEC. 2171. DEFINITIONS.
‘‘(a) MEDICAL ASSISTANCE.—
‘‘(1) IN GENERAL.—For purposes of this title,
except as provided in paragraph (2), the term ‘medi-
cal assistance’ means payment of part or all the cost
of any of the following for eligible low-income indi-
viduals (as defined in subsection (b)) as specified
under the MediGrant plan:
‘‘(A) Inpatient hospital services.
‘‘(B) Outpatient hospital services.
‘‘(C) Physician services.
‘‘(D) Surgical services.
‘‘(E) Clinic services and other ambulatory
health care services.
‘‘(F) Nursing facility services.
‘‘(G) Intermediate care facility services for
the mentally retarded.
‘‘(H) Prescription drugs and biologicals.
‘‘(I) Over-the-counter medications.
‘‘(J) Laboratory and radiological services.
‘‘(K) Family planning services and sup-
plies.
‘‘(L) Inpatient mental health services, in-
cluding services furnished in a State-operated
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mental hospital and including residential or
other 24-hour therapeutically planned struc-
tured services in the case of a child.
‘‘(M) Outpatient mental health services, in-
cluding services furnished in a State-operated
mental hospital and including community-based
services in the case of a child.
‘‘(N) Durable medical equipment and other
medically-related or remedial devices (such as
prosthetic devices, implants, eyeglasses, hearing
aids, dental devices, and adaptive devices).
‘‘(O) Disposable medical supplies.
‘‘(P) Home and community-based health
care services and related supportive services
(such as home health nursing services, home
health aide services, personal care, assistance
with activities of daily living, chore services, day
care services, respite care services, and training
for family members).
‘‘(Q) Community supported living arrange-
ments.
‘‘(R) Nursing care services (such as private
duty nursing care, nurse midwife services, res-
piratory care services, pediatric nurse services,
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and advanced practice nurse services) in a
home, school, or other setting.
‘‘(S) Dental services.
‘‘(T) Inpatient substance abuse treatment
services and residential substance abuse treat-
ment services.
‘‘(U) Outpatient substance abuse treat-
ment services.
‘‘(V) Case management services.
‘‘(W) Care coordination services.
‘‘(X) Physical therapy, occupational ther-
apy, and services for individuals with speech,
hearing, and language disorders.
‘‘(Y) Hospice care.
‘‘(Z) Any other medical, diagnostic, screen-
ing, preventive, restorative, remedial, thera-
peutic, or rehabilitative services (whether in a
facility, home, school, or other setting) if recog-
nized by State law and if the service is—
‘‘(i) prescribed by or furnished by a
physician or other licensed or registered
practitioner within the scope of practice as
defined by State law,
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‘‘(ii) performed under the general su-
pervision or at the direction of a physician,
or
‘‘(iii) furnished by a health care facil-
ity that is operated by a State or local gov-
ernment or is licensed under State law and
operating within the scope of the license.
‘‘(AA) Premiums for private health care
insurance coverage, including private long-term
care insurance coverage.
‘‘(BB) Medical transportation.
‘‘(CC) Medicare cost-sharing (as defined in
subsection (c)).
‘‘(DD) Enabling services (such as trans-
portation, translation, and outreach services)
designed to increase the accessibility of primary
and preventive health care services for eligible
low-income individuals.
‘‘(EE) Any other health care services or
items specified by the Secretary.
‘‘(2) EXCLUSION
OF
CERTAIN
PAYMENTS.—
Such term does not include the payment with re-
spect to care or services for—
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‘‘(A) any individual who is an inmate of a
public institution (except as a patient in a State
psychiatric hospital); and
‘‘(B) any individual who is not an eligible
low-income individual.
‘‘(b) ELIGIBLE
LOW-INCOME
INDIVIDUAL.—The
term ‘eligible low-income individual’ means an individual
who has been determined eligible by the State for medical
assistance under the MediGrant plan and whose family in-
come (as determined under the plan) does not exceed a
percentage (specified in the MediGrant plan and not to
exceed 300 percent) of the poverty line for a family of
the size involved. In determining the amount of income
under the previous sentence, a State may exclude costs
incurred for medical care or other types of remedial care
recognized by the State.
‘‘(c) MEDICARE COST-SHARING.—For purposes of
this title, the term ‘medicare cost-sharing’ means any of
the following:
‘‘(1)(A) Premiums under section 1839.
‘‘(B) Premiums under section 1818 or 1818A.
‘‘(2) Coinsurance under title XVIII (including
coinsurance described in section 1813).
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‘‘(3) Deductibles established under title XVIII
(including those described in section 1813 and sec-
tion 1833(b)).
‘‘(4) The difference between the amount that is
paid under section 1833(a) and the amount that
would be paid under such section if any reference to
‘80 percent’ therein were deemed a reference to ‘100
percent’.
‘‘(5) Premiums for enrollment of an individual
with an eligible organization under section 1876 or
with a MedicarePlus organization under part C of
title XVIII.
‘‘(d) ADDITIONAL DEFINITIONS.—For purposes of
this title:
‘‘(1) CHILD.—The term ‘child’ means an indi-
vidual under 19 years of age.
‘‘(2) POVERTY LINE DEFINED.—The term ‘pov-
erty line’ means the income official poverty line (as
defined by the Office of Management and Budget
and revised annually in accordance with section
673(2) of the Omnibus Budget Reconciliation Act of
1981).
‘‘(3) PREGNANT WOMAN.—The term ‘pregnant
woman’ includes a woman during the 60-day period
beginning on the last day of the pregnancy.
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‘‘SEC. 2172. TREATMENT OF TERRITORIES.
‘‘Notwithstanding any other requirement of this title,
the Secretary may waive or modify any requirement of this
title with respect to the medical assistance program a
State other than the 50 States and the District of Colum-
bia, other than a waiver of—
‘‘(1) the applicable Federal medical assistance
percentage,
‘‘(2) the limitation on total payments in a fiscal
year to the amount of the allotment under section
2121(c), or
‘‘(3) the requirement that payment may be
made for medical assistance only with respect to
amounts expended by the State for care and services
described in paragraph (1) of section 2171(a) and
medically-related services (as defined in section
2112(e)(2)).
‘‘SEC. 2173. DESCRIPTION OF TREATMENT OF INDIAN
HEALTH SERVICE FACILITIES.
‘‘In the case of a State in which one or more facilities
of the Indian Health Service are located, the MediGrant
plan shall include a description of—
‘‘(1) what provision (if any) has been made for
payment for items and services furnished by such fa-
cilities, and
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‘‘(2) the manner in which medical assistance for
low-income eligible individuals who are Indians will
be provided, as determined by the State in consulta-
tion with the appropriate Indian tribes and tribal or-
ganizations.
‘‘SEC. 2174. APPLICATION OF CERTAIN GENERAL PROVI-
SIONS.
‘‘The following sections in part A of title XI shall
apply to States under this title in the same manner as
they applied to a State under title XIX:
‘‘(1) Section 1101(a)(1) (relating to definition
of State).
‘‘(2) Section 1116 (relating to administrative
and judicial review), but only insofar as consistent
with the provisions of part C.
‘‘(3) Section 1124 (relating to disclosure of
ownership and related information).
‘‘(4) Section 1126 (relating to disclosure of in-
formation about certain convicted individuals).
‘‘(5) Section 1128B(d) (relating to criminal
penalties for certain additional charges).
‘‘(6) Section 1132 (relating to periods within
which claims must be filed).
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‘‘SEC. 2175. MEDIGRANT MASTER DRUG REBATE AGREE-
MENTS.
‘‘(a) REQUIREMENT FOR MANUFACTURER TO ENTER
INTO AGREEMENT.—
‘‘(1) 
IN
GENERAL.—Pursuant 
to 
section
2123(f), in order for payment to be made to a State
under part C for medical assistance for covered out-
patient drugs of a manufacturer, the manufacturer
shall enter into and have in effect an MediGrant
master rebate agreement described in subsection (b)
with the Secretary on behalf of States electing to
participate in the agreement.
‘‘(2) STATE PARTICIPATION IN MASTER AGREE-
MENT OPTIONAL.—Nothing in this section shall be
construed to—
‘‘(A) require a State to participate in an
MediGrant master rebate agreement under this
section; or
‘‘(B) prohibit a State from entering into
an agreement with a manufacturer of covered
outpatient drugs (under such terms as the
State and manufacturer may agree upon) re-
garding the amount of payment for such drugs
under the MediGrant plan.
‘‘(3) COVERAGE
OF
DRUGS
NOT
COVERED
UNDER REBATE AGREEMENTS.—Nothing in this sec-
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tion shall be construed to prohibit a State in its dis-
cretion from providing coverage under its MediGrant
plan of a covered outpatient drug for which no re-
bate agreement is in effect under this section.
‘‘(4) EFFECT ON EXISTING AGREEMENTS.—If a
State has a rebate agreement in effect with a manu-
facturer on the date of the enactment of this section
which provides for a minimum aggregate rebate
equal to or greater than the minimum aggregate re-
bate which would otherwise be paid under the
MediGrant master agreement under this section, at
the option of the State—
‘‘(A) such agreement shall be considered to
meet the requirements of the MediGrant master
rebate agreement; and
‘‘(B) the State shall be considered to have
elected to participate in the MediGrant master
rebate agreement.
‘‘(b) TERMS OF REBATE AGREEMENT.—
‘‘(1) PERIODIC
REBATES.—The MediGrant
master rebate agreement under this section shall re-
quire the manufacturer to provide, to the MediGrant
plan of each State participating in the agreement, a
rebate for a rebate period in an amount specified in
subsection (c) for covered outpatient drugs of the
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manufacturer dispensed after the effective date of
the agreement, for which payment was made under
the plan for such period. Such rebate shall be paid
by the manufacturer not later than 30 days after the
date of receipt of the information described in para-
graph (2) for the period involved.
‘‘(2) STATE PROVISION OF INFORMATION.—
‘‘(A) STATE RESPONSIBILITY.—Each State
participating in the MediGrant master rebate
agreement shall report to each manufacturer
not later than 60 days after the end of each re-
bate period and in a form consistent with a
standard reporting format established by the
Secretary, information on the total number of
units of each dosage form and strength and
package size of each covered outpatient drug,
for which payment was made under the
MediGrant plan for the period, and shall
promptly transmit a copy of such report to the
Secretary.
‘‘(B) AUDITS.—A manufacturer may audit
the information provided (or required to be pro-
vided) under subparagraph (A). Adjustments to
rebates shall be made to the extent that infor-
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mation indicates that utilization was greater or
less than the amount previously specified.
‘‘(3) MANUFACTURER PROVISION OF PRICE IN-
FORMATION.—
‘‘(A) IN
GENERAL.—Each manufacturer
which is subject to the MediGrant master re-
bate agreement under this section shall report
to the Secretary—
‘‘(i) not later than 30 days after the
last day of each rebate period under the
agreement (beginning on or after January
1, 1991), on the average manufacturer
price (as defined in subsection (i)(1)) and,
for single source drugs and innovator mul-
tiple source drugs, the manufacturer’s best
price (as defined in subsection (c)(1)(C))
for each covered outpatient drug for the
rebate period under the agreement, and
‘‘(ii) not later than 30 days after the
date of entering into an agreement under
this section, on the average manufacturer
price (as defined in subsection (i)(1)) as of
October 1, 1990, for each of the manufac-
turer’s covered outpatient drugs.
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‘‘(B) VERIFICATION SURVEYS OF AVERAGE
MANUFACTURER
PRICE.—The Secretary may
survey wholesalers and manufacturers that di-
rectly distribute their covered outpatient drugs,
when necessary, to verify manufacturer prices
reported under subparagraph (A). The Sec-
retary may impose a civil monetary penalty in
an amount not to exceed $10,000 on a whole-
saler, manufacturer, or direct seller, if the
wholesaler, manufacturer, or direct seller of a
covered outpatient drug refuses a request for
information by the Secretary in connection with
a survey under this subparagraph. The provi-
sions of section 1128A (other than subsections
(a) (with respect to amounts of penalties or ad-
ditional assessments) and (b)) shall apply to a
civil money penalty under this subparagraph in
the same manner as such provisions apply to
a 
penalty 
or 
proceeding 
under 
section
1128A(a).
‘‘(C) PENALTIES.—
‘‘(i) FAILURE TO PROVIDE TIMELY IN-
FORMATION.—In the case of a manufac-
turer which is subject to the MediGrant
master rebate agreement that fails to pro-
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vide information required under subpara-
graph (A) on a timely basis, the amount of
the penalty shall be $10,000 for each day
in which such information has not been
provided and such amount shall be paid to
the Treasury. If such information is not
reported within 90 days of the deadline im-
posed, the agreement shall be suspended
for services furnished after the end of such
90-day period and until the date such in-
formation is reported (but in no case shall
such suspension be for a period of less
than 30 days).
‘‘(ii) 
FALSE
INFORMATION.—Any
manufacturer which is subject to the
MediGrant master rebate agreement, or a
wholesaler or direct seller, that knowingly
provides false information under subpara-
graph (A) or (B) is subject to a civil
money penalty in an amount not to exceed
$100,000 for each item of false informa-
tion. Any such civil money penalty shall be
in addition to other penalties as may be
prescribed by law. The provisions of sec-
tion 1128A (other than subsections (a) and
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(b)) shall apply to a civil money penalty
under this subparagraph in the same man-
ner as such provisions apply to a penalty
or proceeding under section 1128A(a).
‘‘(D) 
CONFIDENTIALITY
OF
INFORMA-
TION.—Notwithstanding any other provision of
law, information disclosed by manufacturers or
wholesalers under this paragraph or under an
agreement with the Secretary of Veterans Af-
fairs described in section 2123(f) is confidential
and shall not be disclosed by the Secretary or
the Secretary of Veterans Affairs or a State
agency (or contractor therewith) in a form
which discloses the identity of a specific manu-
facturer or wholesaler or the prices charged for
drugs by such manufacturer or wholesaler, ex-
cept—
‘‘(i) as the Secretary determines to be
necessary to carry out this section,
‘‘(ii) to permit the Comptroller Gen-
eral to review the information provided,
and
‘‘(iii) to permit the Director of the
Congressional Budget Office to review the
information provided.
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‘‘(4) LENGTH OF AGREEMENT.—
‘‘(A) IN GENERAL.—The MediGrant mas-
ter rebate agreement under this section shall be
effective for an initial period of not less than 1
year and shall be automatically renewed for a
period of not less than one year unless termi-
nated under subparagraph (B).
‘‘(B) TERMINATION.—
‘‘(i) BY THE SECRETARY.—The Sec-
retary may provide for termination of the
MediGrant master rebate agreement with
respect to a manufacturer for violation of
the requirements of the agreement or other
good cause shown. Such termination shall
not be effective earlier than 60 days after
the date of notice of such termination. The
Secretary shall provide, upon request, a
manufacturer with a hearing concerning
such a termination, but such hearing shall
not delay the effective date of the termi-
nation. Failure of a State to provide any
advance notice of such a termination as re-
quired by regulation shall not affect the
State’s right to terminate coverage of the
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drugs affected by such termination as of
the effective date of such termination.
‘‘(ii) BY A MANUFACTURER.—A man-
ufacturer may terminate its participation
in the MediGrant master rebate agreement
under this section for any reason. Any
such termination shall not be effective
until the calendar quarter beginning at
least 60 days after the date the manufac-
turer provides notice to the Secretary.
‘‘(iii) EFFECTIVENESS
OF
TERMI-
NATION.—Any termination under this sub-
paragraph shall not affect rebates due
under the agreement before the effective
date of its termination.
‘‘(iv) NOTICE
TO
STATES.—In the
case of a termination under this subpara-
graph, the Secretary shall provide notice of
such termination to the States within not
less than 30 days before the effective date
of such termination.
‘‘(v) APPLICATION TO TERMINATIONS
OF OTHER AGREEMENTS.—The provisions
of this subparagraph shall apply to the ter-
minations of master agreements described
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in section 8126(a) of title 38, United
States Code.
‘‘(C) DELAY
BEFORE
REENTRY.—In the
case of any rebate agreement with a manufac-
turer under this section which is terminated,
another such agreement with the manufacturer
(or a successor manufacturer) may not be en-
tered into until a period of 1 calendar quarter
has elapsed since the date of the termination,
unless the Secretary finds good cause for an
earlier reinstatement of such an agreement.
‘‘(c) DETERMINATION OF AMOUNT OF REBATE.—
‘‘(1) BASIC
REBATE
FOR
SINGLE
SOURCE
DRUGS
AND
INNOVATOR
MULTIPLE
SOURCE
DRUGS.—
‘‘(A) IN GENERAL.—Except as provided in
paragraph (2), the amount of the rebate speci-
fied in this subsection with respect to a State
participating in the MediGrant master rebate
agreement for a rebate period (as defined in
subsection (i)(8)) with respect to each dosage
form and strength of a single source drug or
an innovator multiple source drug shall be equal
to the product of—
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‘‘(i) the total number of units of each
dosage form and strength paid for under
the State plan in the rebate period (as re-
ported by the State); and
‘‘(ii) the greater of—
‘‘(I) the difference between the
average manufacturer price and the
best price (as defined in subparagraph
(C)) for the dosage form and strength
of the drug, or
‘‘(II) the minimum rebate per-
centage (specified in subparagraph
(B)) of such average manufacturer
price,
for the rebate period.
‘‘(B) MINIMUM
REBATE
PERCENTAGE.—
For purposes of subparagraph (A)(ii)(II), the
‘minimum rebate percentage’ is 15.1 percent.
‘‘(C) BEST
PRICE
DEFINED.—For pur-
poses of this section—
‘‘(i) IN
GENERAL.—The term ‘best
price’ means, with respect to a single
source drug or innovator multiple source
drug of a manufacturer, the lowest price
available from the manufacturer during the
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rebate period to any wholesaler, retailer,
provider, health maintenance organization,
nonprofit entity, or governmental entity
within the United States, excluding—
‘‘(I) any prices charged on or
after October 1, 1992, to the Indian
Health Service, the Department of
Veterans Affairs, a State home receiv-
ing funds under section 1741 of title
38, United States Code, the Depart-
ment of Defense, the Public Health
Service, or a covered entity described
in section 340B(a)(4) of the Public
Health Service Act;
‘‘(II) any prices charged under
the Federal Supply Schedule of the
General Services Administration;
‘‘(III) any prices used under a
State pharmaceutical assistance pro-
gram; and
‘‘(IV) any depot prices and single
award contract prices, as defined by
the Secretary, of any agency of the
Federal Government.
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‘‘(ii) SPECIAL RULES.—The term ‘best
price’—
‘‘(I) shall be inclusive of cash dis-
counts, free goods that are contingent
on any purchase requirement, volume
discounts, and rebates (other than re-
bates under this section);
‘‘(II) shall be determined without
regard to special packaging, labeling,
or identifiers on the dosage form or
product or package;
‘‘(III) shall not take into account
prices that are merely nominal in
amount; and
‘‘(IV) shall exclude rebates paid
under this section or any other re-
bates paid to a State participating in
the MediGrant master rebate agree-
ment.
‘‘(2) ADDITIONAL REBATE FOR SINGLE SOURCE
AND INNOVATOR MULTIPLE SOURCE DRUGS.—
‘‘(A) IN GENERAL.—The amount of the re-
bate specified in this subsection with respect to
a State participating in the MediGrant master
rebate agreement for a rebate period, with re-
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spect to each dosage form and strength of a
single source drug or an innovator multiple
source drug, shall be increased by an amount
equal to the product of—
‘‘(i) the total number of units of such
dosage form and strength dispensed after
December 31, 1990, for which payment
was made under the MediGrant plan for
the rebate period; and
‘‘(ii) the amount (if any) by which—
‘‘(I) the average manufacturer
price 
for 
the 
dosage 
form 
and
strength of the drug for the period,
exceeds
‘‘(II) the average manufacturer
price for such dosage form and
strength for the calendar quarter be-
ginning July 1, 1990 (without regard
to whether or not the drug has been
sold or transferred to an entity, in-
cluding a division or subsidiary of the
manufacturer, after the first day of
such quarter), increased by the per-
centage by which the consumer price
index for all urban consumers (United
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States city average) for the month be-
fore the month in which the rebate pe-
riod begins exceeds such index for
September 1990.
‘‘(B) TREATMENT OF SUBSEQUENTLY AP-
PROVED DRUGS.—In the case of a covered out-
patient drug approved by the Food and Drug
Administration after October 1, 1990, clause
(ii)(II) of subparagraph (A) shall be applied by
substituting ‘the first full calendar quarter after
the day on which the drug was first marketed’
for ‘the calendar quarter beginning July 1,
1990’ and ‘the month prior to the first month
of the first full calendar quarter after the day
on which the drug was first marketed’ for ‘Sep-
tember 1990’.
‘‘(3) REBATE FOR OTHER DRUGS.—
‘‘(A) IN GENERAL.—The amount of the re-
bate paid to a State participating in the
MediGrant master rebate agreement for a re-
bate period with respect to each dosage form
and strength of covered outpatient drugs (other
than single source drugs and innovator multiple
source drugs) shall be equal to the product of—
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‘‘(i) the applicable percentage (as de-
scribed in subparagraph (B)) of the aver-
age manufacturer price for the dosage
form and strength for the rebate period,
and
‘‘(ii) the total number of units of such
dosage form and strength dispensed after
December 31, 1990, for which payment
was made under the MediGrant plan for
the rebate period.
‘‘(B) 
APPLICABLE
PERCENTAGE
DE-
FINED.—For purposes of subparagraph (A)(i),
the ‘applicable percentage’ is 11 percent.
‘‘(4) LIMITATION ON AMOUNT OF REBATE TO
AMOUNTS PAID FOR CERTAIN DRUGS.—Upon request
of a manufacturer of a covered outpatient drug for
which a majority of the estimated number of units
of such dosage form and strength that are subject
to rebates under this section were dispensed to inpa-
tients of nursing facilities (including drugs which are
exempt from the requirements of the MediGrant
master rebate agreement under this section under
subsection (h)(1)(B)), the Secretary shall limit the
amount of the rebate under this subsection with re-
spect to a dosage form and strength of the drug for
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a rebate period to the amount paid under the
MediGrant plan with respect to such dosage form
and strength of the drug in the rebate period (with-
out consideration of any dispensing fees paid).
‘‘(d) LIMITATIONS
ON COVERAGE
OF DRUGS
BY
STATES PARTICIPATING IN MASTER AGREEMENT.—
‘‘(1) PERMISSIBLE
RESTRICTIONS.—A State
participating in the MediGrant master rebate agree-
ment under this section may—
‘‘(A) subject to prior authorization under
its MediGrant plan any covered outpatient drug
so long as any such prior authorization pro-
gram complies with the requirements of para-
graph (5); and
‘‘(B) exclude or otherwise restrict coverage
under its plan of a covered outpatient drug if—
‘‘(i) the prescribed use is not for a
medically accepted indication (as defined in
subsection (i)(5));
‘‘(ii) the drug is contained in the list
referred to in paragraph (2);
‘‘(iii) the drug is subject to such re-
strictions pursuant to the MediGrant mas-
ter rebate agreement or any agreement de-
scribed in subsection (a)(4); or
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‘‘(iv) the State has excluded coverage
of the drug from its formulary established
in accordance with paragraph (4).
‘‘(2) LIST
OF
DRUGS
SUBJECT
TO
RESTRIC-
TION.—The following drugs or classes of drugs, or
their medical uses, may be excluded from coverage
or otherwise restricted by a State participating in
the MediGrant master rebate agreement:
‘‘(A) Agents when used for anorexia,
weight loss, or weight gain.
‘‘(B) Agents when used to promote fertil-
ity.
‘‘(C) Agents when used for cosmetic pur-
poses or hair growth.
‘‘(D) Agents when used for the sympto-
matic relief of cough and colds.
‘‘(E) Agents when used to promote smok-
ing cessation.
‘‘(F) Prescription vitamins and mineral
products, except prenatal vitamins and fluoride
preparations.
‘‘(G) Nonprescription drugs.
‘‘(H) Covered outpatient drugs which the
manufacturer seeks to require as a condition of
sale that associated tests or monitoring services
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be purchased exclusively from the manufacturer
or its designee.
‘‘(I) Barbiturates.
‘‘(J) Benzodiazepines.
‘‘(3) ADDITIONS TO DRUG LISTINGS.—The Sec-
retary shall, by regulation, periodically update the
list of drugs or classes of drugs described in para-
graph (2), or their medical uses, which the Secretary
has determined to be subject to clinical abuse or in-
appropriate use.
‘‘(4) REQUIREMENTS
FOR
FORMULARIES.—A
State participating in the MediGrant master rebate
agreement may establish a formulary if the for-
mulary meets the following requirements:
‘‘(A) The formulary is developed by a com-
mittee consisting of physicians, pharmacists,
and other appropriate individuals appointed by
the Governor of the State.
‘‘(B) Except as provided in subparagraph
(C), the formulary includes the covered out-
patient drugs of any manufacturer which has
entered into and complies with the agreement
under subsection (a) (other than any drug ex-
cluded from coverage or otherwise restricted
under paragraph (2)).
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‘‘(C) A covered outpatient drug may be ex-
cluded with respect to the treatment of a spe-
cific disease or condition for an identified popu-
lation (if any) only if, based on the drug’s label-
ing (or, in the case of a drug the prescribed use
of which is not approved under the Federal
Food, Drug, and Cosmetic Act but is a medi-
cally accepted indication, based on information
from the appropriate compendia described in
subsection (i)(5)), the excluded drug does not
have a significant, clinically meaningful thera-
peutic advantage in terms of safety, effective-
ness, or clinical outcome of such treatment for
such population over other drugs included in
the formulary and there is a written expla-
nation (available to the public) of the basis for
the exclusion.
‘‘(D) The State plan permits coverage of a
drug excluded from the formulary (other than
any drug excluded from coverage or otherwise
restricted under paragraph (2)) pursuant to a
prior authorization program that is consistent
with paragraph (5).
‘‘(E) The formulary meets such other re-
quirements as the Secretary may impose in
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order to achieve program savings consistent
with protecting the health of program bene-
ficiaries.
A prior authorization program established by a State
under paragraph (5) is not a formulary subject to
the requirements of this paragraph.
‘‘(5) REQUIREMENTS OF PRIOR AUTHORIZATION
PROGRAMS.—The MediGrant plan of a State partici-
pating in the MediGrant master rebate agreement
may require, as a condition of coverage or payment
for a covered outpatient drug for which Federal fi-
nancial participation is available in accordance with
this section the approval of the drug before its dis-
pensing for any medically accepted indication (as de-
fined in subsection (i)(5)) only if the system provid-
ing for such approval—
‘‘(A) provides response by telephone or
other telecommunication device within 24 hours
of a request for prior authorization; and
‘‘(B) except with respect to the drugs on
the list referred to in paragraph (2), provides
for the dispensing of at least a 72-hour supply
of a covered outpatient prescription drug in an
emergency situation (as defined by the Sec-
retary).
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‘‘(6) OTHER
PERMISSIBLE
RESTRICTIONS.—A
State participating in the MediGrant master rebate
agreement may impose limitations, with respect to
all such drugs in a therapeutic class, on the mini-
mum or maximum quantities per prescription or on
the number of refills, if such limitations are nec-
essary to discourage waste, and may address in-
stances of fraud or abuse by individuals in any man-
ner authorized under this Act.
‘‘(e) DRUG USE REVIEW.—
‘‘(1) IN GENERAL.—A State participating in the
MediGrant master rebate agreement may provide for
a drug use review program to educate physicians
and pharmacists to identify and reduce the fre-
quency of patterns of fraud, abuse, gross overuse, or
inappropriate or medically unnecessary care, among
physicians, pharmacists, and patients, or associated
with specific drugs or groups of drugs, as well as po-
tential and actual severe adverse reactions to drugs.
‘‘(2) APPLICATION OF STATE STANDARDS.—A
State with a drug use review program under this
subsection shall establish and operate the program
under such standards as it may establish.
‘‘(f) ELECTRONIC CLAIMS MANAGEMENT.—In ac-
cordance with chapter 35 of title 44, United States Code
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(relating to coordination of Federal information policy),
the Secretary shall encourage each State to establish, as
its principal means of processing claims for covered out-
patient drugs under its MediGrant plan, a point-of-sale
electronic claims management system, for the purpose of
performing on-line, real time eligibility verifications,
claims data capture, adjudication of claims, and assisting
pharmacists (and other authorized persons) in applying
for and receiving payment.
‘‘(g) ANNUAL REPORT.—
‘‘(1) IN GENERAL.—Not later than May 1 of
each year, the Secretary shall transmit to the Com-
mittee on Finance of the Senate, the Committee on
Commerce of the House of Representatives, and the
Committee on Aging of the Senate a report on the
operation of this section in the preceding fiscal year.
‘‘(2) DETAILS.—Each report shall include infor-
mation on—
‘‘(A) ingredient costs paid under this title
for single source drugs, multiple source drugs,
and nonprescription covered outpatient drugs;
‘‘(B) the total value of rebates received
and number of manufacturers providing such
rebates;
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‘‘(C) the effect of inflation on the value of
rebates required under this section;
‘‘(D) trends in prices paid under this title
for covered outpatient drugs; and
‘‘(E) Federal and State administrative
costs associated with compliance with the provi-
sions of this title.
‘‘(h) EXEMPTION FOR CAPITATED HEALTH CARE
ORGANIZATIONS, HOSPITALS, AND
NURSING
FACILI-
TIES.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), the requirements of the MediGrant mas-
ter rebate agreement under this section shall not
apply with respect to covered outpatient drugs dis-
pensed by or through—
‘‘(A) a capitated health care organization
(as defined in section 2114(c)(1)); or
‘‘(B) a hospital or nursing facility that dis-
penses covered outpatient drugs using a drug
formulary system and bills the State no more
than the hospital’s purchasing costs for covered
outpatient drugs.
‘‘(2) CONSTRUCTION
IN
DETERMINING
BEST
PRICE.—Nothing in paragraph (1) shall be con-
strued as excluding amounts paid by the entities de-
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scribed in such paragraph for covered outpatient
drugs from the determination of the best price (as
defined in subsection (c)(1)(C)) for such drugs.
‘‘(i) DEFINITIONS.—In the section—
‘‘(1) AVERAGE
MANUFACTURER
PRICE.—The
term ‘average manufacturer price’ means, with re-
spect to a covered outpatient drug of a manufacturer
for a rebate period, the average price paid to the
manufacturer for the drug in the United States by
wholesalers for drugs distributed to the retail phar-
macy class of trade, after deducting customary
prompt pay discounts.
‘‘(2) COVERED OUTPATIENT DRUG.—Subject to
the exceptions in subparagraph (D), the term ‘cov-
ered outpatient drug’ means—
‘‘(A) of those drugs which are treated as
prescribed drugs for purposes of section
2171(a)(1)(H), a drug which may be dispensed
only upon prescription (except as provided in
paragraph (7)), and—
‘‘(i) which is approved as a prescrip-
tion drug under section 505 or 507 of the
Federal Food, Drug, and Cosmetic Act;
‘‘(ii)(I) which was commercially used
or sold in the United States before the
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date of the enactment of the Drug Amend-
ments of 1962 or which is identical, simi-
lar, or related (within the meaning of sec-
tion 310.6(b)(1) of title 21 of the Code of
Federal Regulations) to such a drug, and
(II) which has not been the subject of a
final determination by the Secretary that it
is a ‘new drug’ (within the meaning of sec-
tion 201(p) of the Federal Food, Drug,
and Cosmetic Act) or an action brought by
the Secretary under section 301, 302(a),
or 304(a) of such Act to enforce section
502(f) or 505(a) of such Act; or
‘‘(iii)(I) which is described in section
107(c)(3) of the Drug Amendments of
1962 and for which the Secretary has de-
termined there is a compelling justification
for its medical need, or is identical, simi-
lar, or related (within the meaning of sec-
tion 310.6(b)(1) of title 21 of the Code of
Federal Regulations) to such a drug, and
(II) for which the Secretary has not issued
a notice of an opportunity for a hearing
under section 505(e) of the Federal Food,
Drug, and Cosmetic Act on a proposed
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order of the Secretary to withdraw ap-
proval of an application for such drug
under such section because the Secretary
has determined that the drug is less than
effective for some or all conditions of use
prescribed, recommended, or suggested in
its labeling;
‘‘(B) a biological product, other than a
vaccine which—
‘‘(i) may only be dispensed upon pre-
scription,
‘‘(ii) is licensed under section 351 of
the Public Health Service Act, and
‘‘(iii) is produced at an establishment
licensed under such section to produce
such product;
‘‘(C) insulin certified under section 506 of
the Federal Food, Drug, and Cosmetic Act; and
‘‘(D) a drug which may be sold without a
prescription (commonly referred to as an ‘over-
the-counter drug’), if the drug is prescribed by
a physician (or other person authorized to pre-
scribe under State law).
‘‘(3) LIMITING DEFINITION.—The term ‘covered
outpatient drug’ does not include any drug, biologi-
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cal product, or insulin provided as part of, or as in-
cident to and in the same setting as, any of the fol-
lowing (and for which payment may be made under
a MediGrant plan as part of payment for the follow-
ing and not as direct reimbursement for the drug):
‘‘(A) Inpatient hospital services.
‘‘(B) Hospice services.
‘‘(C) Dental services, except that drugs for
which the MediGrant plan authorizes direct re-
imbursement to the dispensing dentist are cov-
ered outpatient drugs.
‘‘(D) Physicians’ services.
‘‘(E) Outpatient hospital services.
‘‘(F) Nursing facility services and services
provided by an intermediate care facility for the
mentally retarded.
‘‘(G) Other laboratory and x-ray services.
‘‘(H) Renal dialysis services.
Such term also does not include any such drug or
product for which a National Drug Code number is
not required by the Food and Drug Administration
or a drug or biological used for a medical indication
which is not a medically accepted indication. Any
drug, biological product, or insulin excluded from the
definition of such term as a result of this paragraph
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shall be treated as a covered outpatient drug for
purposes of determining the best price (as defined in
subsection (c)(1)(C)) for such drug, biological prod-
uct, or insulin.
‘‘(4) MANUFACTURER.—The term ‘manufac-
turer’ means, with respect to a covered outpatient
drug, the entity holding legal title to or possession
of the National Drug Code number for such drug.
‘‘(5) MEDICALLY ACCEPTED INDICATION.—The
term ‘medically accepted indication’ means any use
for a covered outpatient drug which is approved
under the Federal Food, Drug, and Cosmetic Act, or
the use of which is supported by one or more cita-
tions included or approved for inclusion in any of the
following compendia:
‘‘(A) American Hospital Formulary Service
Drug Information.
‘‘(B) United States Pharmacopeia-Drug
Information.
‘‘(C) American Medical Association Drug
Evaluations.
‘‘(D) The peer-reviewed medical literature.
‘‘(6) MULTIPLE
SOURCE
DRUG; INNOVATOR
MULTIPLE
SOURCE
DRUG; NONINNOVATOR
MUL-
TIPLE SOURCE DRUG; SINGLE SOURCE DRUG.—
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‘‘(A) DEFINED.—
‘‘(i) MULTIPLE SOURCE DRUG.—The
term ‘multiple source drug’ means, with
respect to a rebate period, a covered out-
patient drug (not including any drug de-
scribed in paragraph (2)(D)) for which
there are 2 or more drug products which—
‘‘(I) are rated as therapeutically
equivalent (under the Food and Drug
Administration’s most recent publica-
tion of ‘Approved Drug Products with
Therapeutic 
Equivalence 
Evalua-
tions’),
‘‘(II) except as provided in sub-
paragraph (B), are pharmaceutically
equivalent and bioequivalent, as de-
fined in subparagraph (C) and as de-
termined by the Food and Drug Ad-
ministration, and
‘‘(III) are sold or marketed in
the State during the period.
‘‘(ii) INNOVATOR
MULTIPLE
SOURCE
DRUG.—The 
term 
‘innovator 
multiple
source drug’ means a multiple source drug
that was originally marketed under an
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original new drug application or product li-
censing application approved by the Food
and Drug Administration.
‘‘(iii) 
NONINNOVATOR
MULTIPLE
SOURCE
DRUG.—The term ‘noninnovator
multiple source drug’ means a multiple
source drug that is not an innovator mul-
tiple source drug.
‘‘(iv) SINGLE
SOURCE
DRUG.—The
term ‘single source drug’ means a covered
outpatient drug which is produced or dis-
tributed under an original new drug appli-
cation approved by the Food and Drug Ad-
ministration, including a drug product
marketed by any cross-licensed producers
or distributors operating under the new
drug application or product licensing appli-
cation.
‘‘(B) 
EXCEPTION.—Subparagraph
(A)(i)(II) shall not apply if the Food and Drug
Administration changes by regulation the re-
quirement that, for purposes of the publication
described in subparagraph (A)(i)(I), in order
for drug products to be rated as therapeutically
equivalent, they must be pharmaceutically
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equivalent and bioequivalent, as defined in sub-
paragraph (C).
‘‘(C) DEFINITIONS.—For purposes of this
paragraph—
‘‘(i) drug products are pharmaceuti-
cally equivalent if the products contain
identical amounts of the same active drug
ingredient in the same dosage form and
meet compendial or other applicable stand-
ards of strength, quality, purity, and iden-
tity;
‘‘(ii) drugs are bioequivalent if they do
not 
present 
a 
known 
or 
potential
bioequivalence problem, or, if they do
present such a problem, they are shown to
meet 
an 
appropriate 
standard 
of
bioequivalence; and
‘‘(iii) a drug product is considered to
be sold or marketed in a State if it appears
in a published national listing of average
wholesale prices selected by the Secretary,
if the listed product is generally available
to the public through retail pharmacies in
that State.
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‘‘(7) 
NONPRESCRIPTION
DRUGS.—If 
the
MediGrant plan of a State participating in the
MediGrant master rebate agreement under this sec-
tion includes coverage of prescribed drugs as de-
scribed in section 2171(a)(1)(H) and permits cov-
erage of drugs which may be sold without a prescrip-
tion (commonly referred to as ‘over-the-counter’
drugs), if they are prescribed by a physician (or
other person authorized to prescribe under State
law), such a drug shall be regarded as a covered out-
patient drug for purposes of the State’s participation
in the agreement.
‘‘(8) REBATE PERIOD.—The term ‘rebate pe-
riod’ means, with respect to an agreement under
subsection (a), a calendar quarter or other period
specified by the Secretary with respect to the pay-
ment of rebates under such agreement.’’.
SEC. 16002. TERMINATION OF CURRENT PROGRAM AND
TRANSITION.
(a) TERMINATION OF CURRENT PROGRAM; LIMITA-
TION ON MEDICAID PAYMENTS IN FISCAL YEAR 1996.—
Title XIX of the Social Security Act is amended—
(1) by redesignating section 1931 as section
1932; and
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(2) by inserting after section 1930 the following
new section:
‘‘TERMINATION OF MEDICAID PROGRAM; LIMITATION ON
NEW OBLIGATION AUTHORITY
‘‘SEC. 1931. (a) ELIMINATION OF INDIVIDUAL ENTI-
TLEMENT.—Effective on the date of the enactment of this
section—
‘‘(1) except as provided in subsection (b), the
Federal Government has no obligation to provide
payment with respect to items and services provided
under this title, and
‘‘(2) this title shall not be construed as provid-
ing for an entitlement, under Federal law in relation
to the Federal Government, in an individual or per-
son (including any provider) at the time of provision
or receipt of services.
‘‘(b) LIMITATION
ON OBLIGATION AUTHORITY.—
Notwithstanding any other provision of this title—
‘‘(1) 
POST-ENACTMENT, 
PRE-MEDIGRANT.—
Subject to paragraph (2), the Secretary is author-
ized to enter into obligations with any State under
this title for expenses incurred after the date of the
enactment of this Act and during fiscal year 1996,
but not in excess of the obligation allotment for that
State for fiscal year 1996 under section 2121(b)(4).
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‘‘(2) NONE AFTER MEDIGRANT.—The Secretary
is not authorized to enter into any obligation with
any State under this title for expenses incurred on
or after the earlier of—
‘‘(A) October 1, 1996; or
‘‘(B) the first day of the first quarter on
which the State plan under title XXI is first ef-
fective.
‘‘(3) AGREEMENT.—A State’s submission of
claims for payment under section 1903 after the
date of the enactment of this title with respect to
which the limitation described in paragraph (1) ap-
plies is deemed to constitute the State’s acceptance
of the obligation limitation under such paragraph
(including the formula for computing the amount of
such obligation limitation).
‘‘(c) REQUIREMENT
FOR TIMELY SUBMITTAL
OF
CLAIMS.—No payment shall be made to a State under this
title with respect to an obligation incurred before the date
of the enactment of this section, unless the State has sub-
mitted to the Secretary, by not later than June 30, 1996,
a claim for Federal financial participation for expenses
paid by the State with respect to such obligations. Nothing
in subsection (a) or (b) shall be construed as affecting the
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obligation of the Federal Government to pay claims de-
scribed in the previous sentence.’’.
(b) MEDICAID TRANSITION.—
(1) TREATMENT OF CERTAIN CAUSES OF AC-
TION.—No cause of action under title XIX of the
Social Security Act which seeks to require a State
to establish or maintain minimum payment rates
under such title and which has not become final as
of the date of the enactment of this Act shall be
brought or continued.
(2) 
TREATMENT
OF
CERTAIN
DISALLOW-
ANCES.—Notwithstanding any provision of law, in
the case where payment has been made under sec-
tion 1903(a) of the Social Security Act to a State
before October 1, 1995, and for which a disallow-
ance has not been taken as of such date (or, if so
taken, has not been completed by such date), the
Secretary of Health and Human Services shall dis-
continue the disallowance proceeding and, if such
disallowance has been taken as of the date of the en-
actment of this Act, any payment reductions effected
shall be rescinded and the payments returned to the
State.
(3) EXTENSION
OF
MORATORIUM.—Section
6408(a)(3) of the Omnibus Budget Reconciliation
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Act of 1989, as amended by section 13642 of the
Omnibus Budget Reconciliation Act of 1993, is
amended by striking ‘‘December 31, 1995’’ and in-
serting ‘‘the first day of the first quarter on which
the MediGrant plan for the State of Michigan is
first effective under title XXI of such Act’’.
(c) NO APPLICATION OF PRIOR MEDICAID JUDG-
MENTS TO MEDIGRANT PROGRAM.—No judicial or admin-
istrative decision rendered regarding requirements im-
posed under title XIX of the Social Security Act with re-
spect to a State shall have any application to the
MediGrant plan of the State title XXI of such Act. A
State may, pursuant to the previous sentence, seek the
abrogation or modification of any such decision after the
date of termination of the State plan under title XIX of
such Act.
(d) TERMINATION OF PROGRAM FOR DISTRIBUTION
OF PEDIATRIC VACCINES
(1) IN GENERAL.—Subject to paragraph (2),
section 1928 of the Social Security Act (42 U.S.C.
1396s) is repealed, effective on the date of the en-
actment of this Act.
(2) TRANSITION.—(A) Such repeal shall not af-
fect the distribution of vaccines purchased and deliv-
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ered to the States before the date of the enactment
of this Act.
(B) No vaccine may be purchased after such
date by the Federal Government or any State under
any contract under section 1928(d) of the Social Se-
curity Act.
(e) ANTI-FRAUD PROVISIONS.—
(1) IN GENERAL.—Section 1128(h)(1) of the
Social Security Act (42 U.S.C. 1320a–7(h)(1)) is
amended by inserting ‘‘or a MediGrant plan under
title XXI’’ after ‘‘title XIX’’.
(2) CONTINUED
ROLE
OF
INSPECTOR
GEN-
ERAL.—The Inspector General in the Department of
Health and Human Services shall have the same re-
sponsibilities and duties in relation to fraud and
abuse and related matters under the MediGrant pro-
gram under title XXI of the Social Security Act as
such Inspector General has had in relation to the
medicaid program under title XIX of such Act be-
fore the date of the enactment of this Act.
(f) FINAL EXTENSION OF MEDICAID WAIVER FOR
DAYTON AREA HEALTH PLAN.—Section 2 of Public Law
102–276, as amended by section 13644 of the Omnibus
Budget Reconciliation Act of 1993, is amended by striking
‘‘December 31, 1995’’ and inserting ‘‘the last day of the
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last calendar quarter in which a State medicaid plan is
in effect in Ohio under title XIX of the Social Security
Act’’.
TITLE XVII—ABOLISHMENT OF
DEPARTMENT OF COMMERCE
SEC. 17001. SHORT TITLE.
This title may be cited as the ‘‘Department of Com-
merce Dismantling Act’’.
SEC. 17002. TABLE OF CONTENTS.
The table of contents for this title is as follows:
TITLE XVII—ABOLISHMENT OF DEPARTMENT OF COMMERCE
Sec. 17001. Short title.
Sec. 17002. Table of contents.
Subtitle A—Abolishment of Department of Commerce
Sec. 17101. Abolishment of Department of Commerce.
Sec. 17102. Resolution and termination of Department functions.
Sec. 17103. Responsibilities of the Director of the Office of Management and
Budget.
Sec. 17104. Office of Programs Resolution.
Sec. 17105. Personnel.
Sec. 17106. Plans and reports.
Sec. 17107. GAO audit and access to records.
Sec. 17108. Conforming amendments.
Sec. 17109. Privatization framework.
Sec. 17110. Priority placement programs for Federal employees affected by a
reduction in force attributable to this title.
Sec. 17111. Funding reductions for transferred functions.
Sec. 17112. Definitions.
Subtitle B—Disposition of Various Programs, Functions, and Agencies of
Department of Commerce
Sec. 17201. Abolishment of Economic Development Administration and trans-
fer of functions.
Sec. 17202. Technology Administration.
Sec. 17203. Reorganization of the Bureau of the Census.
Sec. 17204. Bureau of Economic Analysis.
Sec. 17205. Terminated functions of NTIA.
Sec. 17206. National Oceanic and Atmospheric Administration.
Sec. 17207. National Institute for Science and Technology.
Sec. 17208. Miscellaneous terminations; moratorium on program activities.
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Sec. 17209. Effective date.
Subtitle C—Office of United States Trade Representative
CHAPTER 1—GENERAL PROVISIONS
Sec. 17301. Definitions.
CHAPTER 2—OFFICE OF UNITED STATES TRADE REPRESENTATIVE
SUBCHAPTER A—ESTABLISHMENT
Sec. 17311. Establishment of the Office.
Sec. 17312. Functions of the USTR.
SUBCHAPTER B—OFFICERS
Sec. 17321. Deputy Administrator of the Office.
Sec. 17322. Deputy United States Trade Representatives.
Sec. 17323. Assistant Administrators.
Sec. 17324. Director General for Export Promotion.
Sec. 17325. General Counsel.
Sec. 17326. Inspector General.
Sec. 17327. Chief Financial Officer.
SUBCHAPTER C—TRANSFERS TO THE OFFICE
Sec. 17331. Office of the United States Trade Representative.
Sec. 17332. Transfers from the Department of Commerce.
Sec. 17333. Trade and Development Agency.
Sec. 17334. Export-Import Bank.
Sec. 17335. Overseas Private Investment Corporation.
Sec. 17336. Consolidation of export promotion and financing activities.
Sec. 17337. Additional trade functions.
SUBCHAPTER D—ADMINISTRATIVE PROVISIONS
Sec. 17341. Personnel provisions.
Sec. 17342. Delegation and assignment.
Sec. 17343. Succession.
Sec. 17344. Reorganization.
Sec. 17345. Rules.
Sec. 17346. Funds transfer.
Sec. 17347. Contracts, grants, and cooperative agreements.
Sec. 17348. Use of facilities.
Sec. 17349. Gifts and bequests.
Sec. 17350. Working capital fund.
Sec. 17351. Service charges.
Sec. 17352. Seal of Office.
SUBCHAPTER E—RELATED AGENCIES
Sec. 17361. Interagency Trade Organization.
Sec. 17362. National Security Council.
Sec. 17363. International Monetary Fund.
SUBCHAPTER F—CONFORMING AMENDMENTS
Sec. 17371. Amendments to general provisions.
Sec. 17372. Repeals.
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Sec. 17373. Conforming amendments relating to Executive Schedule positions.
SUBCHAPTER G—MISCELLANEOUS
Sec. 17381. Effective date.
Sec. 17382. Interim appointments.
Sec. 17383. Funding reductions resulting from reorganization.
Subtitle D—Patent and Trademark Office Corporation
Sec. 17401. Short title.
CHAPTER 1—PATENT AND TRADEMARK OFFICE
Sec. 17411. Establishment of Patent and Trademark Office as a corporation.
Sec. 17412. Powers and duties.
Sec. 17413. Organization and management.
Sec. 17414. Management Advisory Board.
Sec. 17415. Independence from Department of Commerce.
Sec. 17416. Trademark trial and appeal board.
Sec. 17417. Board of patent appeals and interferences.
Sec. 17418. Suits by and against the corporation.
Sec. 17419. Annual report of Commissioner.
Sec. 17420. Suspension or exclusion from practice.
Sec. 17421. Funding.
Sec. 17422. Audits.
Sec. 17423. Transfers.
CHAPTER 2—EFFECTIVE DATE; TECHNICAL AMENDMENTS
Sec. 17431. Effective date.
Sec. 17432. Technical and conforming amendments.
Subtitle E—Miscellaneous Provisions
Sec. 17501. References.
Sec. 17502. Exercise of authorities.
Sec. 17503. Savings provisions.
Sec. 17504. Transfer of assets.
Sec. 17505. Delegation and assignment.
Sec. 17506. Authority of director of the office of management and budget with
respect to functions transferred.
Sec. 17507. Certain vesting of functions considered transfers.
Sec. 17508. Availability of existing funds.
Sec. 17509. Definitions.
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Subtitle A—Abolishment of
Department of Commerce
SEC. 17101. ABOLISHMENT OF DEPARTMENT OF COM-
MERCE.
(a) ABOLISHMENT OF DEPARTMENT.—The Depart-
ment of Commerce is abolished effective on the abolish-
ment date specified in subsection (c).
(b) TRANSFER
OF DEPARTMENT FUNCTIONS
TO
OMB.—Except as otherwise provided in this title, all func-
tions that immediately before the abolishment date speci-
fied in subsection (c) are authorized to be performed by
the Secretary of Commerce, any other officer or employee
of the Department acting in that capacity, or any agency
or office of the Department, are transferred to the Direc-
tor of the Office of Management and Budget effective on
that abolishment date.
(c) ABOLISHMENT DATE.—The abolishment date re-
ferred to in subsections (a) and (b) is the earlier of—
(1) the last day of the 6-month period begin-
ning on the date of the enactment of this Act; or
(2) September 30, 1996.
SEC. 17102. RESOLUTION AND TERMINATION OF DEPART-
MENT FUNCTIONS.
(a) RESOLUTION OF FUNCTIONS.—During the period
beginning on the date of enactment of this Act and ending
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on the functions termination date specified in subsection
(c)—
(1) the disposition and resolution of functions
of the Department of Commerce shall be completed
in accordance with this title; and
(2) the Director shall resolve all functions that
are transferred to the Director under section
17101(b) and are not otherwise continued under this
title.
(b) TERMINATION
OF FUNCTIONS.—All functions
that are transferred to the Director under section
17101(b) that are not otherwise continued by this title
shall terminate on the functions termination date specified
in subsection (c).
(c) FUNCTIONS TERMINATION DATE.—The functions
termination date referred to in subsections (a) and (b) is
the last day of the 3-year period beginning on the date
of the enactment of this Act.
SEC. 17103. RESPONSIBILITIES OF THE DIRECTOR OF THE
OFFICE OF MANAGEMENT AND BUDGET.
The Director of the Office of Management and Budg-
et, acting through the Administrator of the Office of Pro-
grams Resolution, shall be responsible for the implementa-
tion of this subtitle, including—
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(1) the administration and wind-up, during the
wind-up period, of all functions transferred to the
Director under section 17101(b);
(2) the administration and wind-up, during the
wind-up period, of any outstanding obligations of the
Federal Government under any programs terminated
by this title; and
(3) taking such other actions as may be nec-
essary to wind-up any outstanding affairs of the De-
partment of Commerce before the end of the wind-
up period.
SEC. 17104. OFFICE OF PROGRAMS RESOLUTION.
(a) ESTABLISHMENT OF OFFICE.—There is estab-
lished in the Office of Management and Budget an office
to be known as the Office of Programs Resolution.
(b) ADMINISTRATOR.—There shall be at the head of
the Office an Administrator who shall be appointed by the
President, by and with the advice and consent of the Sen-
ate. The Administrator shall receive compensation at the
rate prescribed for level III of the Executive Schedule
under section 5314 of title 5, United States Code. The
Administrator shall serve as principal adviser to the Direc-
tor on Government organization and reorganization mat-
ters, and shall report directly to the Director.
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(c) FUNCTIONS.—The Administrator shall perform
such functions as are vested in the Administrator by this
title or delegated to the Administrator by the Director.
(d) AUTHORITIES
OF
THE ADMINISTRATOR.—For
purposes of performing the functions of the Administrator
under subsection (c) and subject to the availability of ap-
propriations, the Administrator may—
(1) enter into contracts;
(2) employ experts and consultants in accord-
ance with section 3109 of title 5, United States
Code, at rates for individuals not to exceed the per
diem rate equivalent to the rate for level IV of the
Executive Schedule; and
(3) utilize, on a reimbursable basis, the services,
facilities, and personnel of other Federal agencies.
(e) AUDITOR GENERAL.—
(1) IN GENERAL.—There shall be in the Office
an Auditor General, who shall be appointed by and
report to the Administrator.
(2) FUNCTIONS.—The Auditor General shall—
(A) conduct audits and investigations with
respect to activities of the Office; and
(B) submit to the Administrator and the
Director reports on the findings of those audits
and investigations.
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(f) REORGANIZATION.—The Administrator may allo-
cate or reallocate among the officers of the Office any
function vested in the Administrator or the Office, and
may establish, consolidate, alter, or discontinue in the Of-
fice any organizational entities that were entities of the
Department of Commerce, as the Administrator considers
necessary or appropriate.
(g) ANNUAL AUTHORIZATION REQUIRED.—No sums
may be appropriated for any fiscal year for the Office ex-
cept as specifically authorized for that fiscal year by law.
SEC. 17105. PERSONNEL.
Effective on the abolishment date specified in section
17101(c), there are transferred to the Office all individ-
uals who—
(1) immediately before the abolishment date,
were officers or employees of the Department of
Commerce; and
(2) in their capacity as such an officer or em-
ployee, performed functions that are transferred to
the Director under section 17101(b).
SEC. 17106. PLANS AND REPORTS.
(a) INITIAL IMPLEMENTATION PLAN.—
(1) IN GENERAL.—Not later than 90 days after
the date of enactment of this Act, the Director shall
submit a report, through the President, to the Con-
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gress specifying those actions taken and necessary to
be taken—
(A) to resolve those programs and func-
tions terminated on the date of enactment of
this Act; and
(B) to implement the additional transfers
and other program dispositions provided for in
this title.
(2) CONTENTS.—The report shall include—
(A) a description of the anticipated size
and composition of the Programs Resolution
Office,
(B) recommendations for additional legisla-
tion, if any, needed to reflect or otherwise to
implement the abolishments, transfers, termi-
nations, and other dispositions of programs and
functions under this title; and
(C) a description of actions planned and
taken to comply with limitations imposed by
this Act on future spending for continued func-
tions.
(b) ANNUAL STATUS REPORTS.—At the end of each
of the first, second, and third years following the date of
enactment of this Act, the Director shall submit a report,
through the President, to the Congress which—
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(1) specifies the status and progress of actions
taken to implement this title and to wind-up the af-
fairs of the Department of Commerce by the func-
tions termination date specified in section 17102(c);
(2) includes a summary of reports submitted to
the Director under section 17104(e)(2)(B) during
the period covered by the report by the Auditor Gen-
eral of the Office;
(3) includes any recommendations the Director
may have for additional legislation; and
(4) describes actions taken to comply with limi-
tations imposed by this Act on future spending for
continued functions.
(c) GAO REPORTS.—Not later than 60 days after is-
suance of each report under subsections (a) and (b), the
Comptroller General of the United States shall submit to
the Congress a report which—
(1) evaluates the report under that subsection;
and
(2) includes any recommendations the Comp-
troller General considers appropriate.
SEC. 17107. GAO AUDIT AND ACCESS TO RECORDS.
(a) AUDIT OF PERSONS PERFORMING FUNCTIONS
PURSUANT TO THIS ACT.—All agencies, corporations, or-
ganizations, and other persons of any description which
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under the authority of the United States perform any
function or activity pursuant to this title shall be subject
to audit by the Comptroller General of the United States
with respect to such function or activity.
(b) AUDIT OF PERSONS PROVIDING CERTAIN GOODS
OR SERVICES.—All persons and organizations which, by
contract, grant, or otherwise, provide goods or services to,
or receive financial assistance from, any agency or other
person performing functions or activities under or referred
to by this title shall be subject to audit by the Comptroller
General of the United States with respect to such provi-
sion of goods or services or receipt of financial assistance.
(c) PROVISIONS APPLICABLE
TO
AUDITS UNDER
THIS SECTION.—
(1) NATURE
AND
SCOPE
OF
AUDIT.—The
Comptroller General of the United States shall de-
termine the nature, scope, terms, and conditions of
audits conducted under this section.
(2) COORDINATION
WITH
OTHER
PROVISIONS
OF LAW.—The authority of the Comptroller General
of the United States under this section shall be in
addition to any audit authority available to the
Comptroller General under other provisions of this
title or any other law.
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(3) RIGHTS
OF
ACCESS, EXAMINATION, AND
COPYING.—The Comptroller General of the United
States, and any duly authorized representative of the
Comptroller General, shall have access to, and the
right to examine and copy, all records and other re-
corded information in any form, and to examine any
property within the possession or control of any
agency or person which is subject to audit under this
section, which the Comptroller General considers rel-
evant to an audit conducted under this section.
(4) ENFORCEMENT OF RIGHT OF ACCESS.—The
right of access of the Comptroller General of the
United States to information under this section shall
be enforceable under section 716 of title 31, United
States Code.
(5) 
MAINTENANCE
OF
CONFIDENTIAL
RECORDS.—Section 716(e) of title 31, United States
Code, shall apply to information obtained by the
Comptroller General under this section.
SEC. 17108. CONFORMING AMENDMENTS.
(a) PRESIDENTIAL SUCCESSION.—Section 19(d)(1)
of title 3, United States Code, is amended by striking
‘‘Secretary of Commerce,’’.
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(b) EXECUTIVE DEPARTMENTS.—Section 101 of title
5, United States Code, is amended by striking the follow-
ing item: ‘‘The Department of Commerce.’’.
(c) SECRETARY’S COMPENSATION.—Section 5312 of
title 5, United States Code, is amended by striking the
following item: ‘‘Secretary of Commerce.’’.
(d) COMPENSATION FOR POSITIONS AT LEVEL III.—
Section 5314 of title 5, United States Code, is amended—
(1) by striking the following item:
‘‘Under Secretary of Commerce, Under Secretary of
Commerce for Economic Affairs, Under Secretary of Com-
merce for Export Administration and Under Secretary of
Commerce for Travel and Tourism.’’;
(2) by striking the following item:
‘‘Under Secretary of Commerce for Oceans and At-
mosphere, the incumbent of which also serves as Adminis-
trator of the National Oceanic and Atmospheric Adminis-
tration.’’;
(3) by striking the following item:
‘‘Under Secretary of Commerce for Technology.’’;
and
(4) by adding at the end the following item:
‘‘Administrator, Office of Programs Resolution’’.
(e) COMPENSATION FOR POSITIONS AT LEVEL IV.—
Section 5315 of title 5, United States Code, is amended—
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(1) by striking the following item:
‘‘Assistant Secretaries of Commerce (11).’’;
(2) by striking the following item:
‘‘General Counsel of the Department of Commerce.’’;
(3) by striking the following item:
‘‘Assistant Secretary of Commerce for Oceans and
Atmosphere, the incumbent of which also serves as Deputy
Administrator of the National Oceanic and Atmospheric
Administration.’’;
(4) by striking the following item:
‘‘Director, National Institute of Standards and Tech-
nology, Department of Commerce.’’;
(5) by striking the following item:
‘‘Inspector General, Department of Commerce.’’;
(6) by striking the following item:
‘‘Chief Financial Officer, Department of Com-
merce.’’; and
(7) in the item relating to the Bureau of the
Census, by striking ‘‘, Department of Commerce’’.
(f) COMPENSATION FOR POSITIONS AT LEVEL V.—
Section 5316 of title 5, United States Code, is amended—
(1) by striking the following item:
‘‘Director, United States Travel Service, Department
of Commerce.’’; and
(2) by striking the following item:
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‘‘National Export Expansion Coordinator, Depart-
ment of Commerce.’’.
(g) INSPECTOR GENERAL ACT OF 1978.—The In-
spector General Act of 1978 (5 U.S.C. App.) is amend-
ed—
(1) in section 9(a)(1), by striking subparagraph
(B);
(2) in section 11(1), by striking ‘‘Commerce,’’;
and
(3) in section 11(2), by striking ‘‘Commerce,’’.
(h) EFFECTIVE DATE.—The amendments made by
this section shall be effective on the abolishment date spec-
ified in section 17101(c).
SEC. 17109. PRIVATIZATION FRAMEWORK.
(a) IN GENERAL.—The Office of Management and
Budget shall privatize each function designated for privat-
ization under subtitle B within 18 months of the date the
transfer of such function to the Office. The Office shall
pursue such forms of privatization arrangements as the
Office considers appropriate to best serve the interests of
the United States. If the Office is unable to privatize a
function within 18 months, the Office shall report its in-
ability to the Congress with its recommendations as to the
appropriate disposition of the function and its assets.
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(b) ROLE OF THE FEDERAL GOVERNMENT.—No pri-
vatization arrangement made under subsection (a) shall
include any future role for, or accountability to, the Fed-
eral Government unless it is necessary to assure the con-
tinued accomplishment of a specific Federal objective. The
Federal role should be the minimum necessary to accom-
plish Federal objectives.
(c) ASSETS.—In privatizing a function, the Office of
Management and Budget shall take any action necessary
to preserve the value of the assets of a function during
the period the Office holds such assets and to continue
the performance of the function to the extent necessary
to preserve the value of the assets or to accomplish core
Federal objectives.
SEC. 17110. PRIORITY PLACEMENT PROGRAMS FOR FED-
ERAL EMPLOYEES AFFECTED BY A REDUC-
TION IN FORCE ATTRIBUTABLE TO THIS
TITLE.
(a) IN GENERAL.—Subchapter I of chapter 33 of title
5, United States Code, is amended by adding at the end
the following:
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‘‘§ 3329b. Priority placement programs for employees
affected by a reduction in force attrib-
utable to the Department of Commerce
Dismantling Act
‘‘(a)(1) For the purpose of this section, the term ‘af-
fected agency’—
‘‘(A) except as provided in subparagraph (B),
means an Executive agency to which personnel are
transferred in connection with a transfer of function
under the Department of Commerce Dismantling
Act, and
‘‘(B) with respect to employees of the Depart-
ment of Commerce in general administration, the In-
spector General’s office, or the General Council’s of-
fice, or who provided overhead support to other com-
ponents of the Department on a reimbursable basis,
means all agencies to which functions of those em-
ployees are transferred under the Department of
Commerce Dismantling Act.
‘‘(2) This section applies with respect to any reduc-
tion in force that—
‘‘(A) occurs within 12 months after the date of
the enactment of this section; and
‘‘(B) is due to—
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‘‘(i) the termination of any function of the
Department of Commerce or the Office of Pro-
grams Resolution, as the case may be; or
‘‘(ii) the agency’s having excess personnel
as a result of a transfer of function described
in paragraph (1), as determined by—
‘‘(I) the Administrator of the Office of
Programs Resolution, in the case of a
function transferred to the Office of Man-
agement and Budget; or
‘‘(II) the head of the agency, in the
case of any other function.
‘‘(b) As soon as practicable after the date of the en-
actment of this section, each affected agency shall estab-
lish an agencywide priority placement program to facili-
tate employment placement for employees who—
‘‘(1) are scheduled to be separated from service
due to a reduction in force described in subsection
(a)(2); or
‘‘(2) are separated from service due to such a
reduction in force.
‘‘(c)(1) Each agencywide priority placement program
shall include provisions under which a vacant position
shall not be filled by the appointment or transfer of any
individual from outside of that agency if—
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‘‘(A) there is then available any individual de-
scribed in paragraph (2) who is qualified for the po-
sition; and
‘‘(B) the position—
‘‘(i) is at the same grade (or pay level) or
not more than 1 grade (or pay level) below that
of the position last held by such individual be-
fore placement in the new position; and
‘‘(ii) is within the same commuting area as
the individual’s last-held position (as referred to
in clause (i)) or residence.
‘‘(2) For purposes of an agencywide priority place-
ment program, an individual shall be considered to be de-
scribed in this paragraph if such individual’s most recent
performance evaluation was at least fully successful (or
the equivalent), and such individual is either—
‘‘(A) an employee of such agency who is sched-
uled to be separated, as described in subsection
(b)(1); or
‘‘(B) an individual who became a former em-
ployee of such agency as a result of a separation, as
described in subsection (b)(2).
‘‘(d)(1) Nothing in this section shall affect any prior-
ity placement program of the Department of Defense
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which is in operation as of the date of the enactment of
this section.
‘‘(2) Nothing in this section shall impair placement
programs within agencies subject to reductions in force re-
sulting from causes other than the Department of Com-
merce Dismantling Act.
‘‘(e) An individual shall cease to be eligible to partici-
pate in a program under this section on the earlier of—
‘‘(1) the conclusion of the 12-month period be-
ginning on the date on which that individual first
became eligible to participate under subsection
(c)(2); or
‘‘(2) the date on which the individual declines
a bona fide offer (or if the individual does not act
on the offer, the last day for accepting such offer)
from the affected agency of a position described in
subsection (c)(1)(B).’’.
(b) TECHNICAL AND CONFORMING AMENDMENTS.—
(1) Title 5, United States Code, is amended by redesignat-
ing the second section which is designated as section 3329
as section 3329a.
(2) The table of sections for chapter 33 of title 5,
United States Code, is amended by striking the item relat-
ing to the second section which is designated as section
3329 and inserting the following:
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‘‘3329a.
Government-wide list of vacant positions.
‘‘3329b.
Priority placement programs for employees affected by a reduction
in force attributable to the Department of Commerce Disman-
tling Act.’’.
SEC. 17111. FUNDING REDUCTIONS FOR TRANSFERRED
FUNCTIONS.
(a) FUNDING REDUCTIONS.—Except as provided in
subsection (b), for each fiscal year that begins on or after
the date of the enactment of this Act, the total amount
obligated or expended by the United States in performing
functions transferred under this title to the Director or
to the Office from the Department of Commerce, or any
of its officers or components, may not exceed 75 percent
of the total amount obligated or expended by the United
States in performing such functions for fiscal year 1995.
(b) EXCEPTIONS.—Subsection (a) shall not apply
to—
(1) functions transferred to the Director under
section 17203 (relating to the Bureau of the Cen-
sus); or
(2) obligations or expenditures incurred as a di-
rect consequence of the termination, transfer, or
other disposition of functions described in subsection
(a) pursuant to this title.
(c) RULE
OF CONSTRUCTION.—This section shall
take precedence over any other provision of law unless
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such provision explicitly refers to this section and makes
an exception to it.
(d) RESPONSIBILITIES OF THE DIRECTOR.—The Di-
rector shall—
(1) ensure compliance with the requirements of
this section; and
(2) include in each report under sections 17106
(a) and (b) a description of actions taken to comply
with such requirements.
SEC. 17112. DEFINITIONS.
For purposes of this subtitle, the following definitions
apply:
(1) ADMINISTRATOR.—The term ‘‘Adminis-
trator’’ means the Administrator of the Office of
Programs Resolution.
(2) DIRECTOR.—The term ‘‘Director’’ means
the Director of the Office of Management and Budg-
et.
(3) OFFICE.—The term ‘‘Office’’ means the Of-
fice of Programs Resolution.
(4) WIND-UP PERIOD.—The term ‘‘wind-up pe-
riod’’ means the period beginning on the date of the
enactment of this Act and ending on the functions
termination date specified in section 17102(c).
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Subtitle B—Disposition of Various
Programs, Functions, and Agen-
cies of Department of Com-
merce
SEC. 17201. ABOLISHMENT OF ECONOMIC DEVELOPMENT
ADMINISTRATION AND TRANSFER OF FUNC-
TIONS.
(a) IN GENERAL.—The Public Works and Economic
Development Act of 1965 (40 U.S.C. 3131 et seq.) is
amended by striking all after the first section and insert-
ing the following:
‘‘SEC. 2. ADMINISTRATOR DEFINED.
‘‘In this Act, the term ‘Administrator’ means the Ad-
ministrator of the Small Business Administration.
‘‘TITLE I—STATEMENT OF
PURPOSE
‘‘SEC. 101. FINDINGS AND DECLARATION.
‘‘(a) FINDINGS.—Congress finds that—
‘‘(1) the maintenance of the national economy
at a high level is vital to the best interests of the
United States, but that some of our regions, coun-
ties, and communities are suffering substantial and
persistent unemployment and underemployment that
cause hardship to many individuals and their fami-
lies, and waste invaluable human resources;
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‘‘(2) to overcome this problem the Federal Gov-
ernment, in cooperation with the States, should help
areas and regions of substantial and persistent un-
employment and underemployment to take effective
steps in planning and financing their public works
and economic development;
‘‘(3) Federal financial assistance, including
grants for public works and development facilities to
communities, industries, enterprises, and individuals
in areas needing development should enable such
areas to help themselves achieve lasting improve-
ment and enhance the domestic prosperity by the es-
tablishment of stable and diversified local economies
and improved local conditions, if such assistance is
preceded by and consistent with sound, long-range
economic planning; and
‘‘(4) under the provisions of this Act, new em-
ployment opportunities should be created by develop-
ing and expanding new and existing public works
and other facilities and resources rather than by
merely transferring jobs from one area of the United
States to another.
‘‘(b) DECLARATION.—Congress declares that, in fur-
therance of maintaining the national economy at a high
level—
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‘‘(1) the assistance authorized by this Act
should be made available to both rural and urban
areas;
‘‘(2) such assistance should be made available
for planning for economic development prior to the
actual occurrences of economic distress in order to
avoid such condition; and
‘‘(3) such assistance should be used for long-
term economic rehabilitation in areas where long-
term economic deterioration has occurred or is tak-
ing place.
‘‘TITLE II—GRANTS FOR PUBLIC
WORKS AND DEVELOPMENT
FACILITIES
‘‘SEC. 201. DIRECT AND SUPPLEMENTARY GRANTS.
‘‘(a) IN GENERAL.—Upon the application of any eli-
gible recipient, the Administrator may—
‘‘(1) make direct grants for the acquisition or
development of land and improvements for public
works, public service, or development facility usage,
and the acquisition, design and engineering, con-
struction, rehabilitation, alteration, expansion, or im-
provement of such facilities, including related ma-
chinery and equipment, within an area described in
section 502(a), if the Administrator finds that—
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‘‘(A) the project for which financial assist-
ance is sought will directly or indirectly—
‘‘(i) tend to improve the opportunities,
in the area where such project is or will be
located, for the successful establishment or
expansion of industrial or commercial
plants or facilities;
‘‘(ii) otherwise assist in the creation
of additional long-term employment oppor-
tunities for such area; or
‘‘(iii) primarily benefit the long-term
unemployed and members of low-income
families;
‘‘(B) the project for which a grant is re-
quested will fulfill a pressing need of the area,
or part thereof, in which it is, or will be, lo-
cated; and
‘‘(C) the area for which a project is to be
undertaken has an approved investment strat-
egy as provided by section 503 and such project
is consistent with such strategy;
‘‘(2) make supplementary grants in order to en-
able the States and other entities within areas de-
scribed in section 502(a) to take maximum advan-
tage of designated Federal grant-in-aid programs (as
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defined in subsection (c)(4)), direct grants-in-aid au-
thorized under this section, and Federal grant-in-aid
programs authorized by the Watershed Protection
and Flood Prevention Act (68 Stat. 666), and the
11 watersheds authorized by the Flood Control Act
of December 22, 1944 (58 Stat. 887), for which
they are eligible but for which, because of their eco-
nomic situation, they cannot supply the required
matching share.
‘‘(b) COST SHARING.—Subject to subsection (c), the
amount of any direct grant under this subsection for any
project shall not exceed 50 percent of the cost of such
project.
‘‘(c) REQUIREMENTS
APPLICABLE
TO
SUPPLE-
MENTARY GRANTS.—
‘‘(1) AMOUNT OF SUPPLEMENTARY GRANTS.—
‘‘(A) IN GENERAL.—Except as provided by
subparagraph (B), the amount of any supple-
mentary grant under this section for any
project shall not exceed the applicable percent-
age established by regulations promulgated by
the Administrator, but in no event shall the
non-Federal share of the aggregate cost of any
such project (including assumptions of debt) be
less than 20 percent of such cost.
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‘‘(B) EXCEPTION.—Notwithstanding sub-
paragraph (A), in the case of an Indian tribe,
a State (or a political subdivision of the State),
or a community development corporation which
the Administrator determines has exhausted its
effective taxing and borrowing capacity, the Ad-
ministrator shall reduce the non-Federal share
below the percentage specified in subparagraph
(A) or shall waive the non-Federal share in the
case of such a grant for a project in an area
described in section 502(a)(4).
‘‘(2) FORM
OF
SUPPLEMENTARY
GRANTS.—
Supplementary grants shall be made by the Admin-
istrator, in accordance with such regulations as the
Administrator may prescribe, by increasing the
amounts of direct grants authorized under this sec-
tion or by the payment of funds appropriated under
this Act to the heads of the departments, agencies,
and instrumentalities of the Federal Government re-
sponsible for the administration of the applicable
Federal programs.
‘‘(3) FEDERAL SHARE LIMITATIONS SPECIFIED
IN OTHER LAWS.—Notwithstanding any requirement
as to the amount or sources of non-Federal funds
that may otherwise be applicable to the Federal pro-
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gram involved, funds provided under this subsection
shall be used for the sole purpose of increasing the
Federal contribution to specific projects in areas de-
scribed in section 502(a) under such programs above
the fixed maximum portion of the cost of such
project otherwise authorized by the applicable law.
‘‘(4) 
DESIGNATED
FEDERAL
GRANT-IN-AID
PROGRAMS DEFINED.—In this subsection, the term
‘designated Federal grant-in-aid programs’ means
such existing or future Federal grant-in-aid pro-
grams assisting in the construction or equipping of
facilities as the Administrator may, in furtherance of
the purposes of this Act, designate as eligible for al-
location of funds under this section.
‘‘(5) CONSIDERATION OF RELATIVE NEED IN
DETERMINING
AMOUNT.—In 
determining 
the
amount of any supplementary grant available to any
project under this section, the Administrator shall
take into consideration the relative needs of the area
and the nature of the projects to be assisted.
‘‘(d) REGULATIONS.—The Administrator shall pre-
scribe rules, regulations, and procedures to carry out this
section which will assure that adequate consideration is
given to the relative needs of eligible areas. In prescribing
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such rules, regulations, and procedures the Administrator
shall consider among other relevant factors—
‘‘(1) the severity of the rates of unemployment
in the eligible areas and the duration of such unem-
ployment; and
‘‘(2) the income levels of families and the extent
of underemployment in eligible areas.
‘‘(e) REVIEW AND COMMENT UPON PROJECTS BY
LOCAL GOVERNMENTAL AUTHORITIES.—The Adminis-
trator shall prescribe regulations which will assure that
appropriate local governmental authorities have been given
a reasonable opportunity to review and comment upon
proposed projects under this section.
‘‘SEC. 202. CONSTRUCTION COST INCREASES.
‘‘In any case where a grant (including a supplemental
grant) has been made by the Administrator under this
title for a project and after such grant has been made
but before completion of the project, the cost of such
project based upon the designs and specifications which
were the basis of the grant has been increased because
of increases in costs, the amount of such grant may be
increased by an amount equal to the percentage increase,
as determined by the Administrator, in such costs, but in
no event shall the percentage of the Federal share of such
project exceed that originally provided for in such grant.
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‘‘SEC. 203. USE OF FUNDS IN PROJECTS CONSTRUCTED
UNDER PROJECTED COST.
‘‘In any case where a grant (including a supplemental
grant) has been made by the Administrator under this
title for a project, and after such grant has been made
but before completion of the project, the cost of such
project based upon the designs and specifications which
were the basis of the grant has decreased because of de-
creases in costs, such underrun funds may be used to im-
prove the project either directly or indirectly as deter-
mined by the Administrator.
‘‘SEC. 204. CHANGED PROJECT CIRCUMSTANCES.
‘‘In any case where a grant (including a supplemental
grant) has been made by the Administrator under this
title for a project, and after such grant has been made
but before completion of the project, the purpose or scope
of such project based upon the designs and specifications
which were the basis of the grant has changed, the Admin-
istrator may approve the use of grant funds on such
changed project if the Administrator determines that such
changed project meets the requirements of this title and
that such changes are necessary to enhance economic de-
velopment in the area.
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‘‘TITLE III—SPECIAL ECONOMIC
DEVELOPMENT AND ADJUST-
MENT ASSISTANCE
‘‘SEC. 301. STATEMENT OF PURPOSE.
‘‘The purpose of this title to provide special economic
development and adjustment assistance programs to help
State and local areas meet special needs arising from ac-
tual or threatened severe unemployment arising from eco-
nomic dislocation (including unemployment arising from
actions of the Federal Government, from defense base clo-
sures and realignments, and from compliance with envi-
ronmental requirements which remove economic activities
from a locality) and economic adjustment problems result-
ing from severe changes in economic conditions (including
long-term economic deterioration), and to encourage coop-
erative intergovernmental action to prevent or solve eco-
nomic adjustment problems. Nothing in this title is in-
tended to replace the efforts of the economic adjustment
program of the Department of Defense.
‘‘SEC. 302. SPECIAL ECONOMIC DEVELOPMENT AND AD-
JUSTMENT ASSISTANCE.
‘‘(a) IN GENERAL.—The Administrator is authorized
to make grants directly to any eligible recipient in an area
which the Administrator determines, in accordance with
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criteria to be established by the Administrator by regula-
tion—
‘‘(1) has experienced, or may reasonably be
foreseen to be about to experience, a special need to
meet an expected rise in unemployment, or other
economic adjustment problems (including those
caused by any action or decision of the Federal Gov-
ernment); or
‘‘(2) has demonstrated long-term economic de-
terioration.
‘‘(b) PURPOSES.—Amounts from grants under sub-
section (a) shall be used by an eligible recipient to carry
out or develop an investment strategy which—
‘‘(1) meets the requirements of section 503; and
‘‘(2) is approved by the Administrator.
‘‘(c) TYPES OF ASSISTANCE.—In carrying out an in-
vestment strategy using amounts from grants under sub-
section (a), an eligible recipient may provide assistance for
any of the following:
‘‘(1) Public facilities.
‘‘(2) Public services.
‘‘(3) Business development.
‘‘(4) Planning.
‘‘(5) Research and technical assistance.
‘‘(6) Administrative expenses.
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‘‘(A) the proposed district is of sufficient
size or population, and contains sufficient re-
sources, to foster economic development on a
scale involving more than a single area de-
scribed in section 502(a);
‘‘(B) the proposed district contains at least
1 area described in section 502(a);
‘‘(C) the proposed district contains 1 or
more areas described in section 502(a) or eco-
nomic development centers identified in an ap-
proved district investment strategy as having
sufficient size and potential to foster the eco-
nomic growth activities necessary to alleviate
the distress of the areas described in section
502(a) within the district; and
‘‘(D) the proposed district has a district
investment strategy which includes adequate
land use and transportation planning and con-
tains a specific program for district cooperation,
self-help, and public investment and is approved
by the State or States affected and by the Ad-
ministrator;
‘‘(2) designate as ‘economic development cen-
ters’, in accordance with such regulations as the Ad-