centers for educating medicare beneficiaries con-
cerning enrollment and the benefits under this part. 
‘‘(3) AUTHORIZATION
OF
APPROPRIATIONS.— 
There 
are 
authorized 
to 
be 
appropriated 
$10,000,000 to carry out paragraph (2) and the 
issuance of the pamphlet described in subsection 
(b)(2)(B). 
‘‘(b) AUTOMATIC ENROLLMENT WITHOUT NEED FOR 
SEPARATE APPLICATION.— 
‘‘(1) IN GENERAL.—The Secretary shall auto-
matically enroll under this part each eligible indi-
vidual described in subsection (a) without the need 
for any separate application. 
‘‘(2) ISSUANCE
OF
MEDICARE
PRESCRIPTION 
DRUG CARD; INFORMATION PAMPHLET.— 
‘‘(A) IN
GENERAL.—The Secretary shall 
provide for the issuance, through the mail to 
each individual enrolled under this section, of a 
medicare prescription drug card evidencing such 
enrollment. Such card shall be designed to indi-
cate whether or not the individual is eligible for 
lowered cost-sharing under section 1860D– 
5(e)(2). 
‘‘(B) INFORMATION
PAMPHLET.— The 
issuance of such card shall be accompanied by
a brief pamphlet that describes the benefits 
available under this part and how to use them. 
‘‘(3) VOLUNTARY PROGRAM.—Nothing in this 
section shall prevent an individual from voluntarily 
electing not to be enrolled under this part. No pen-
alty shall be imposed under this part at any time for 
an individual who voluntarily decides to enroll or not 
enroll in the program under this part. 
‘‘(4) INFORMATION.— 
‘‘(A) IN
GENERAL.—The Secretary shall 
broadly distribute information to individuals 
who satisfy subsection (a) on the benefits pro-
vided under this part. The Secretary shall peri-
odically make available information on the cost 
differentials to enrollees for the use of generic 
drugs and other drugs. 
‘‘(B) TOLL-FREE
HOTLINE.—The Sec-
retary shall maintain a toll-free telephone hot-
line (which may be a hotline already used by 
the Secretary under this title) for purposes of 
providing assistance to beneficiaries in the pro-
gram under this part, including responding to 
questions concerning coverage, enrollment, ben-
efits, grievances and appeals procedures, and 
other aspects of such program.
‘‘(5) ENROLLEE
DEFINED.—For purposes of 
this part, the term ‘enrollee’ means an individual en-
rolled for benefits under this part. 
‘‘(c) COVERAGE PERIOD.— 
‘‘(1) IN GENERAL.—The period during which 
an individual is entitled to benefits under this part 
(in this subsection referred to as the individual’s 
‘coverage period’) shall begin on such a date as the 
Secretary shall establish consistent with the type of 
coverage rules described in subsections (a) and (e) 
of section 1838, except that in no case shall a cov-
erage period begin before July 1, 2006. No pay-
ments may be made under this part with respect to 
the expenses of an individual unless such expenses 
were incurred by such individual during a period 
which, with respect to the individual, is a coverage 
period. 
‘‘(2) TERMINATION.—The Secretary shall pro-
vide for the application of provisions under this sub-
section similar to the provisions in section 1838(b). 
‘‘(d) 
PROVISION
OF
BENEFITS
TO 
MEDICAREADVANTAGE ENROLLEES.—In the case of an 
individual who is enrolled under this part and is enrolled 
in an MA plan under part C, the individual shall be pro-
vided the benefits under this part through such plan and 
not through payment under this part. 
‘‘(e) ELECTION OF PHARMACY CONTRACTOR TO AD-
MINISTER BENEFITS.—The Secretary shall establish a 
process whereby each individual enrolled under this part 
and residing in a region may elect the pharmacy con-
tractor that will administer the benefits under this part 
with respect to the individual. Such process shall permit 
the individual to make an initial election and to change 
such an election on at least an annual basis and under 
such other circumstances as the Secretary shall specify. 
‘‘PROVISION OF, AND ENTITLEMENT TO, BENEFITS; RE-
DUCTION
IN
COINSURANCE
FOR
LOWER
INCOME 
BENEFICIARIES 
‘‘SEC. 1860D–5. (a) BENEFITS.—Subject to the suc-
ceeding provisions of this section, the benefits provided to 
an enrollee by the program under this part shall consist 
of the following: 
‘‘(1) COVERED
OUTPATIENT
PRESCRIPTION 
DRUG
BENEFITS.—Entitlement to have payment 
made on the individual’s behalf for covered out-
patient prescription drugs. 
‘‘(2) LIMITATION ON COST-SHARING FOR PART 
B OUTPATIENT PRESCRIPTION DRUGS.— 
‘‘(A) IN GENERAL.—Once an enrollee has 
incurred aggregate countable cost-sharing (as
defined in subparagraph (B)) equal to the stop- 
loss limit specified in subsection (c)(4) for ex-
penses in a year, entitlement to the elimination 
of cost-sharing otherwise applicable under part 
B for additional expenses incurred in the year 
for outpatient prescription drugs or biologicals 
for which payment is made under part B. 
‘‘(B) 
COUNTABLE
COST-SHARING
DE-
FINED.—For purposes of this part, the term 
‘countable cost-sharing’ means— 
‘‘(i) out-of-pocket expenses for out-
patient prescription drugs with respect to 
which benefits are payable under part B, 
and 
‘‘(ii) cost-sharing under subsections 
(c)(3)(B) and (c)(3)(C)(i). 
‘‘(b) COVERED OUTPATIENT PRESCRIPTION DRUG 
DEFINED.— 
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), for purposes of this part the term ‘cov-
ered outpatient prescription drug’ means any of the 
following products: 
‘‘(A) A drug which may be dispensed only 
upon prescription, and—
‘‘(i) which is approved for safety and 
effectiveness as a prescription drug under 
section 505 of the Federal Food, Drug, 
and Cosmetic Act; 
‘‘(ii)(I) which was commercially used 
or sold in the United States before the 
date of 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 section 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 en-
force 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 Fed-
eral Food, Drug, and Cosmetic Act on a 
proposed order of the Secretary to with-
draw approval of an application for such 
drug under such section because the Sec-
retary has determined that the drug is less 
than effective for all conditions of use pre-
scribed, recommended, or suggested in its 
labeling. 
‘‘(B) A biological product 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 approved under appropriate 
Federal law, and needles, syringes, and dispos-
able pumps for the administration of such insu-
lin. 
‘‘(D) A prescribed drug or biological prod-
uct that would meet the requirements of sub-
paragraph (A) or (B) but that is available over- 
the-counter in addition to being available upon 
prescription, but only if the particular dosage 
form or strength prescribed and required for 
the individual is not available over-the-counter. 
‘‘(E) Smoking cessation agents (as speci-
fied by the Secretary). 
‘‘(2) EXCLUSION.—The term ‘covered out-
patient prescription drug’ does not include— 
‘‘(A) drugs or classes of drugs, or their 
medical uses, which may be excluded from cov-
erage or otherwise restricted under section 
1927(d)(2), other than subparagraph (E) there-
of (relating to smoking cessation agents), as the 
Secretary may specify and does not include 
such other drugs, classes, and uses as the Sec-
retary may specify consistent with the goals of 
providing quality care and containing costs 
under this part;
‘‘(B) except as provided in paragraphs 
(1)(D) and (1)(E), any product which may be 
distributed to individuals without a prescrip-
tion; 
‘‘(C) any product 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; or 
‘‘(D) any product that is covered under 
part B of this title. 
‘‘(c) PAYMENT OF BENEFITS.— 
‘‘(1) COVERED
OUTPATIENT
PRESCRIPTION 
DRUGS.—There shall be paid from the Federal Medi-
care Prescription Drug Trust Fund, in the case of 
each enrollee who incurs expenses for prescription 
drugs with respect to which benefits are payable 
under this part under subsection (a)(1), amounts 
equal to the sum of— 
‘‘(A) the price for which the drug is made 
available under this part (consistent with sec-
tions 1860D–2 and 1860D–3), reduced by any 
applicable cost-sharing under paragraphs (2) 
and (3); and 
‘‘(B) a reasonable dispensing fee.
The price under subparagraph (A) shall in no case 
exceed the retail price for the prescription drug in-
volved. 
‘‘(2) NO DEDUCTIBLE.—There is no deductible 
applicable to payment of benefits under this part. 
‘‘(3) COINSURANCE.— 
‘‘(A) IN GENERAL.—The amount of pay-
ment under paragraph (1) for expenses in-
curred in a year shall be further reduced (sub-
ject to the stop-loss limit under paragraph (4)) 
by coinsurance as provided under this para-
graph. 
‘‘(B) PREFERRED DRUGS.—Subject to sub-
section (e), the coinsurance under this para-
graph in the case of a preferred drug (including 
a drug treated as a preferred drug under para-
graph (5)), is equal to 10 percent of the price 
applicable under paragraph (1)(A) (or such 
lower percentage as may be provided for under 
section 1860D–6(a)(1)(A)(ii)). In this part, the 
term ‘preferred drug’ means, with respect to 
drugs classified within a therapeutic class, those 
drugs which have been designated as a pre-
ferred drug by the Secretary or the pharmacy 
contractor involved with respect to that class
and (in the case of a nongeneric drug) with re-
spect to which a contract has been negotiated 
under this part. 
‘‘(C) NONPREFERRED DRUGS.—Subject to 
subsection (e), the coinsurance under this para-
graph in the case of a nonpreferred drug that 
is not treated as a preferred drug under para-
graph (5) is equal to the sum of— 
‘‘(i) 10 percent of the price for lowest 
price preferred drug that is within the 
same therapeutic class; and 
‘‘(ii) the amount by which— 
‘‘(I) the price at which the non-
preferred drug is made available to 
the enrollee; exceeds 
‘‘(II) the price of such lowest 
price preferred drug. 
‘‘(4) NO COINSURANCE ONCE OUT-OF-POCKET 
EXPENDITURES EQUAL STOP-LOSS LIMIT.—Once an 
enrollee has incurred aggregate countable cost-shar-
ing under paragraph (3) (including cost-sharing 
under part B attributable to outpatient prescription 
drugs or biologicals) equal to the amount specified 
in section 1860D–1(4) (subject to adjustment under 
paragraph (8)) for expenses in a year—
‘‘(A) there shall be no coinsurance under 
paragraph (3) for additional expenses incurred 
in the year involved; and 
‘‘(B) there shall be no coinsurance under 
part B for additional expenses incurred in the 
year involved for outpatient prescription drugs 
and biologicals. 
‘‘(5) APPEALS RIGHTS RELATING TO COVERAGE 
OF NONPREFERRED DRUGS.— 
‘‘(A) PROCEDURES
REGARDING
THE
DE-
TERMINATION OF DRUGS THAT ARE MEDICALLY 
NECESSARY.—Each pharmacy contractor shall 
have in place procedures on a case-by-case basis 
to treat a nonpreferred drug as a preferred 
drug under this part if the preferred drug is de-
termined to be not as effective for the enrollee 
or to have significant adverse effect on the en-
rollee. Such procedures shall require that such 
determinations are based on professional med-
ical judgment, the medical condition of the en-
rollee, and other medical evidence. 
‘‘(B) PROCEDURES
REGARDING
DENIALS 
OF CARE.—Such contractor shall have in place 
procedures to ensure—