I
106TH CONGRESS
1ST SESSION
H. R. 1796
To amend part B of title XVIII of the Social Security Act to provide
for a chronic disease prescription drug benefit under the Medicare Program.
IN THE HOUSE OF REPRESENTATIVES
MAY 13, 1999
Mr. CARDIN (for himself, Mr. COYNE, Mr. LEVIN, Mr. STARK, and Mrs.
THURMAN) introduced the following bill; which was referred to the Com-
mittee on Commerce, and in addition to the Committee on Ways and
Means, for a period to be subsequently determined by the Speaker, in
each case for consideration of such provisions as fall within the jurisdic-
tion of the committee concerned
A BILL
To amend part B of title XVIII of the Social Security
Act to provide for a chronic disease prescription drug
benefit under the Medicare Program.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Medicare Chronic Dis-
ease Prescription Drug Benefit Act of 1999’’.
SEC. 2. MEDICARE CHRONIC DISEASE PRESCRIPTION
DRUG BENEFIT.
(a) COVERAGE.—
(1) IN GENERAL.—Section 1832(a)(2) of the
Social Security Act (42 U.S.C. 1395k(a)(2)) is
amended—
(A) by striking ‘‘and’’ at the end of sub-
paragraph (I);
(B) by striking the period at the end of
subparagraph (J) and inserting ‘‘; and’’; and
(C) by adding at the end the following new
subparagraph:
‘‘(K) subject to subsection (b), prescription
drugs for treatment of certain chronic condi-
tions (as defined in section 1861(uu)(1)).’’.
(2) PROVISION OF BENEFITS THROUGH EXIST-
ING
NON-MEDICAID
STATE
PRESCRIPTION
DRUG
BENEFIT PROGRAMS.—Section 1832 of such Act (42
U.S.C. 1395k) is further amended—
(1) by redesignating subsection (b) as sub-
section (c); and
(2) by inserting after subsection (a) the
following new subsection:
‘‘(b)(1) Prescription drug benefits shall not be avail-
able under subsection (a)(2)(K) to an individual to the ex-
tent that the individual receives benefits for the prescrip-
tion drugs under a State non-medicaid prescription drug
benefit program if the following requirements are met:
‘‘(A) The program is sponsored or financially
underwritten by a State, but Federal financial as-
sistance under title XIX is not available for expendi-
tures under the program.
‘‘(B) The program is in operation as of May 1,
1999.
‘‘(C) The State elects to receive payment (de-
scribed in paragraph (2)) for providing benefits
under this subsection.
‘‘(D) The deductible and coinsurance applicable
does not exceed the deductible and coinsurance oth-
erwise applicable to the prescription drug benefit de-
scribed in subsection (a)(2)(K).
‘‘(2) The Secretary shall provide for payment to a
State that operates a program that meets the require-
ments of paragraph (1) of an amount (agreed to by the
State) that does not exceed the Secretary’s estimate of the
amount of payment that would have been made under this
part (taking into account the application of a deductible
and coinsurance) for prescription drugs for which coverage
is provided under such program, if this subsection did not
apply.’’.
(b) DEFINITION OF BENEFIT.—
(1) IN GENERAL.—Section 1861 of such Act
(42 U.S.C. 1395x) is amended by adding at the end
the following new subsection:
‘‘Prescription Drugs for Treatment of Certain Chronic
Conditions
‘‘(uu)(1) The term ‘prescription drugs for treatment
of certain chronic conditions’ means, subject to paragraph
(3), prescription drugs described in paragraph (2) that
have been shown to have a demonstrable effect in treating
any of the following conditions (in the case of an individual
who has been diagnosed by a physician as having that con-
dition):
‘‘(A) Hypertension.
‘‘(B) Diabetes.
‘‘(C) Congestive or ischemic heart disease.
‘‘(D) Major depression.
‘‘(E) Rheumatoid arthritis.
‘‘(2) Prescription drugs described in this paragraph
are—
‘‘(A) a prescription drug that meets the require-
ment of clause (i), (ii), or (iii) of section
1927(k)(2)(A);
‘‘(B) a biological product described in section
1927(k)(2)(B); or
‘‘(C) insulin described in section 1927(k)(2)(C).
‘‘(3) The term ‘prescription drugs for treatment of
certain chronic conditions’ does not include any product—
‘‘(A) which may be distributed to individuals
without a prescription;
‘‘(B) when furnished as part of, or as incident
to, a diagnostic service or any other item or service
for which payment may be made under this title;
‘‘(C) that was covered under this title on the
day before the date of enactment of the Medicare
Chronic Disease Prescription Drug Benefit Act of
1999; or
‘‘(D) that is a therapeutically equivalent re-
placement for a product described in subparagraph
(B) or (C), as determined by the Secretary.’’.
(2) PROCESS FOR IDENTIFICATION OF COVERED
DRUGS.—The Secretary of Health and Human Serv-
ices shall implement a process for the timely identi-
fication of prescription drugs for treatment of cer-
tain chronic conditions that should be covered under
section 1861(uu) of the Social Security Act, as
added by paragraph (1). Under such process—
(A) within 60 days after the date of the
enactment of this Act, the Agency for Health
Care Policy and Research shall complete an ini-
tial review of the available data on the preva-
lence of conditions described in such section in
the population of medicare beneficiaries, the
adequacy of data demonstrating the effective-
ness of different prescription drugs in treating
such conditions, and the severity of potential
complications in using such drugs;
(B) within 6 months after the date of the
enactment of this Act, the Secretary shall speci-
fy by rule the initial prescription drugs that
shall be covered under such section;
(C) thereafter the Secretary, taking into
consideration recommendations made under
subsection (e), may by rule change the prescrip-
tion drugs that are so covered; and
(D) the Secretary may, on an emergency
basis, provide for the replacement of a prescrip-
tion drug on the list if another drug (for the
treatment of the same condition) is recalled.
(3) CONSTRUCTION.—Nothing in this section
(or the amendments made by this section) shall be
construed—
(A) as preventing medicare beneficiaries
from purchasing prescription drugs not identi-
fied under paragraph (2), including through
coverage under a group health plan or medicare
supplemental policy; and
(B) the coverage under a medicare supple-
mental policy of prescription drugs for condi-
tions not specified on the list complied under
paragraph (2) shall not be considered to dupli-
cate benefits under title XVIII of such Act, for
purposes of applying section 1882(d)(3) of such
Act (42 U.S.C. 1395ss(d)(3)).
(c) SELECTION OF ENTITY TO PROVIDE DRUG BEN-
EFIT; PAYMENT.—Part B of title XVIII of the Social Se-
curity Act is amended by adding at the end the following
new section:
‘‘SEC. 1849. SELECTION OF ENTITIES TO PROVIDE OUT-
PATIENT DRUG BENEFIT; PAYMENT.
‘‘(a) ESTABLISHMENT OF BIDDING PROCESS.—
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish procedures under which the Secretary accepts
bids from eligible entities and awards contracts to
such entities in order to provide covered outpatient
drugs to eligible beneficiaries in an area. Such con-
tracts may be awarded based on shared risk, capita-
tion, or performance.
‘‘(2) AREA.—
‘‘(A) REGIONAL BASIS.—The contract en-
tered into between the Secretary and an eligible
entity shall require the eligible entity to provide
covered outpatient drugs on a regional basis.
‘‘(B) DETERMINATION.—In determining
coverage areas under this section, the Secretary
shall take into account the number of eligible
beneficiaries in an area in order to encourage
participation by eligible entities.
‘‘(3) SUBMISSION OF BIDS.—Each eligible enti-
ty desiring to provide covered outpatient drugs
under this section shall submit a bid to the Sec-
retary at such time, in such manner, and accom-
panied by such information as the Secretary may
reasonably require. Such bids shall include the
amount the eligible entity will charge enrollees under
subsection (e)(2) for covered outpatient drugs under
the contract.
‘‘(4) ACCESS.—The Secretary shall ensure
that—
‘‘(A) an eligible entity complies with the
access requirements described in subsection
(f)(5);
‘‘(B) 
if 
an 
eligible 
entity 
employs
formularies pursuant to subsection (f)(6)(A),
such entity complies with the requirements of
subsection (f)(6)(B);
‘‘(C) an eligible entity makes available to
each beneficiary covered under the contract at
least one drug in each therapeutic class from
those approved by the Secretary for the treat-
ment of certain chronic conditions and at least
one generic equivalent for each drug, if avail-
able; and
‘‘(D) an eligible entity makes available to
each such beneficiary alternative prescription
drugs for the treatment of certain chronic con-
ditions when a physician certifies that, because
of a drug allergy or other documented medical
condition, that none of the drugs approved by
the Secretary for the treatment of these condi-
tions can adequately treat the patient and that
these drugs are medically necessary.
‘‘(5) DURATION
OF
CONTRACTS.—Each con-
tract under this section shall be for a term of at
least 2 years but not more than 5 years, as deter-
mined by the Secretary.
‘‘(b) ENROLLMENT.—
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish a process through which an eligible beneficiary
shall make an election to enroll with any eligible en-
tity that has been awarded a contract under this sec-
tion and serves the geographic area in which the
beneficiary resides. In establishing such process, the
Secretary shall use rules similar to the rules for en-
rollment and disenrollment with a Medicare+Choice
plan under section 1851.
‘‘(2) REQUIREMENT OF ENROLLMENT.—An eli-
gible beneficiary not enrolled in a Medicare+Choice
plan under part C must enroll with an eligible entity
under this section in order to be eligible to receive
covered outpatient drugs under this title.
‘‘(3) ENROLLMENT IN ABSENCE OF ELECTION
BY ELIGIBLE BENEFICIARY.—In the case of an eligi-
ble beneficiary that fails to make an election pursu-
ant to paragraph (1), the Secretary shall provide,
pursuant to procedures developed by the Secretary,
for the enrollment of such beneficiary with an eligi-
ble entity that has a contract under this section that
covers the area in which such beneficiary resides.
‘‘(4) AREAS NOT COVERED BY CONTRACTS.—
The Secretary shall develop procedures for the provi-
sion of covered outpatient drugs under this title to
eligible beneficiaries that reside in an area that is
not covered by any contract under this section.
‘‘(5) BENEFICIARIES RESIDING IN DIFFERENT
LOCATIONS.—The Secretary shall develop procedures
to ensure that an eligible beneficiary that resides in
different regions in a year is provided benefits under
this section throughout the entire year.
‘‘(c) 
PROVIDING
INFORMATION
TO
BENE-
FICIARIES.—The Secretary shall provide for activities
under this section to broadly disseminate information to
medicare beneficiaries on the coverage provided under this
section. Such activities shall be similar to the activities
performed by the Secretary under section 1851(d).
‘‘(d) PAYMENTS TO ELIGIBLE ENTITIES.—The Sec-
retary shall establish procedures for making payments to
an eligible entity under a contract.
‘‘(e) COST-SHARING.—
‘‘(1) ANNUAL
DEDUCTIBLE.—Benefits under
this section shall not begin in a year until the eligi-
ble beneficiary has met a $250 deductible.
‘‘(2) COPAYMENT.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), the eligible beneficiary shall be re-
sponsible for making payments in an amount
not greater than 20 percent of the cost (as stat-
ed in the contract) of any covered outpatient
drug that is provided to the beneficiary. Pursu-
ant to subsection (a)(4)(B), an eligible entity
may reduce the payment amount that an eligi-
ble beneficiary is responsible for making to the
entity.
‘‘(B) NO
COPAYMENT
FOR
GENERICS.—
The copayment amount under subparagraph
(A) shall be zero in the case of a covered out-
patient drug that is a drug approved under sec-
tion 505(j) of the Federal Food Drug and Cos-
metic Act.
‘‘(f) CONDITIONS FOR AWARDING CONTRACT.—The
Secretary shall not award a contract to an eligible entity
under subsection (a) unless the Secretary finds that the
eligible entity is in compliance with such terms and condi-
tions as the Secretary shall specify, including the fol-
lowing:
‘‘(1) QUALITY AND FINANCIAL STANDARDS.—
The eligible entity meets quality and financial stand-
ards specified by the Secretary.
‘‘(2) INFORMATION.—The eligible entity pro-
vides the Secretary with information that the Sec-
retary determines is necessary in order to carry out
the bidding process under this section, including
data needed to implement subsection (a)(6) and data
regarding utilization, expenditures, and costs.
‘‘(3) EDUCATION.—The eligible entity estab-
lishes educational programs that meet the criteria
established by the Secretary pursuant to subsection
(g)(1).
‘‘(4) PROCEDURES TO ENSURE PROPER UTILI-
ZATION
AND
TO
AVOID
ADVERSE
DRUG
REAC-
TIONS.—The eligible entity has in place procedures
to ensure the—
‘‘(A) appropriate utilization by eligible
beneficiaries of the benefits to be provided
under the contract; and
‘‘(B) avoidance of adverse drug reactions
among eligible beneficiaries enrolled with the
entity.
‘‘(5) ACCESS.—The eligible entity ensures that
the covered outpatient drugs are accessible and con-
venient to eligible beneficiaries covered under the
contract, including by offering the services in the fol-
lowing manner:
‘‘(A) SERVICES DURING EMERGENCIES.—
The offering of services 24 hours a day and 7
days a week for emergencies.
‘‘(B) CONTRACTS
WITH
RETAIL
PHAR-
MACIES.—The offering of services—
‘‘(i) at a sufficient (as determined by
the Secretary) number of retail phar-
macies; and
‘‘(ii) to the extent feasible, at retail
pharmacies located throughout the eligible
entity’s service area.
‘‘(6) RULES RELATING TO PROVISION OF BENE-
FITS.—
‘‘(A) PROVISION
OF
BENEFITS.—In pro-
viding benefits under a contract under this sec-
tion, an eligible entity may—
‘‘(i) employ mechanisms to provide
benefits economically, including the use
of—
‘‘(I) formularies (pursuant to
subparagraph (B));
‘‘(II) alternative methods of dis-
tribution; and
‘‘(III) generic drug substitution;
and
‘‘(ii) use incentives to encourage eligi-
ble beneficiaries to select less costly means
of receiving drugs.
‘‘(B) FORMULARIES.—If an eligible entity
uses a formulary to contain costs under this
Act—
‘‘(i) the eligible entity shall—
‘‘(I) ensure participation of prac-
ticing physicians and pharmacists in
the development of the formulary;
‘‘(II) include in the formulary at
least 1 drug from each therapeutic
class from the drugs identified under
section 
2(b)(2) 
of 
the 
Medicare
Chronic Disease Prescription Drug
Benefit Act of 1999 and provide at
least 1 generic equivalent, if available;
‘‘(III) provide for coverage of
otherwise 
covered 
non-formulary
drugs when recommended by pre-
scribing providers; and
‘‘(IV) disclose to current and
prospective beneficiaries and to pro-
viders in the service area the nature
of the formulary restrictions, includ-
ing information regarding the drugs
included in the formulary, copayment
amounts, and any difference in the
cost-sharing for different types of
drugs; but
‘‘(ii) nothing shall preclude an entity
from—
‘‘(I) requiring higher cost-sharing
for drugs provided under clause
(i)(III), subject to limits established
in subsection (e)(2)(A), except that an
entity shall provide for coverage of a
nonformulary drug on the same basis
as a drug within the formulary if such
nonformulary drug is determined by
the prescribing provider to be medi-
cally indicated;
‘‘(II) educating prescribing pro-
viders, pharmacists, and beneficiaries
about medical and cost benefits of for-
mulary products; and
‘‘(III) requesting prescribing pro-
viders to consider a formulary product
prior to dispensing of a nonformulary
drug, as long as such request does not
unduly delay the provision of the
drug.
‘‘(7) PROCEDURES
TO
COMPENSATE
PHAR-
MACISTS FOR COUNSELING.—The eligible entity shall
compensate pharmacists for providing the counseling
described in subsection (g)(2)(B).
‘‘(8) CLINICAL OUTCOMES.—
‘‘(A) REQUIREMENT.—The eligible entity
shall comply with clinical quality standards as
determined by the Secretary.
‘‘(B) DEVELOPMENT
OF
STANDARDS.—
The Secretary, in consultation with appropriate
medical specialty societies, shall develop clinical
quality standards that are applicable to eligible
entities. Such standards shall be based on cur-
rent standards of care.
‘‘(9) PROCEDURES
REGARDING
DENIALS
OF
CARE.—The eligible entity has in place procedures to
ensure—
‘‘(A) the timely review and resolution of
denials of care and complaints (including those
regarding the use of formularies under para-
graph (6)) by enrollees, or providers, phar-
macists, and other individuals acting on behalf
of such individual (with the individual’s con-
sent) in accordance with requirements (as es-
tablished by the Secretary) that are comparable
to such requirements for Medicare+Choice or-
ganizations under part C;
‘‘(B) that beneficiaries are provided with
information regarding the appeals procedures
under this section at the time of enrollment;
and
‘‘(C) that providers receive information on
the entity’s procedures for coverage of otherwise
covered non-formulary and alternative prescrip-
tion drugs for treatment of certain chronic con-
ditions.
‘‘(g) EDUCATIONAL REQUIREMENTS TO ENSURE AP-
PROPRIATE UTILIZATION.—
‘‘(1) 
ESTABLISHMENT
OF
PROGRAM
CRI-
TERIA.—The Secretary shall establish a model for
comprehensive educational programs in order to as-
sure the appropriate—
‘‘(A) prescribing and dispensing of covered
outpatient drugs under this section; and
‘‘(B) use of such drugs by eligible bene-
ficiaries.
‘‘(2) ELEMENTS OF MODEL.—The model estab-
lished under paragraph (1) shall include the fol-
lowing elements:
‘‘(A) On-line prospective review available
24 hours a day and 7 days a week in order to
evaluate each prescription for drug therapy
problems due to duplication, interaction, or in-
correct dosage or duration of therapy.
‘‘(B) Consistent with State law, guidelines
for counseling eligible beneficiaries enrolled
under a contract under this section regarding—
‘‘(i) the proper use of prescribed cov-
ered outpatient drugs; and
‘‘(ii) interactions and contra-indica-
tions.
‘‘(C) Methods to identify and educate pro-
viders, pharmacists, and eligible beneficiaries
regarding—
‘‘(i) instances or patterns concerning
the unnecessary or inappropriate pre-
scribing or dispensing of covered out-
patient drugs;
‘‘(ii) instances or patterns of sub-
standard care;
‘‘(iii) potential adverse reactions to
covered outpatient drugs;
‘‘(iv) inappropriate use of antibiotics;
‘‘(v) appropriate use of generic prod-
ucts; and
‘‘(vi) the importance of using covered
outpatient drugs in accordance with the in-
struction of prescribing providers.
‘‘(h) PROTECTION OF PATIENT CONFIDENTIALITY.—
Insofar as an eligible organization maintains individually
identifiable medical records or other health information re-
garding enrollees under a contract entered into under this
section, the organization shall—
‘‘(1) safeguard the privacy of any individually
identifiable enrollee information;
‘‘(2) maintain such records and information in
a manner that is accurate and timely; and
‘‘(3) assure timely access of such enrollees to
such records and information.
‘‘(i) DEFINITIONS.—In this section:
‘‘(1) COVERED OUTPATIENT DRUG.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘covered outpatient
drug’ means prescription drugs for treatment of
certain chronic conditions (as defined in section
1861(uu)(1)).
‘‘(B) EXCLUSION.—The term ‘covered out-
patient drug’ does not include any product—
‘‘(i) which may be distributed to indi-
viduals without a prescription;
‘‘(ii) when furnished as part of, or as
incident to, a diagnostic service or any
other item or service for which payment
may be made under this title;
‘‘(iii) that was covered under this title
on the day before the date of enactment of
the Medicare Chronic Disease Prescription
Drug Benefit Act of 1999; or
‘‘(iv) that is a therapeutically equiva-
lent replacement for a product described in
clause (ii) or (iii), as determined by the
Secretary.
‘‘(2) ELIGIBLE BENEFICIARY.—The term ‘eligi-
ble beneficiary’ means an individual that is enrolled
under part B of this title.
‘‘(3) ELIGIBLE ENTITY.—The term ‘eligible en-
tity’ means any entity that the Secretary determines
to be appropriate, including—
‘‘(A) pharmaceutical benefit management
companies;
‘‘(B) wholesale and retail pharmacist deliv-
ery systems;
‘‘(C) insurers;
‘‘(D) other entities; or
‘‘(E) any combination of the entities de-
scribed in subparagraphs (A) through (D).’’.
(2) NO APPLICATION TO REGULAR PART B DE-
DUCTIBLE.—Section 1833(b) of such Act (42 U.S.C.
1395l(b)) is amended—
(A) in paragraph (1), by inserting ‘‘or for
prescription drugs for treatment of certain
chronic 
conditions’’ 
after 
‘‘section
1861(s)(10)(A)’’; and
(B) in paragraph (2), by inserting ‘‘and
shall not apply with respect to prescription
drugs for treatment of certain chronic condi-
tions’ after ‘‘section 1861(kk)))’’.
(3) PAYMENT CONFORMING AMENDMENT.—Sec-
tion 1832(a) of such Act (42 U.S.C. 1395k(a)) is
amended—
(A) in paragraph (2)(A), by striking ‘‘and
(I)’’ and inserting ‘‘(I), and (K)’’;
(B) by striking ‘‘and’’ at the end of para-
graph (8);
(C) by striking the period at the end of
subparagraph (9) and inserting ‘‘; and’’; and
(D) by adding at the end the following new
paragraph:
‘‘(10) with respect to prescription drugs for
treatment of certain chronic conditions, the amounts
provided under section 1849;’’.
(d) ANALYSIS OF BENEFIT.—
(1) IN GENERAL.—The Secretary of Health and
Human Services shall enter into an arrangement
with the Institute of Medicine of the National Acad-
emy of Sciences under which the Institute on an on-
going basis collects and analyzes data, and submits
annual reports to the Secretary and Congress, on—
(A) the effectiveness of the benefits pro-
vided under the amendments made by this sec-
tion in reducing demand for acute medical serv-
ices;
(B) the annual cost of the benefits and the
annual savings in acute medical services; and
(C) additional diagnoses, and additional
prescription drugs, for which such benefits
should be provided, using the criteria described
in section 2(b)(2)(A) of this Act.
(2) CONSULTATION.—In carrying out para-
graph (1)(C), the Secretary shall establish a process
through which health care providers, advocacy
groups, and other interested parties may submit evi-
dence to the Institute of Medicine and the Institute
shall consider such evidence.
(3) CONSIDERATIONS.—Analyses under this
subsection shall consider both the short term and
long term benefits, and costs to the medicare pro-
gram of any change in benefits.
(4) SECRETARIAL
RECOMMENDATIONS.—The
Secretary, taking into account the annual reports
submitted under this subsection, may submit to Con-
gress recommendations regarding changes in the
chronic conditions for which prescription drug cov-
erage is available under the medicare program.
(5) HEARINGS.—The Committee on Ways and
Means and the Committee on Commerce of the
House of Representatives and the Committee on Fi-
nance of the Senate shall conduct hearings to con-
sider the reports and recommendations submitted
under this subsection before making any change in
covered prescription drug benefits under the medi-
care program.
(6) FUNDING.—From funds appropriated to the
Department of Health and Human Services for each
fiscal year (beginning with fiscal year 2000), the
Secretary shall provide for such funding as the Sec-
retary determines necessary for the conduct of the
analyses conducted under this subsection.
(e) EFFECTIVE DATE.—Benefits shall first be made
available under the amendments made by this section for
prescription drugs furnished on or after January 1, 2001.
SEC. 3. MEDICAID COVERAGE OF MEDICARE PRESCRIP-
TION DRUG COST SHARING FOR SLMBS.
Section 1902(a)(10)(E)(iii) of the Social Security Act
(42 U.S.C. 1396a(a)(10)(E)(iii)) by inserting ‘‘and medi-
care cost-sharing described in subparagraphs (B) and (C)
of section 1905(p)(3) with respect to the deductible and
copayment described in section 1849(e)’’ after ‘‘section
1905(p)(4),’’.
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