‘‘(III) drugs in a class with same 
or similar clinical benefit for which it 
would be appropriate for the Sec-
retary to competitively bid (or nego-
tiate) for placement on the formulary. 
‘‘(C) CONSIDERATION
OF
AHRQ
REC-
OMMENDATIONS.— 
‘‘(i) IN
GENERAL.—The Secretary, 
after taking into consideration the rec-
ommendations under subparagraph (B)(v), 
shall establish a formulary, and formulary 
incentives, to encourage use of covered 
part D drugs that— 
‘‘(I) have a lower cost and pro-
vide a greater clinical benefit than 
other drugs; 
‘‘(II) have a lower cost than 
other drugs with same or similar clin-
ical benefit; and 
‘‘(III) drugs that have the same 
cost but provide greater clinical ben-
efit than other drugs. 
‘‘(ii) FORMULARY
INCENTIVES.—The 
formulary incentives under clause (i) may 
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be in the form of one or more of the fol-
lowing: 
‘‘(I) Tiered copayments. 
‘‘(II) Reference pricing. 
‘‘(III) Prior authorization. 
‘‘(IV) Step therapy. 
‘‘(V) Medication therapy manage-
ment. 
‘‘(VI) Generic drug substitution. 
‘‘(iii) FLEXIBILITY.—In applying such 
formulary incentives the Secretary may de-
cide not to impose any cost-sharing for a 
covered part D drug for which— 
‘‘(I) the elimination of cost shar-
ing would be expected to increase 
compliance with a drug regimen; and 
‘‘(II) compliance would be ex-
pected to produce savings under part 
A or B or both. 
‘‘(3) LIMITATIONS
ON
FORMULARY.—In any 
formulary established under this subsection, the for-
mulary may not be changed during a year, except— 
‘‘(A) to add a generic version of a covered 
part D drug that entered the market; 
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‘‘(B) to remove such a drug for which a 
safety problem is found; and 
‘‘(C) to add a drug that the Secretary 
identifies as a drug which treats a condition for 
which there has not previously been a treatment 
option or for which a clear and significant ben-
efit has been demonstrated over other covered 
part D drugs. 
‘‘(4) ADDING
DRUGS
TO
THE
INITIAL
FOR-
MULARY.— 
‘‘(A) USE OF ADVISORY COMMITTEE.—The 
Secretary shall establish and appoint an advi-
sory committee (in this paragraph referred to 
as the ‘advisory committee’)— 
‘‘(i) to review petitions from drug 
manufacturers, health care provider orga-
nizations, patient groups, and other enti-
ties for inclusion of a drug in, or other 
changes to, such formulary; and 
‘‘(ii) to recommend any changes to the 
formulary established under this sub-
section. 
‘‘(B) COMPOSITION.—The advisory com-
mittee shall be composed of 9 members and 
shall include representatives of physicians, 
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pharmacists, and consumers and others with ex-
pertise in evaluating prescription drugs. The 
Secretary shall select members based on their 
knowledge of pharmaceuticals and the Medicare 
population. Members shall be deemed to be spe-
cial Government employees for purposes of ap-
plying the conflict of interest provisions under 
section 208 of title 18, United States Code, and 
no waiver of such provisions for such a member 
shall be permitted. 
‘‘(C) CONSULTATION.—The advisory com-
mittee shall consult, as necessary, with physi-
cians who are specialists in treating the disease 
for which a drug is being considered. 
‘‘(D) REQUEST FOR STUDIES.—The advi-
sory committee may request the Agency for 
Healthcare Research and Quality or an aca-
demic or research institution to study and make 
a report on a petition described in subpara-
graph (A)(ii) in order to assess— 
‘‘(i) clinical effectiveness; 
‘‘(ii) comparative effectiveness; 
‘‘(iii) safety; and 
‘‘(iv) enhanced compliance with a 
drug regimen. 
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‘‘(E) RECOMMENDATIONS.—The advisory 
committee shall make recommendations to the 
Secretary regarding— 
‘‘(i) whether a covered part D drug is 
found to provide a greater clinical benefit, 
including fewer safety concerns or less risk 
of side-effects, than another drug in the 
same class that is currently included in the 
formulary and should be included in the 
formulary; 
‘‘(ii) whether a covered part D drug is 
found to provide less clinical benefit, in-
cluding greater safety concerns or a great-
er risk of side-effects, than another drug in 
the same class that is currently included in 
the formulary and should not be included 
in the formulary; and 
‘‘(iii) whether a covered part D drug 
has the same or similar clinical benefit to 
a drug in the same class that is currently 
included in the formulary and whether the 
drug should be included in the formulary. 
‘‘(F) LIMITATIONS ON REVIEW OF MANU-
FACTURER
PETITIONS.—The advisory com-
mittee shall not review a petition of a drug 
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manufacturer under subparagraph (A)(ii) with 
respect to a covered part D drug unless the pe-
tition is accompanied by the following: 
‘‘(i) Raw data from clinical trials on 
the safety and effectiveness of the drug. 
‘‘(ii) Any data from clinical trials con-
ducted using active controls on the drug or 
drugs that are the current standard of 
care. 
‘‘(iii) Any available data on compara-
tive effectiveness of the drug. 
‘‘(iv) Any other information the Sec-
retary requires for the advisory committee 
to complete its review. 
‘‘(G) RESPONSE TO RECOMMENDATIONS.— 
The Secretary shall review the recommenda-
tions of the advisory committee and if the Sec-
retary accepts such recommendations the Sec-
retary shall modify the formulary established 
under this subsection accordingly. Nothing in 
this section shall preclude the Secretary from 
adding to the formulary a drug for which the 
Director of the Agency for Healthcare Research 
and Quality or the advisory committee has not 
made a recommendation. 
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