SEC. 2. REQUIRING DRUG MANUFACTURERS TO PROVIDE 
DRUG REBATES FOR DRUGS DISPENSED TO 
LOW-INCOME INDIVIDUALS. 
(a) IN GENERAL.—Section 1860D–2 of the Social 
Security Act (42 U.S.C. 1395w–102) is amended— 
(1) in subsection (e)(1), in the matter preceding 
subparagraph (A), by inserting ‘‘and subsection (f)’’ 
after ‘‘this subsection’’; and 
(2) by adding at the end the following new sub-
section: 
‘‘(f) PRESCRIPTION DRUG REBATE AGREEMENT FOR 
REBATE ELIGIBLE INDIVIDUALS.— 
‘‘(1) REQUIREMENT.— 
‘‘(A) IN GENERAL.—For plan years begin-
ning on or after January 1, 2017, in this part, 
the term ‘covered part D drug’ does not include 
any drug or biological product that is manufac-
tured by a manufacturer that has not entered 
into and have in effect a rebate agreement de-
scribed in paragraph (2). 
‘‘(B) 2016 PLAN YEAR REQUIREMENT.— 
Any drug or biological product manufactured by 
a manufacturer that declines to enter into a re-
bate agreement described in paragraph (2) for 
the period beginning on January 1, 2016, and 
ending on December 31, 2016, shall not be in-
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cluded as a ‘covered part D drug’ for the subse-
quent plan year. 
‘‘(2) REBATE
AGREEMENT.—A rebate agree-
ment under this subsection shall require the manu-
facturer to provide to the Secretary a rebate for 
each rebate period (as defined in paragraph (6)(B)) 
ending after December 31, 2015, in the amount 
specified in paragraph (3) for any covered part D 
drug of the manufacturer dispensed after December 
31, 2015, to any rebate eligible individual (as de-
fined in paragraph (6)(A)) for which payment was 
made by a PDP sponsor or MA organization under 
this part for such period, including payments passed 
through the low-income and reinsurance subsidies 
under sections 1860D–14 and 1860D–15(b), respec-
tively. Such rebate shall be paid by the manufac-
turer to the Secretary not later than 30 days after 
the date of receipt of the information described in 
section 1860D–12(b)(7), including as such section is 
applied under section 1857(f)(3), or 30 days after 
the receipt of information under subparagraph (D) 
of paragraph (3), as determined by the Secretary. 
Insofar as not inconsistent with this subsection, the 
Secretary shall establish terms and conditions of 
such agreement relating to compliance, penalties, 
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and program evaluations, investigations, and audits 
that are similar to the terms and conditions for re-
bate agreements under paragraphs (3) and (4) of 
section 1927(b). 
‘‘(3) REBATE FOR REBATE ELIGIBLE MEDICARE 
DRUG PLAN ENROLLEES.— 
‘‘(A) IN GENERAL.—The amount of the re-
bate specified under this paragraph for a manu-
facturer for a rebate period, with respect to 
each dosage form and strength of any covered 
part D drug provided by such manufacturer 
and dispensed to a rebate eligible individual, 
shall be equal to the product of— 
‘‘(i) the total number of units of such 
dosage form and strength of the drug so 
provided and dispensed for which payment 
was made by a PDP sponsor or an MA or-
ganization under this part for the rebate 
period, including payments passed through 
the low-income and reinsurance subsidies 
under sections 1860D–14 and 1860D– 
15(b), respectively; and 
‘‘(ii) the amount (if any) by which— 
‘‘(I) the Medicaid rebate amount 
(as defined in subparagraph (B)) for 
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such form, strength, and period, ex-
ceeds 
‘‘(II) the average Medicare drug 
program rebate eligible rebate amount 
(as defined in subparagraph (C)) for 
such form, strength, and period. 
‘‘(B) MEDICAID
REBATE
AMOUNT.—For 
purposes of this paragraph, the term ‘Medicaid 
rebate amount’ means, with respect to each 
dosage form and strength of a covered part D 
drug provided by the manufacturer for a rebate 
period— 
‘‘(i) in the case of a single source 
drug or an innovator multiple source drug, 
the 
amount 
specified 
in 
paragraph 
(1)(A)(ii)(II) or (2)(C) of section 1927(c) 
plus the amount, if any, specified in sub-
paragraph (A)(ii) of paragraph (2) of such 
section, for such form, strength, and pe-
riod; or 
‘‘(ii) in the case of any other covered 
outpatient drug, the amount specified in 
paragraph (3)(A)(i) of such section for 
such form, strength, and period. 
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‘‘(C) AVERAGE MEDICARE DRUG PROGRAM 
REBATE ELIGIBLE REBATE AMOUNT.—For pur-
poses of this subsection, the term ‘average 
Medicare drug program rebate eligible rebate 
amount’ means, with respect to each dosage 
form and strength of a covered part D drug 
provided by a manufacturer for a rebate period, 
the sum, for all PDP sponsors under part D 
and MA organizations administering an MA– 
PD plan under part C, of— 
‘‘(i) the product, for each such spon-
sor or organization, of— 
‘‘(I) the sum of all rebates, dis-
counts, or other price concessions (not 
taking into account any rebate pro-
vided under paragraph (2) or any dis-
counts under the program under sec-
tion 1860D–14A) for such dosage 
form and strength of the drug dis-
pensed, calculated on a per-unit basis, 
but only to the extent that any such 
rebate, discount, or other price con-
cession applies equally to drugs dis-
pensed to rebate eligible Medicare 
drug plan enrollees and drugs dis-
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pensed to PDP and MA–PD enrollees 
who are not rebate eligible individuals; 
and 
‘‘(II) the number of the units of 
such dosage and strength of the drug 
dispensed during the rebate period to 
rebate eligible individuals enrolled in 
the prescription drug plans adminis-
tered by the PDP sponsor or the MA– 
PD plans administered by the MA or-
ganization; divided by 
‘‘(ii) the total number of units of such 
dosage and strength of the drug dispensed 
during the rebate period to rebate eligible 
individuals enrolled in all prescription drug 
plans administered by PDP sponsors and 
all MA–PD plans administered by MA or-
ganizations. 
‘‘(D) USE OF ESTIMATES.—The Secretary 
may establish a methodology for estimating the 
average Medicare drug program rebate eligible 
rebate amounts for each rebate period based on 
bid and utilization information under this part 
and may use these estimates as the basis for 
determining the rebates under this section. If 
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