H. R. 1—377
(4) Health care costs for even just 1 member of a family
can be catastrophic, resulting in medical bills potentially
harming the economic stability of the entire family.
(5) Common life occurrences can jeopardize the ability of
a family to retain private coverage or jeopardize access to
public coverage.
(6) Innovations in health care access, coverage, and quality
of care, including the use of technology, have often come from
States, local communities, and private sector organizations,
but more creative policies could tap this potential.
(7) Despite our Nation’s wealth, the health care system
does not provide coverage to all Americans who want it.
(b) PURPOSES.—The purposes of this section are—
(1) to provide for a nationwide public debate about
improving the health care system to provide every American
with the ability to obtain quality, affordable health care cov-
erage; and
(2) to provide for a vote by Congress on the recommenda-
tions that result from the debate.
(c) ESTABLISHMENT.—The Secretary, acting through the Agency
for Healthcare Research and Quality, shall establish an entity to
be known as the Citizens’ Health Care Working Group (referred
to in this section as the ‘‘Working Group’’).
(d) MEMBERSHIP.—
(1) NUMBER AND APPOINTMENT.—The Working Group shall
be composed of 15 members. One member shall be the Sec-
retary. The Comptroller General of the United States shall
appoint 14 members.
(2) QUALIFICATIONS.—
(A) IN
GENERAL.—The membership of the Working
Group shall include—
(i) consumers of health services that represent
those individuals who have not had insurance within
2 years of appointment, that have had chronic illnesses,
including mental illness, are disabled, and those who
receive insurance coverage through medicare and med-
icaid; and
(ii) individuals with expertise in financing and
paying for benefits and access to care, business and
labor perspectives, and providers of health care.
The membership shall reflect a broad geographic represen-
tation and a balance between urban and rural representa-
tives.
(B) PROHIBITED
APPOINTMENTS.—Members of the
Working Group shall not include Members of Congress
or other elected government officials (Federal, State, or
local). Individuals appointed to the Working Group shall
not be paid employees or representatives of associations
or advocacy organizations involved in the health care
system.
(e) PERIOD OF APPOINTMENT.—Members of the Working Group
shall be appointed for a life of the Working Group. Any vacancies
shall not affect the power and duties of the Working Group but
shall be filled in the same manner as the original appointment.
(f) DESIGNATION OF THE CHAIRPERSON.—Not later than 15 days
after the date on which all members of the Working Group have
H. R. 1—378
been appointed under subsection (d)(1), the Comptroller General
shall designate the chairperson of the Working Group.
(g) SUBCOMMITTEES.—The Working Group may establish sub-
committees if doing so increases the efficiency of the Working
Group in completing its tasks.
(h) DUTIES.—
(1) HEARINGS.—Not later than 90 days after the date of
the designation of the chairperson under subsection (f), the
Working Group shall hold hearings to examine—
(A) the capacity of the public and private health care
systems to expand coverage options;
(B) the cost of health care and the effectiveness of
care provided at all stages of disease;
(C) innovative State strategies used to expand health
care coverage and lower health care costs;
(D) local community solutions to accessing health care
coverage;
(E) efforts to enroll individuals currently eligible for
public or private health care coverage;
(F) the role of evidence-based medical practices that
can be documented as restoring, maintaining, or improving
a patient’s health, and the use of technology in supporting
providers in improving quality of care and lowering costs;
and
(G) strategies to assist purchasers of health care,
including consumers, to become more aware of the impact
of costs, and to lower the costs of health care.
(2) ADDITIONAL HEARINGS.—The Working Group may hold
additional hearings on subjects other than those listed in para-
graph (1) so long as such hearings are determined to be nec-
essary by the Working Group in carrying out the purposes
of this section. Such additional hearings do not have to be
completed within the time period specified in paragraph (1)
but shall not delay the other activities of the Working Group
under this section.
(3) THE HEALTH REPORT TO THE AMERICAN PEOPLE.—Not
later than 90 days after the hearings described in paragraphs
(1) and (2) are completed, the Working Group shall prepare
and make available to health care consumers through the Inter-
net and other appropriate public channels, a report to be enti-
tled, ‘‘The Health Report to the American People’’. Such report
shall be understandable to the general public and include—
(A) a summary of—
(i) health care and related services that may be
used by individuals throughout their life span;
(ii) the cost of health care services and their med-
ical effectiveness in providing better quality of care
for different age groups;
(iii) the source of coverage and payment, including
reimbursement, for health care services;
(iv) the reasons people are uninsured or under-
insured and the cost to taxpayers, purchasers of health
services, and communities when Americans are unin-
sured or underinsured;
(v) the impact on health care outcomes and costs
when individuals are treated in all stages of disease;
(vi) health care cost containment strategies; and
H. R. 1—379
(vii) information on health care needs that need
to be addressed;
(B) examples of community strategies to provide health
care coverage or access;
(C) information on geographic-specific issues relating
to health care;
(D) information concerning the cost of care in different
settings, including institutional-based care and home and
community-based care;
(E) a summary of ways to finance health care coverage;
and
(F) the role of technology in providing future health
care including ways to support the information needs of
patients and providers.
(4) COMMUNITY MEETINGS.—
(A) IN GENERAL.—Not later than 1 year after the date
on which all the members of the Working Group have
been appointed under subsection (d)(1) and appropriations
are first made available to carry out this section, the
Working Group shall initiate health care community
meetings throughout the United States (in this paragraph
referred to as ‘‘community meetings’’). Such community
meetings may be geographically or regionally based and
shall be completed within 180 days after the initiation
of the first meeting.
(B) NUMBER OF MEETINGS.—The Working Group shall
hold a sufficient number of community meetings in order
to receive information that reflects—
(i) the geographic differences throughout the
United States;
(ii) diverse populations; and
(iii) a balance among urban and rural populations.
(C) MEETING REQUIREMENTS.—
(i) FACILITATOR.—A State health officer may be
the facilitator at the community meetings.
(ii) ATTENDANCE.—At least 1 member of the
Working Group shall attend and serve as chair of
each community meeting. Other members may partici-
pate through interactive technology.
(iii) TOPICS.—The community meetings shall, at
a minimum, address the following questions:
(I) What health care benefits and services
should be provided?
(II) How does the American public want health
care delivered?
(III) How should health care coverage be
financed?
(IV) What trade-offs are the American public
willing to make in either benefits or financing
to ensure access to affordable, high quality health
care coverage and services?
(iv) 
INTERACTIVE
TECHNOLOGY.—The 
Working
Group may encourage public participation in commu-
nity meetings through interactive technology and other
means as determined appropriate by the Working
Group.
H. R. 1—380
(D) INTERIM REQUIREMENTS.—Not later than 180 days
after the date of completion of the community meetings,
the Working Group shall prepare and make available to
the public through the Internet and other appropriate
public channels, an interim set of recommendations on
health care coverage and ways to improve and strengthen
the health care system based on the information and pref-
erences expressed at the community meetings. There shall
be a 90-day public comment period on such recommenda-
tions.
(i) RECOMMENDATIONS.—Not later than 120 days after the
expiration of the public comment period described in subsection
(h)(4)(D), the Working Group shall submit to Congress and the
President a final set of recommendations.
(j) ADMINISTRATION.—
(1) EXECUTIVE
DIRECTOR.—There shall be an Executive
Director of the Working Group who shall be appointed by
the chairperson of the Working Group in consultation with
the members of the Working Group.
(2) COMPENSATION.—While serving on the business of the
Working Group (including travel time), a member of the
Working Group shall be entitled to compensation at the per
diem equivalent of the rate provided for level IV of the Execu-
tive Schedule under section 5315 of title 5, United States Code,
and while so serving away from home and the member’s regular
place of business, a member may be allowed travel expenses,
as authorized by the chairperson of the Working Group. For
purposes of pay and employment benefits, rights, and privileges,
all personnel of the Working Group shall be treated as if
they were employees of the Senate.
(3) INFORMATION FROM FEDERAL AGENCIES.—The Working
Group may secure directly from any Federal department or
agency such information as the Working Group considers nec-
essary to carry out this section. Upon request of the Working
Group, the head of such department or agency shall furnish
such information.
(4) POSTAL SERVICES.—The Working Group may use the
United States mails in the same manner and under the same
conditions as other departments and agencies of the Federal
Government.
(k) DETAIL.—Not more than 10 Federal Government employees
employed by the Department of Labor and 10 Federal Government
employees employed by the Department of Health and Human
Services may be detailed to the Working Group under this section
without further reimbursement. Any detail of an employee shall
be without interruption or loss of civil service status or privilege.
(l) TEMPORARY AND INTERMITTENT SERVICES.—The chairperson
of the Working Group may procure temporary and intermittent
services under section 3109(b) of title 5, United States Code, at
rates for individuals which do not exceed the daily equivalent
of the annual rate of basic pay prescribed for level V of the Executive
Schedule under section 5316 of such title.
(m) ANNUAL REPORT.—Not later than 1 year after the date
of enactment of this Act, and annually thereafter during the exist-
ence of the Working Group, the Working Group shall report to
Congress and make public a detailed description of the expenditures
H. R. 1—381
of the Working Group used to carry out its duties under this
section.
(n) SUNSET OF WORKING GROUP.—The Working Group shall
terminate on the date that is 2 years after the date on which
all the members of the Working Group have been appointed under
subsection (d)(1) and appropriations are first made available to
carry out this section.
(o) ADMINISTRATION REVIEW AND COMMENTS.—Not later than
45 days after receiving the final recommendations of the Working
Group under subsection (i), the President shall submit a report
to Congress which shall contain—
(1) additional views and comments on such recommenda-
tions; and
(2) recommendations for such legislation and administra-
tive actions as the President considers appropriate.
(p) REQUIRED CONGRESSIONAL ACTION.—Not later than 45 days
after receiving the report submitted by the President under sub-
section (o), each committee of jurisdiction of Congress, the Com-
mittee on Finance of the Senate, the Committee on Health, Edu-
cation, Labor, and Pensions of the Senate, the Committee on Ways
and Means of the House of Representatives, the Committee on
Energy and Commerce of the House of Representatives, Committee
on Education and the Workforce of the House of Representatives,
shall hold at least 1 hearing on such report and on the final
recommendations of the Working Group submitted under subsection
(i).
(q) AUTHORIZATION OF APPROPRIATIONS.—
(1) IN GENERAL.—There are authorized to be appropriated
to carry out this section, other than subsection (h)(3), $3,000,000
for each of fiscal years 2005 and 2006.
(2) HEALTH REPORT TO THE AMERICAN PEOPLE.—There are
authorized to be appropriated for the preparation and dissemi-
nation of the Health Report to the American People described
in subsection (h)(3), such sums as may be necessary for the
fiscal year in which the report is required to be submitted.
SEC. 1015. FUNDING START-UP ADMINISTRATIVE COSTS FOR MEDI-
CARE REFORM.
(a) IN GENERAL.—There are appropriated to carry out this
Act (including the amendments made by this Act), to be transferred
from the Federal Hospital Insurance Trust Fund and the Federal
Supplementary Medical Insurance Trust Fund—
(1) not to exceed $1,000,000,000 for the Centers for Medi-
care & Medicaid Services; and
(2) not to exceed $500,000,000 for the Social Security
Administration.
(b) AVAILABILITY.—Amounts provided under subsection (a) shall
remain available until September 30, 2005.
(c) APPLICATION.—From amounts provided under subsection
(a)(2), the Social Security Administration may reimburse the
Internal Revenue Service for expenses in carrying out this Act
(and the amendments made by this Act).
(d) TRANSFER.—The President may transfer amounts provided
under subsection (a) between the Centers for Medicare & Medicaid
Services and the Social Security Administration. Notice of such
transfers shall be transmitted within 15 days to the authorizing
committees of the House of Representatives and of the Senate.
H. R. 1—382
SEC. 1016. HEALTH CARE INFRASTRUCTURE IMPROVEMENT PROGRAM.
Title XVIII is amended by adding at the end the following
new section:
‘‘HEALTH CARE INFRASTRUCTURE IMPROVEMENT PROGRAM
‘‘SEC. 1897. (a) ESTABLISHMENT.—The Secretary shall establish
a loan program that provides loans to qualifying hospitals for pay-
ment of the capital costs of projects described in subsection (d).
‘‘(b) APPLICATION.—No loan may be provided under this section
to a qualifying hospital except pursuant to an application that
is submitted and approved in a time, manner, and form specified
by the Secretary. A loan under this section shall be on such terms
and conditions and meet such requirements as the Secretary deter-
mines appropriate.
‘‘(c) SELECTION CRITERIA.—
‘‘(1) IN GENERAL.—The Secretary shall establish criteria
for selecting among qualifying hospitals that apply for a loan
under this section. Such criteria shall consider the extent to
which the project for which loan is sought is nationally or
regionally significant, in terms of expanding or improving the
health care infrastructure of the United States or the region
or in terms of the medical benefit that the project will have.
‘‘(2) QUALIFYING HOSPITAL DEFINED.—For purposes of this
section, the term ‘qualifying hospital’ means a hospital that—
‘‘(A) is engaged in research in the causes, prevention,
and treatment of cancer; and
‘‘(B) is designated as a cancer center for the National
Cancer Institute or is designated by the State as the official
cancer institute of the State.
‘‘(d) PROJECTS.—A project described in this subsection is a
project of a qualifying hospital that is designed to improve the
health care infrastructure of the hospital, including construction,
renovation, or other capital improvements.
‘‘(e) STATE AND LOCAL PERMITS.—The provision of a loan under
this section with respect to a project shall not—
‘‘(1) relieve any recipient of the loan of any obligation
to obtain any required State or local permit or approval with
respect to the project;
‘‘(2) limit the right of any unit of State or local government
to approve or regulate any rate of return on private equity
invested in the project; or
‘‘(3) otherwise supersede any State or local law (including
any regulation) applicable to the construction or operation of
the project.
‘‘(f) FORGIVENESS OF INDEBTEDNESS.—The Secretary may for-
give a loan provided to a qualifying hospital under this section
under terms and conditions that are analogous to the loan forgive-
ness provision for student loans under part D of title IV of the
Higher Education Act of 1965 (20 U.S.C. 1087a et seq.), except
that the Secretary shall condition such forgiveness on the establish-
ment by the hospital of—
‘‘(A) an outreach program for cancer prevention, early
diagnosis, and treatment that provides services to a
substantial majority of the residents of a State or region,
including residents of rural areas;
H. R. 1—383
‘‘(B) an outreach program for cancer prevention, early
diagnosis, and treatment that provides services to multiple
Indian tribes; and
‘‘(C)(i) unique research resources (such as population
databases); or
‘‘(ii) an affiliation with an entity that has unique
research resources.
‘‘(g) FUNDING.—
‘‘(1) IN GENERAL.—There are appropriated, out of amounts
in the Treasury not otherwise appropriated, to carry out this
section, $200,000,000, to remain available during the period
beginning on July 1, 2004, and ending on September 30, 2008.
‘‘(2) ADMINISTRATIVE COSTS.—From funds made available
under paragraph (1), the Secretary may use, for the administra-
tion of this section, not more than $2,000,000 for each of fiscal
years 2004 through 2008.
‘‘(3) AVAILABILITY.—Amounts appropriated under this sec-
tion shall be available for obligation on July 1, 2004.
‘‘(h) REPORT TO CONGRESS.—Not later than 4 years after the
date of the enactment of this section, the Secretary shall submit
to Congress a report on the projects for which loans are provided
under this section and a recommendation as to whether the Con-
gress should authorize the Secretary to continue loans under this
section beyond fiscal year 2008.’’.
TITLE XI—ACCESS TO AFFORDABLE
PHARMACEUTICALS
Subtitle A—Access to Affordable
Pharmaceuticals
SEC. 1101. THIRTY-MONTH STAY-OF-EFFECTIVENESS PERIOD.
(a) ABBREVIATED NEW DRUG APPLICATIONS.—Section 505(j) of
the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)) is
amended—
(1) in paragraph (2)—
(A) by striking subparagraph (B) and inserting the
following:
‘‘(B) NOTICE OF OPINION THAT PATENT IS INVALID OR WILL NOT
BE INFRINGED.—
‘‘(i) AGREEMENT TO GIVE NOTICE.—An applicant that makes
a certification described in subparagraph (A)(vii)(IV) shall
include in the application a statement that the applicant will
give notice as required by this subparagraph.
‘‘(ii) TIMING OF NOTICE.—An applicant that makes a certifi-
cation described in subparagraph (A)(vii)(IV) shall give notice
as required under this subparagraph—
‘‘(I) if the certification is in the application, not later
than 20 days after the date of the postmark on the notice
with which the Secretary informs the applicant that the
application has been filed; or
‘‘(II) if the certification is in an amendment or supple-
ment to the application, at the time at which the applicant
submits the amendment or supplement, regardless of
whether the applicant has already given notice with respect
H. R. 1—384
to another such certification contained in the application
or in an amendment or supplement to the application.
‘‘(iii) RECIPIENTS OF NOTICE.—An applicant required under
this subparagraph to give notice shall give notice to—
‘‘(I) each owner of the patent that is the subject of
the certification (or a representative of the owner des-
ignated to receive such a notice); and
‘‘(II) the holder of the approved application under sub-
section (b) for the drug that is claimed by the patent
or a use of which is claimed by the patent (or a representa-
tive of the holder designated to receive such a notice).
‘‘(iv) CONTENTS OF NOTICE.—A notice required under this
subparagraph shall—
‘‘(I) state that an application that contains data from
bioavailability or bioequivalence studies has been sub-
mitted under this subsection for the drug with respect
to which the certification is made to obtain approval to
engage in the commercial manufacture, use, or sale of
the drug before the expiration of the patent referred to
in the certification; and
‘‘(II) include a detailed statement of the factual and
legal basis of the opinion of the applicant that the patent
is invalid or will not be infringed.’’; and
(B) by adding at the end the following subparagraph:
‘‘(D)(i) An applicant may not amend or supplement an applica-
tion to seek approval of a drug referring to a different listed drug
from the listed drug identified in the application as submitted
to the Secretary.
‘‘(ii) With respect to the drug for which an application is sub-
mitted, nothing in this subsection prohibits an applicant from
amending or supplementing the application to seek approval of
a different strength.
‘‘(iii) Within 60 days after the date of the enactment of the
Medicare Prescription Drug, Improvement, and Modernization Act
of 2003, the Secretary shall issue guidance defining the term ‘listed
drug’ for purposes of this subparagraph.’’; and
(2) in paragraph (5)—
(A) in subparagraph (B)—
(i) by striking ‘‘under the following’’ and inserting
‘‘by applying the following to each certification made
under paragraph (2)(A)(vii)’’; and
(ii) in clause (iii)—
(I) in the first sentence, by striking ‘‘unless’’
and all that follows and inserting ‘‘unless, before
the expiration of 45 days after the date on which
the notice described in paragraph (2)(B) is
received, an action is brought for infringement of
the patent that is the subject of the certification
and for which information was submitted to the
Secretary under subsection (b)(1) or (c)(2) before
the date on which the application (excluding an
amendment or supplement to the application),
which the Secretary later determines to be
substantially complete, was submitted.’’; and
(II) in the second sentence—
(aa) by striking subclause (I) and inserting
the following:
H. R. 1—385
‘‘(I) if before the expiration of such period the district
court decides that the patent is invalid or not infringed
(including any substantive determination that there is no
cause of action for patent infringement or invalidity), the
approval shall be made effective on—
‘‘(aa) the date on which the court enters judgment
reflecting the decision; or
‘‘(bb) the date of a settlement order or consent
decree signed and entered by the court stating that
the patent that is the subject of the certification is
invalid or not infringed;’’;
(bb) 
by 
striking 
subclause 
(II) 
and
inserting the following:
‘‘(II) if before the expiration of such period the district
court decides that the patent has been infringed—
‘‘(aa) if the judgment of the district court is
appealed, the approval shall be made effective on—
‘‘(AA) the date on which the court of appeals
decides that the patent is invalid or not infringed
(including any substantive determination that
there is no cause of action for patent infringement
or invalidity); or
‘‘(BB) the date of a settlement order or consent
decree signed and entered by the court of appeals
stating that the patent that is the subject of the
certification is invalid or not infringed; or
‘‘(bb) if the judgment of the district court is not
appealed or is affirmed, the approval shall be made
effective on the date specified by the district court
in a court order under section 271(e)(4)(A) of title 35,
United States Code;’’;
(cc) in subclause (III), by striking ‘‘on the
date of such court decision.’’ and inserting ‘‘as
provided in subclause (I); or’’;
(dd) by inserting after subclause (III) the
following:
‘‘(IV) if before the expiration of such period the court
grants a preliminary injunction prohibiting the applicant
from engaging in the commercial manufacture or sale of
the drug until the court decides the issues of patent validity
and infringement and if the court decides that such patent
has been infringed, the approval shall be made effective
as provided in subclause (II).’’; and
(ee) in the matter after and below sub-
clause (IV) (as added by item (dd)), by striking
‘‘Until the expiration’’ and all that follows;
(B) by redesignating subparagraphs (C) and (D) as
subparagraphs (E) and (F), respectively; and
(C) by inserting after subparagraph (B) the following:
‘‘(C) CIVIL ACTION TO OBTAIN PATENT CERTAINTY.—
‘‘(i) DECLARATORY
JUDGMENT
ABSENT
INFRINGE-
MENT ACTION.—
‘‘(I) IN GENERAL.—No action may be brought
under section 2201 of title 28, United States Code,
by an applicant under paragraph (2) for a declara-
tory judgment with respect to a patent which is
H. R. 1—386
the subject of the certification referred to in
subparagraph (B)(iii) unless—
‘‘(aa) the 45-day period referred to in such
subparagraph has expired;
‘‘(bb) neither the owner of such patent
nor the holder of the approved application
under subsection (b) for the drug that is
claimed by the patent or a use of which is
claimed by the patent brought a civil action
against the applicant for infringement of the
patent before the expiration of such period;
and
‘‘(cc) in any case in which the notice pro-
vided under paragraph (2)(B) relates to non-
infringement, the notice was accompanied by
a document described in subclause (III).
‘‘(II) FILING OF CIVIL ACTION.—If the conditions
described in items (aa), (bb), and as applicable,
(cc) of subclause (I) have been met, the applicant
referred to in such subclause may, in accordance
with section 2201 of title 28, United States Code,
bring a civil action under such section against
the owner or holder referred to in such subclause
(but not against any owner or holder that has
brought such a civil action against the applicant,
unless that civil action was dismissed without
prejudice) for a declaratory judgment that the
patent is invalid or will not be infringed by the
drug for which the applicant seeks approval, except
that such civil action may be brought for a declara-
tory judgment that the patent will not be infringed
only in a case in which the condition described
in subclause (I)(cc) is applicable. A civil action
referred to in this subclause shall be brought in
the judicial district where the defendant has its
principal place of business or a regular and estab-
lished place of business.
‘‘(III) OFFER
OF
CONFIDENTIAL
ACCESS
TO
APPLICATION.—For purposes of subclause (I)(cc),
the document described in this subclause is a docu-
ment providing an offer of confidential access to
the application that is in the custody of the
applicant under paragraph (2) for the purpose of
determining whether an action referred to in
subparagraph (B)(iii) should be brought. The docu-
ment providing the offer of confidential access shall
contain such restrictions as to persons entitled
to access, and on the use and disposition of any
information accessed, as would apply had a protec-
tive order been entered for the purpose of pro-
tecting trade secrets and other confidential busi-
ness information. A request for access to an
application under an offer of confidential access
shall be considered acceptance of the offer of con-
fidential access with the restrictions as to persons
entitled to access, and on the use and disposition
of any information accessed, contained in the offer
H. R. 1—391
entitled to access, and on the use and disposition
of any information accessed, contained in the offer
of confidential access, and those restrictions and
other terms of the offer of confidential access shall
be considered terms of an enforceable contract.
Any person provided an offer of confidential access
shall review the application for the sole and limited
purpose of evaluating possible infringement of the
patent that is the subject of the certification under
subsection (b)(2)(A)(iv) and for no other purpose,
and may not disclose information of no relevance
to any issue of patent infringement to any person
other than a person provided an offer of confiden-
tial access. Further, the application may be
redacted by the applicant to remove any informa-
tion of no relevance to any issue of patent infringe-
ment.
‘‘(ii) COUNTERCLAIM TO INFRINGEMENT ACTION.—
‘‘(I) IN GENERAL.—If an owner of the patent
or the holder of the approved application under
subsection (b) for the drug that is claimed by the
patent or a use of which is claimed by the patent
brings a patent infringement action against the
applicant, the applicant may assert a counterclaim
seeking an order requiring the holder to correct
or delete the patent information submitted by the
holder under subsection (b) or this subsection on
the ground that the patent does not claim either—
‘‘(aa) the drug for which the application
was approved; or
‘‘(bb) an approved method of using the
drug.
‘‘(II) NO INDEPENDENT CAUSE OF ACTION.—Sub-
clause (I) does not authorize the assertion of a
claim described in subclause (I) in any civil action
or proceeding other than a counterclaim described
in subclause (I).
‘‘(iii) NO DAMAGES.—An applicant shall not be enti-
tled to damages in a civil action under clause (i) or
a counterclaim under clause (ii).’’.
(c) APPLICABILITY.—
(1) IN
GENERAL.—Except as provided in paragraphs (2)
and (3), the amendments made by subsections (a) and (b) apply
to any proceeding under section 505 of the Federal Food, Drug,
and Cosmetic Act (21 U.S.C. 355) that is pending on or after
the date of the enactment of this Act regardless of the date
on which the proceeding was commenced or is commenced.
(2) NOTICE OF OPINION THAT PATENT IS INVALID OR WILL
NOT
BE
INFRINGED.—The amendments made by subsections
(a)(1) and (b)(1) apply with respect to any certification under
subsection (b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) of section 505 of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355) sub-
mitted on or after August 18, 2003, in an application filed
under subsection (b) or (j) of that section or in an amendment
or supplement to an application filed under subsection (b) or
(j) of that section.
H. R. 1—392
(3) EFFECTIVE DATE OF APPROVAL.—The amendments made
by subsections (a)(2)(A)(ii)(I) and (b)(2)(B)(i) apply with respect
to any patent information submitted under subsection (b)(1)
or (c)(2) of section 505 of the Federal Food, Drug, and Cosmetic
Act (21 U.S.C. 355) on or after August 18, 2003.
(d) INFRINGEMENT ACTIONS.—Section 271(e) of title 35, United
States Code, is amended by adding at the end the following:
‘‘(5) Where a person has filed an application described in para-
graph (2) that includes a certification under subsection (b)(2)(A)(iv)
or (j)(2)(A)(vii)(IV) of section 505 of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 355), and neither the owner of the patent
that is the subject of the certification nor the holder of the approved
application under subsection (b) of such section for the drug that
is claimed by the patent or a use of which is claimed by the
patent brought an action for infringement of such patent before
the expiration of 45 days after the date on which the notice given
under subsection (b)(3) or (j)(2)(B) of such section was received,
the courts of the United States shall, to the extent consistent
with the Constitution, have subject matter jurisdiction in any action
brought by such person under section 2201 of title 28 for a declara-
tory judgment that such patent is invalid or not infringed.’’.
SEC. 1102. FORFEITURE OF 180-DAY EXCLUSIVITY PERIOD.
(a) IN GENERAL.—Section 505(j)(5) of the Federal Food, Drug,
and Cosmetic Act (21 U.S.C. 355(j)(5)) (as amended by section
1101) is amended—
(1) in subparagraph (B), by striking clause (iv) and
inserting the following:
‘‘(iv) 180-DAY EXCLUSIVITY PERIOD.—
‘‘(I) 
EFFECTIVENESS
OF
APPLICATION.—Subject 
to
subparagraph (D), if the application contains a certification
described in paragraph (2)(A)(vii)(IV) and is for a drug
for which a first applicant has submitted an application
containing such a certification, the application shall be
made effective on the date that is 180 days after the
date of the first commercial marketing of the drug
(including the commercial marketing of the listed drug)
by any first applicant.
‘‘(II) DEFINITIONS.—In this paragraph:
‘‘(aa) 180-DAY EXCLUSIVITY PERIOD.—The term ‘180-
day exclusivity period’ means the 180-day period
ending on the day before the date on which an applica-
tion submitted by an applicant other than a first
applicant could become effective under this clause.
‘‘(bb) FIRST APPLICANT.—As used in this subsection,
the term ‘first applicant’ means an applicant that, on
the first day on which a substantially complete applica-
tion containing a certification described in paragraph
(2)(A)(vii)(IV) is submitted for approval of a drug, sub-
mits a substantially complete application that contains
and lawfully maintains a certification described in
paragraph (2)(A)(vii)(IV) for the drug.
‘‘(cc) SUBSTANTIALLY COMPLETE APPLICATION.—As
used in this subsection, the term ‘substantially com-
plete application’ means an application under this sub-
section that on its face is sufficiently complete to permit
H. R. 1—393
a substantive review and contains all the information
required by paragraph (2)(A).
‘‘(dd) TENTATIVE APPROVAL.—
‘‘(AA) 
IN
GENERAL.—The 
term 
‘tentative
approval’ means notification to an applicant by
the Secretary that an application under this sub-
section meets the requirements of paragraph
(2)(A), but cannot receive effective approval
because the application does not meet the require-
ments of this subparagraph, there is a period of
exclusivity for the listed drug under subparagraph
(F) or section 505A, or there is a 7-year period
of exclusivity for the listed drug under section
527.
‘‘(BB) LIMITATION.—A drug that is granted
tentative approval by the Secretary is not an
approved drug and shall not have an effective
approval until the Secretary issues an approval
after any necessary additional review of the
application.’’; and
(2) by inserting after subparagraph (C) the following:
‘‘(D) FORFEITURE OF 180-DAY EXCLUSIVITY PERIOD.—
‘‘(i) DEFINITION
OF
FORFEITURE
EVENT.—In this
subparagraph, the term ‘forfeiture event’, with respect
to an application under this subsection, means the
occurrence of any of the following:
‘‘(I) FAILURE TO MARKET.—The first applicant
fails to market the drug by the later of—
‘‘(aa) the earlier of the date that is—
‘‘(AA) 75 days after the date on which
the approval of the application of the first
applicant is made effective under subpara-
graph (B)(iii); or
‘‘(BB) 30 months after the date of
submission of the application of the first
applicant; or
‘‘(bb) with respect to the first applicant
or any other applicant (which other applicant
has received tentative approval), the date that
is 75 days after the date as of which, as to
each of the patents with respect to which the
first applicant submitted and lawfully main-
tained a certification qualifying the first
applicant for the 180-day exclusivity period
under subparagraph (B)(iv), at least 1 of the
following has occurred:
‘‘(AA) In an infringement action
brought 
against 
that 
applicant 
with
respect to the patent or in a declaratory
judgment action brought by that applicant
with respect to the patent, a court enters
a final decision from which no appeal
(other than a petition to the Supreme
Court for a writ of certiorari) has been
or can be taken that the patent is invalid
or not infringed.
H. R. 1—394
‘‘(BB) In an infringement action or
a declaratory judgment action described
in subitem (AA), a court signs a settlement
order or consent decree that enters a final
judgment that includes a finding that the
patent is invalid or not infringed.
‘‘(CC) The patent information sub-
mitted under subsection (b) or (c) is with-
drawn by the holder of the application
approved under subsection (b).
‘‘(II) WITHDRAWAL OF APPLICATION.—The first
applicant withdraws the application or the Sec-
retary considers the application to have been with-
drawn as a result of a determination by the Sec-
retary that the application does not meet the
requirements for approval under paragraph (4).
‘‘(III) AMENDMENT
OF
CERTIFICATION.—The
first applicant amends or withdraws the certifi-
cation for all of the patents with respect to which
that applicant submitted a certification qualifying
the applicant for the 180-day exclusivity period.
‘‘(IV) 
FAILURE
TO
OBTAIN
TENTATIVE
APPROVAL.—The first applicant fails to obtain ten-
tative approval of the application within 30 months
after the date on which the application is filed,
unless the failure is caused by a change in or
a review of the requirements for approval of the
application imposed after the date on which the
application is filed.
‘‘(V) AGREEMENT
WITH
ANOTHER
APPLICANT,
THE
LISTED
DRUG
APPLICATION
HOLDER, OR
A
PATENT OWNER.—The first applicant enters into
an agreement with another applicant under this
subsection for the drug, the holder of the applica-
tion for the listed drug, or an owner of the patent
that is the subject of the certification under para-
graph (2)(A)(vii)(IV), the Federal Trade Commis-
sion or the Attorney General files a complaint,
and there is a final decision of the Federal Trade
Commission or the court with regard to the com-
plaint from which no appeal (other than a petition
to the Supreme Court for a writ of certiorari) has
been or can be taken that the agreement has vio-
lated the antitrust laws (as defined in section 1
of the Clayton Act (15 U.S.C. 12), except that
the term includes section 5 of the Federal Trade
Commission Act (15 U.S.C. 45) to the extent that
that section applies to unfair methods of competi-
tion).
‘‘(VI) EXPIRATION OF ALL PATENTS.—All of the
patents as to which the applicant submitted a
certification qualifying it for the 180-day exclu-
sivity period have expired.
‘‘(ii) FORFEITURE.—The 180-day exclusivity period
described in subparagraph (B)(iv) shall be forfeited
by a first applicant if a forfeiture event occurs with
respect to that first applicant.
H. R. 1—395
‘‘(iii) 
SUBSEQUENT
APPLICANT.—If 
all 
first
applicants forfeit the 180-day exclusivity period under
clause (ii)—
‘‘(I) approval of any application containing a
certification described in paragraph (2)(A)(vii)(IV)
shall be made effective in accordance with subpara-
graph (B)(iii); and
‘‘(II) no applicant shall be eligible for a 180-
day exclusivity period.’’.
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in paragraph (2), the
amendment made by subsection (a) shall be effective only with
respect to an application filed under section 505(j) of the Federal
Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)) after the date
of the enactment of this Act for a listed drug for which no
certification under section 505(j)(2)(A)(vii)(IV) of that Act was
made before the date of the enactment of this Act.
(2) COLLUSIVE AGREEMENTS.—If a forfeiture event described
in section 505(j)(5)(D)(i)(V) of that Act occurs in the case of
an applicant, the applicant shall forfeit the 180-day period
under section 505(j)(5)(B)(iv) of that Act without regard to
when the first certification under section 505(j)(2)(A)(vii)(IV)
of that Act for the listed drug was made.
(3) DECISION OF A COURT WHEN THE 180-DAY EXCLUSIVITY
PERIOD HAS NOT BEEN TRIGGERED.—With respect to an applica-
tion filed before, on, or after the date of the enactment of
this Act for a listed drug for which a certification under section
505(j)(2)(A)(vii)(IV) of that Act was made before the date of
the enactment of this Act and for which neither of the events
described in subclause (I) or (II) of section 505(j)(5)(B)(iv) of
that Act (as in effect on the day before the date of the enactment
of this Act) has occurred on or before the date of the enactment
of this Act, the term ‘‘decision of a court’’ as used in clause
(iv) of section 505(j)(5)(B) of that Act means a final decision
of a court from which no appeal (other than a petition to
the Supreme Court for a writ of certiorari) has been or can
be taken.
SEC. 1103. BIOAVAILABILITY AND BIOEQUIVALENCE.
(a) IN GENERAL.—Section 505(j)(8) of the Federal Food, Drug,
and Cosmetic Act (21 U.S.C. 355(j)(8)) is amended—
(1) by striking subparagraph (A) and inserting the fol-
lowing:
‘‘(A)(i) The term ‘bioavailability’ means the rate and extent
to which the active ingredient or therapeutic ingredient is
absorbed from a drug and becomes available at the site of
drug action.
‘‘(ii) For a drug that is not intended to be absorbed into
the bloodstream, the Secretary may assess bioavailability by
scientifically valid measurements intended to reflect the rate
and extent to which the active ingredient or therapeutic ingre-
dient becomes available at the site of drug action.’’; and
(2) by adding at the end the following:
‘‘(C) For a drug that is not intended to be absorbed into
the bloodstream, the Secretary may establish alternative, sci-
entifically valid methods to show bioequivalence if the alter-
native methods are expected to detect a significant difference
H. R. 1—398
involved shall file written descriptions of such agreement that
are sufficient to disclose all the terms and conditions of the
agreement.
SEC. 1113. FILING DEADLINES.
Any filing required under section 1112 shall be filed with
the Assistant Attorney General and the Commission not later than
10 business days after the date the agreements are executed.
SEC. 1114. DISCLOSURE EXEMPTION.
Any information or documentary material filed with the Assist-
ant Attorney General or the Commission pursuant to this subtitle
shall be exempt from disclosure under section 552 of title 5, United
States Code, and no such information or documentary material
may be made public, except as may be relevant to any administra-
tive or judicial action or proceeding. Nothing in this section is
intended to prevent disclosure to either body of the Congress or
to any duly authorized committee or subcommittee of the Congress.
SEC. 1115. ENFORCEMENT.
(a) CIVIL PENALTY.—Any brand name drug company or generic
drug applicant which fails to comply with any provision of this
subtitle shall be liable for a civil penalty of not more than $11,000,
for each day during which such entity is in violation of this subtitle.
Such penalty may be recovered in a civil action brought by the
United States, or brought by the Commission in accordance with
the procedures established in section 16(a)(1) of the Federal Trade
Commission Act (15 U.S.C. 56(a)).
(b) COMPLIANCE AND EQUITABLE RELIEF.—If any brand name
drug company or generic drug applicant fails to comply with any
provision of this subtitle, the United States district court may
order compliance, and may grant such other equitable relief as
the court in its discretion determines necessary or appropriate,
upon application of the Assistant Attorney General or the Commis-
sion.
SEC. 1116. RULEMAKING.
The Commission, with the concurrence of the Assistant
Attorney General and by rule in accordance with section 553 of
title 5, United States Code, consistent with the purposes of this
subtitle—
(1) may define the terms used in this subtitle;
(2) may exempt classes of persons or agreements from
the requirements of this subtitle; and
(3) may prescribe such other rules as may be necessary
and appropriate to carry out the purposes of this subtitle.
SEC. 1117. SAVINGS CLAUSE.
Any action taken by the Assistant Attorney General or the
Commission, or any failure of the Assistant Attorney General or
the Commission to take action, under this subtitle shall not at
any time bar any proceeding or any action with respect to any
agreement between a brand name drug company and a generic
drug applicant, or any agreement between generic drug applicants,
under any other provision of law, nor shall any filing under this
subtitle constitute or create a presumption of any violation of any
competition laws.
H. R. 1—399
SEC. 1118. EFFECTIVE DATE.
This subtitle shall—
(1) take effect 30 days after the date of the enactment
of this Act; and
(2) shall apply to agreements described in section 1112
that are entered into 30 days after the date of the enactment
of this Act.
Subtitle C—Importation of Prescription
Drugs
SEC. 1121. IMPORTATION OF PRESCRIPTION DRUGS.
(a) IN GENERAL.—Chapter VIII of the Federal Food, Drug,
and Cosmetic Act (21 U.S.C. 381 et seq.) is amended by striking
section 804 and inserting the following:
‘‘SEC. 804. IMPORTATION OF PRESCRIPTION DRUGS.
‘‘(a) DEFINITIONS.—In this section:
‘‘(1) IMPORTER.—The term ‘importer’ means a pharmacist
or wholesaler.
‘‘(2) PHARMACIST.—The term ‘pharmacist’ means a person
licensed by a State to practice pharmacy, including the dis-
pensing and selling of prescription drugs.
‘‘(3) PRESCRIPTION
DRUG.—The term ‘prescription drug’
means a drug subject to section 503(b), other than—
‘‘(A) a controlled substance (as defined in section 102
of the Controlled Substances Act (21 U.S.C. 802));
‘‘(B) a biological product (as defined in section 351
of the Public Health Service Act (42 U.S.C. 262));
‘‘(C) an infused drug (including a peritoneal dialysis
solution);
‘‘(D) an intravenously injected drug;
‘‘(E) a drug that is inhaled during surgery; or
‘‘(F) a drug which is a parenteral drug, the importation
of which pursuant to subsection (b) is determined by the
Secretary to pose a threat to the public health, in which
case section 801(d)(1) shall continue to apply.
‘‘(4) QUALIFYING LABORATORY.—The term ‘qualifying labora-
tory’ means a laboratory in the United States that has been
approved by the Secretary for the purposes of this section.
‘‘(5) WHOLESALER.—
‘‘(A) IN GENERAL.—The term ‘wholesaler’ means a per-
son licensed as a wholesaler or distributor of prescription
drugs in the United States under section 503(e)(2)(A).
‘‘(B) EXCLUSION.—The term ‘wholesaler’ does not
include a person authorized to import drugs under section
801(d)(1).
‘‘(b) REGULATIONS.—The Secretary, after consultation with the
United States Trade Representative and the Commissioner of Cus-
toms, shall promulgate regulations permitting pharmacists and
wholesalers to import prescription drugs from Canada into the
United States.
‘‘(c) LIMITATION.—The regulations under subsection (b) shall—
‘‘(1) require that safeguards be in place to ensure that
each prescription drug imported under the regulations complies
with section 505 (including with respect to being safe and
H. R. 1—400
effective for the intended use of the prescription drug), with
sections 501 and 502, and with other applicable requirements
of this Act;
‘‘(2) require that an importer of a prescription drug under
the regulations comply with subsections (d)(1) and (e); and
‘‘(3) contain any additional provisions determined by the
Secretary to be appropriate as a safeguard to protect the public
health or as a means to facilitate the importation of prescription
drugs.
‘‘(d) INFORMATION AND RECORDS.—
‘‘(1) IN
GENERAL.—The regulations under subsection (b)
shall require an importer of a prescription drug under sub-
section (b) to submit to the Secretary the following information
and documentation:
‘‘(A) The name and quantity of the active ingredient
of the prescription drug.
‘‘(B) A description of the dosage form of the prescription
drug.
‘‘(C) The date on which the prescription drug is
shipped.
‘‘(D) The quantity of the prescription drug that is
shipped.
‘‘(E) The point of origin and destination of the prescrip-
tion drug.
‘‘(F) The price paid by the importer for the prescription
drug.
‘‘(G) Documentation from the foreign seller specifying—
‘‘(i) the original source of the prescription drug;
and
‘‘(ii) the quantity of each lot of the prescription
drug originally received by the seller from that source.
‘‘(H) The lot or control number assigned to the prescrip-
tion drug by the manufacturer of the prescription drug.
‘‘(I) The name, address, telephone number, and profes-
sional license number (if any) of the importer.
‘‘(J)(i) In the case of a prescription drug that is shipped
directly from the first foreign recipient of the prescription
drug from the manufacturer:
‘‘(I) 
Documentation 
demonstrating 
that 
the
prescription drug was received by the recipient from
the manufacturer and subsequently shipped by the
first foreign recipient to the importer.
‘‘(II) Documentation of the quantity of each lot
of the prescription drug received by the first foreign
recipient demonstrating that the quantity being
imported into the United States is not more than the
quantity that was received by the first foreign
recipient.
‘‘(III)(aa) In the case of an initial imported ship-
ment, documentation demonstrating that each batch
of the prescription drug in the shipment was statis-
tically sampled and tested for authenticity and deg-
radation.
‘‘(bb) In the case of any subsequent shipment, docu-
mentation demonstrating that a statistically valid
sample of the shipment was tested for authenticity
and degradation.
H. R. 1—401
‘‘(ii) In the case of a prescription drug that is not
shipped directly from the first foreign recipient of the
prescription drug from the manufacturer, documentation
demonstrating that each batch in each shipment offered
for importation into the United States was statistically
sampled and tested for authenticity and degradation.
‘‘(K) Certification from the importer or manufacturer
of the prescription drug that the prescription drug—
‘‘(i) is approved for marketing in the United States
and is not adulterated or misbranded; and
‘‘(ii) meets all labeling requirements under this
Act.
‘‘(L) Laboratory records, including complete data
derived from all tests necessary to ensure that the prescrip-
tion drug is in compliance with established specifications
and standards.
‘‘(M) Documentation demonstrating that the testing
required by subparagraphs (J) and (L) was conducted at
a qualifying laboratory.
‘‘(N) Any other information that the Secretary deter-
mines is necessary to ensure the protection of the public
health.
‘‘(2) MAINTENANCE BY THE SECRETARY.—The Secretary shall
maintain information and documentation submitted under
paragraph (1) for such period of time as the Secretary deter-
mines to be necessary.
‘‘(e) TESTING.—The regulations under subsection (b) shall
require—
‘‘(1) that testing described in subparagraphs (J) and (L)
of subsection (d)(1) be conducted by the importer or by the
manufacturer of the prescription drug at a qualified laboratory;
‘‘(2) if the tests are conducted by the importer—
‘‘(A) that information needed to—
‘‘(i) authenticate the prescription drug being tested;
and
‘‘(ii) confirm that the labeling of the prescription
drug complies with labeling requirements under this
Act;
be supplied by the manufacturer of the prescription drug
to the pharmacist or wholesaler; and
‘‘(B) that the information supplied under subparagraph
(A) be kept in strict confidence and used only for purposes
of testing or otherwise complying with this Act; and
‘‘(3) may include such additional provisions as the Secretary
determines to be appropriate to provide for the protection of
trade secrets and commercial or financial information that is
privileged or confidential.
‘‘(f) REGISTRATION OF FOREIGN SELLERS.—Any establishment
within Canada engaged in the distribution of a prescription drug
that is imported or offered for importation into the United States
shall register with the Secretary the name and place of business
of the establishment and the name of the United States agent
for the establishment.
‘‘(g) SUSPENSION OF IMPORTATION.—The Secretary shall require
that importations of a specific prescription drug or importations
by a specific importer under subsection (b) be immediately sus-
pended on discovery of a pattern of importation of that specific
H. R. 1—402
prescription drug or by that specific importer of drugs that are
counterfeit or in violation of any requirement under this section,
until an investigation is completed and the Secretary determines
that the public is adequately protected from counterfeit and viola-
tive prescription drugs being imported under subsection (b).
‘‘(h) APPROVED LABELING.—The manufacturer of a prescription
drug shall provide an importer written authorization for the
importer to use, at no cost, the approved labeling for the prescription
drug.
‘‘(i) CHARITABLE CONTRIBUTIONS.—Notwithstanding any other
provision of this section, section 801(d)(1) continues to apply to
a prescription drug that is donated or otherwise supplied at no
charge by the manufacturer of the drug to a charitable or humani-
tarian organization (including the United Nations and affiliates)
or to a government of a foreign country.
‘‘(j) WAIVER AUTHORITY FOR IMPORTATION BY INDIVIDUALS.—
‘‘(1) DECLARATIONS.—Congress declares that in the enforce-
ment against individuals of the prohibition of importation of
prescription drugs and devices, the Secretary should—
‘‘(A) focus enforcement on cases in which the importa-
tion by an individual poses a significant threat to public
health; and
‘‘(B) exercise discretion to permit individuals to make
such importations in circumstances in which—
‘‘(i) the importation is clearly for personal use;
and
‘‘(ii) the prescription drug or device imported does
not appear to present an unreasonable risk to the
individual.
‘‘(2) WAIVER AUTHORITY.—
‘‘(A) IN GENERAL.—The Secretary may grant to individ-
uals, by regulation or on a case-by-case basis, a waiver
of the prohibition of importation of a prescription drug
or device or class of prescription drugs or devices, under
such conditions as the Secretary determines to be appro-
priate.
‘‘(B) GUIDANCE ON CASE-BY-CASE WAIVERS.—The Sec-
retary shall publish, and update as necessary, guidance
that accurately describes circumstances in which the Sec-
retary will consistently grant waivers on a case-by-case
basis under subparagraph (A), so that individuals may
know with the greatest practicable degree of certainty
whether a particular importation for personal use will be
permitted.
‘‘(3) DRUGS IMPORTED FROM CANADA.—In particular, the
Secretary shall by regulation grant individuals a waiver to
permit individuals to import into the United States a prescrip-
tion drug that—
‘‘(A) is imported from a licensed pharmacy for personal
use by an individual, not for resale, in quantities that
do not exceed a 90-day supply;
‘‘(B) is accompanied by a copy of a valid prescription;
‘‘(C) is imported from Canada, from a seller registered
with the Secretary;
‘‘(D) is a prescription drug approved by the Secretary
under chapter V;
H. R. 1—403
‘‘(E) is in the form of a final finished dosage that
was manufactured in an establishment registered under
section 510; and
‘‘(F) is imported under such other conditions as the
Secretary determines to be necessary to ensure public
safety.
‘‘(k) CONSTRUCTION.—Nothing in this section limits the
authority of the Secretary relating to the importation of prescription
drugs, other than with respect to section 801(d)(1) as provided
in this section.
‘‘(l) EFFECTIVENESS OF SECTION.—
‘‘(1) COMMENCEMENT
OF
PROGRAM.—This section shall
become effective only if the Secretary certifies to the Congress
that the implementation of this section will—
(A) pose no additional risk to the public’s health and
safety; and
(B) result in a significant reduction in the cost of
covered products to the American consumer.
‘‘(2) TERMINATION OF PROGRAM.—
‘‘(A) IN GENERAL.—If, after the date that is 1 year
after the effective date of the regulations under subsection
(b) and before the date that is 18 months after the effective
date, the Secretary submits to Congress a certification that,
in the opinion of the Secretary, based on substantial evi-
dence obtained after the effective date, the benefits of
implementation of this section do not outweigh any det-
riment of implementation of this section, this section shall
cease to be effective as of the date that is 30 days after
the date on which the Secretary submits the certification.
‘‘(B) PROCEDURE.—The Secretary shall not submit a
certification under subparagraph (A) unless, after a hearing
on the record under sections 556 and 557 of title 5, United
States Code, the Secretary—
‘‘(i)(I) determines that it is more likely than not
that implementation of this section would result in
an increase in the risk to the public health and safety;
‘‘(II) identifies specifically, in qualitative and quan-
titative terms, the nature of the increased risk;
‘‘(III) identifies specifically the causes of the
increased risk; and
‘‘(IV)(aa) considers whether any measures can be
taken to avoid, reduce, or mitigate the increased risk;
and
‘‘(bb) if the Secretary determines that any meas-
ures described in item (aa) would require additional
statutory authority, submits to Congress a report
describing the legislation that would be required;
‘‘(ii) identifies specifically, in qualitative and quan-
titative terms, the benefits that would result from
implementation of this section (including the benefit
of reductions in the cost of covered products to con-
sumers in the United States, allowing consumers to
procure needed medication that consumers might not
otherwise be able to procure without foregoing other
necessities of life); and
H. R. 1—404
‘‘(iii)(I) compares in specific terms the detriment
identified under clause (i) with the benefits identified
under clause (ii); and
‘‘(II) determines that the benefits do not outweigh
the detriment.
‘‘(m) AUTHORIZATION OF APPROPRIATIONS.—There are author-
ized to be appropriated such sums as are necessary to carry out
this section.’’.
(b) CONFORMING AMENDMENTS.—The Federal Food, Drug, and
Cosmetic Act is amended—
(1) in section 301(aa) (21 U.S.C. 331(aa)), by striking ‘‘cov-
ered product in violation of section 804’’ and inserting ‘‘prescrip-
tion drug in violation of section 804’’; and
(2) in section 303(a)(6) (21 U.S.C. 333(a)(6), by striking
‘‘covered product pursuant to section 804(a)’’ and inserting
‘‘prescription drug under section 804(b)’’.
SEC. 1122. STUDY AND REPORT ON IMPORTATION OF DRUGS.
The Secretary, in consultation with appropriate government
agencies, shall conduct a study on the importation of drugs into
the United States pursuant to section 804 of the Federal Food,
Drug, and Cosmetic Act (as added by section 1121 of this Act).
Not later than 12 months after the date of the enactment of this
Act, the Secretary shall submit to the appropriate committees of
the Congress a report providing the findings of such study.
SEC. 1123. STUDY AND REPORT ON TRADE IN PHARMACEUTICALS.
The President’s designees shall conduct a study and report
on issues related to trade and pharmaceuticals.
TITLE XII—TAX INCENTIVES FOR
HEALTH AND RETIREMENT SECURITY
SEC. 1201. HEALTH SAVINGS ACCOUNTS.
(a) IN GENERAL.—Part VII of subchapter B of chapter 1 of
the Internal Revenue Code of 1986 (relating to additional itemized
deductions for individuals) is amended by redesignating section
223 as section 224 and by inserting after section 222 the following
new section:
‘‘SEC. 223. HEALTH SAVINGS ACCOUNTS.
‘‘(a) DEDUCTION ALLOWED.—In the case of an individual who
is an eligible individual for any month during the taxable year,
there shall be allowed as a deduction for the taxable year an
amount equal to the aggregate amount paid in cash during such
taxable year by or on behalf of such individual to a health savings
account of such individual.
‘‘(b) LIMITATIONS.—
‘‘(1) IN GENERAL.—The amount allowable as a deduction
under subsection (a) to an individual for the taxable year shall
not exceed the sum of the monthly limitations for months
during such taxable year that the individual is an eligible
individual.
‘‘(2) MONTHLY LIMITATION.—The monthly limitation for any
month is 1⁄12 of—
H. R. 1—405
‘‘(A) in the case of an eligible individual who has self-
only coverage under a high deductible health plan as of
the first day of such month, the lesser of—
‘‘(i) the annual deductible under such coverage,
or
‘‘(ii) $2,250, or
‘‘(B) in the case of an eligible individual who has family
coverage under a high deductible health plan as of the
first day of such month, the lesser of—
‘‘(i) the annual deductible under such coverage,
or
‘‘(ii) $4,500.
‘‘(3) ADDITIONAL
CONTRIBUTIONS
FOR
INDIVIDUALS
OR
OLDER.—
‘‘(A) IN GENERAL.—In the case of an individual who
has attained age 55 before the close of the taxable year,
the applicable limitation under subparagraphs (A) and (B)
of paragraph (2) shall be increased by the additional con-
tribution amount.
‘‘(B) ADDITIONAL
CONTRIBUTION
AMOUNT.—For pur-
poses of this section, the additional contribution amount
is the amount determined in accordance with the following
table:
‘‘For taxable years beginning in:
The
additional
contribution
amount is:
2004 ...................................................................................................
$500
2005 ...................................................................................................
$600
2006 ...................................................................................................
$700
2007 ...................................................................................................
$800
2008 ...................................................................................................
$900
2009 and thereafter ..........................................................................
$1,000.
‘‘(4) COORDINATION
WITH
OTHER
CONTRIBUTIONS.—The
limitation which would (but for this paragraph) apply under
this subsection to an individual for any taxable year shall
be reduced (but not below zero) by the sum of—
‘‘(A) the aggregate amount paid for such taxable year
to Archer MSAs of such individual, and
‘‘(B) the aggregate amount contributed to health
savings accounts of such individual which is excludable
from the taxpayer’s gross income for such taxable year
under section 106(d) (and such amount shall not be allowed
as a deduction under subsection (a)).
Subparagraph (A) shall not apply with respect to any individual
to whom paragraph (5) applies.
‘‘(5) SPECIAL RULE FOR MARRIED INDIVIDUALS.—In the case
of individuals who are married to each other, if either spouse
has family coverage—
‘‘(A) both spouses shall be treated as having only such
family coverage (and if such spouses each have family
coverage under different plans, as having the family cov-
erage with the lowest annual deductible), and
‘‘(B) the limitation under paragraph (1) (after the
application of subparagraph (A) and without regard to any
additional contribution amount under paragraph (3))—
H. R. 1—406
‘‘(i) shall be reduced by the aggregate amount paid
to Archer MSAs of such spouses for the taxable year,
and
‘‘(ii) after such reduction, shall be divided equally
between them unless they agree on a different division.
‘‘(6) DENIAL OF DEDUCTION TO DEPENDENTS.—No deduction
shall be allowed under this section to any individual with
respect to whom a deduction under section 151 is allowable
to another taxpayer for a taxable year beginning in the calendar
year in which such individual’s taxable year begins.
‘‘(7) MEDICARE
ELIGIBLE
INDIVIDUALS.—The limitation
under this subsection for any month with respect to an indi-
vidual shall be zero for the first month such individual is
entitled to benefits under title XVIII of the Social Security
Act and for each month thereafter.
‘‘(c) DEFINITIONS AND SPECIAL RULES.—For purposes of this
section—
‘‘(1) ELIGIBLE INDIVIDUAL.—
‘‘(A) IN GENERAL.—The term ‘eligible individual’ means,
with respect to any month, any individual if—
‘‘(i) such individual is covered under a high deduct-
ible health plan as of the 1st day of such month,
and
‘‘(ii) such individual is not, while covered under
a high deductible health plan, covered under any
health plan—
‘‘(I) which is not a high deductible health plan,
and
‘‘(II) which provides coverage for any benefit
which is covered under the high deductible health
plan.
‘‘(B) CERTAIN COVERAGE DISREGARDED.—Subparagraph
(A)(ii) shall be applied without regard to—
‘‘(i) coverage for any benefit provided by permitted
insurance, and
‘‘(ii) coverage (whether through insurance or other-
wise) for accidents, disability, dental care, vision care,
or long-term care.
‘‘(2) HIGH DEDUCTIBLE HEALTH PLAN.—
‘‘(A) IN GENERAL.—The term ‘high deductible health
plan’ means a health plan—
‘‘(i) which has an annual deductible which is not
less than—
‘‘(I) $1,000 for self-only coverage, and
‘‘(II) twice the dollar amount in subclause (I)
for family coverage, and
‘‘(ii) the sum of the annual deductible and the
other annual out-of-pocket expenses required to be paid
under the plan (other than for premiums) for covered
benefits does not exceed—
‘‘(I) $5,000 for self-only coverage, and
‘‘(II) twice the dollar amount in subclause (I)
for family coverage.
‘‘(B) EXCLUSION OF CERTAIN PLANS.—Such term does
not include a health plan if substantially all of its coverage
is coverage described in paragraph (1)(B).
H. R. 1—407
‘‘(C) SAFE HARBOR FOR ABSENCE OF PREVENTIVE CARE
DEDUCTIBLE.—A plan shall not fail to be treated as a high
deductible health plan by reason of failing to have a deduct-
ible for preventive care (within the meaning of section
1871 of the Social Security Act, except as otherwise pro-
vided by the Secretary).
‘‘(D) SPECIAL RULES FOR NETWORK PLANS.—In the case
of a plan using a network of providers—
‘‘(i) ANNUAL
OUT-OF-POCKET
LIMITATION.—Such
plan shall not fail to be treated as a high deductible
health plan by reason of having an out-of-pocket limita-
tion for services provided outside of such network
which exceeds the applicable limitation under subpara-
graph (A)(ii).
‘‘(ii) ANNUAL
DEDUCTIBLE.—Such plan’s annual
deductible for services provided outside of such network
shall not be taken into account for purposes of sub-
section (b)(2).
‘‘(3) PERMITTED INSURANCE.—The term ‘permitted insur-
ance’ means—
‘‘(A) insurance if substantially all of the coverage pro-
vided under such insurance relates to—
‘‘(i) liabilities incurred under workers’ compensa-
tion laws,
‘‘(ii) tort liabilities,
‘‘(iii) liabilities relating to ownership or use of prop-
erty, or
‘‘(iv) such other similar liabilities as the Secretary
may specify by regulations,
‘‘(B) insurance for a specified disease or illness, and
‘‘(C) insurance paying a fixed amount per day (or other
period) of hospitalization.
‘‘(4) FAMILY COVERAGE.—The term ‘family coverage’ means
any coverage other than self-only coverage.
‘‘(5) ARCHER MSA.—The term ‘Archer MSA’ has the meaning
given such term in section 220(d).
‘‘(d) HEALTH SAVINGS ACCOUNT.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘health savings account’ means
a trust created or organized in the United States as a health
savings account exclusively for the purpose of paying the quali-
fied medical expenses of the account beneficiary, but only if
the written governing instrument creating the trust meets the
following requirements:
‘‘(A) Except in the case of a rollover contribution
described in subsection (f)(5) or section 220(f)(5), no con-
tribution will be accepted—
‘‘(i) unless it is in cash, or
‘‘(ii) to the extent such contribution, when added
to previous contributions to the trust for the calendar
year, exceeds the sum of—
‘‘(I) the dollar amount in effect under sub-
section (b)(2)(B)(ii), and
‘‘(II) the dollar amount in effect under sub-
section (b)(3)(B).
‘‘(B) The trustee is a bank (as defined in section 408(n)),
an insurance company (as defined in section 816), or
another person who demonstrates to the satisfaction of
H. R. 1—408
the Secretary that the manner in which such person will
administer the trust will be consistent with the require-
ments of this section.
‘‘(C) No part of the trust assets will be invested in
life insurance contracts.
‘‘(D) The assets of the trust will not be commingled
with other property except in a common trust fund or
common investment fund.
‘‘(E) The interest of an individual in the balance in
his account is nonforfeitable.
‘‘(2) QUALIFIED MEDICAL EXPENSES.—
‘‘(A) 
IN
GENERAL.—The 
term 
‘qualified 
medical
expenses’ means, with respect to an account beneficiary,
amounts paid by such beneficiary for medical care (as
defined in section 213(d) for such individual, the spouse
of such individual, and any dependent (as defined in section
152) of such individual, but only to the extent such amounts
are not compensated for by insurance or otherwise.
‘‘(B) HEALTH INSURANCE MAY NOT BE PURCHASED FROM
ACCOUNT.—Subparagraph (A) shall not apply to any pay-
ment for insurance.
‘‘(C) EXCEPTIONS.—Subparagraph (B) shall not apply
to any expense for coverage under—
‘‘(i) a health plan during any period of continuation
coverage required under any Federal law,
‘‘(ii) a qualified long-term care insurance contract
(as defined in section 7702B(b)),
‘‘(iii) a health plan during a period in which the
individual is receiving unemployment compensation
under any Federal or State law, or
‘‘(iv) in the case of an account beneficiary who
has attained the age specified in section 1811 of the
Social Security Act, any health insurance other than
a medicare supplemental policy (as defined in section
1882 of the Social Security Act).
‘‘(3) ACCOUNT BENEFICIARY.—The term ‘account beneficiary’
means the individual on whose behalf the health savings
account was established.
‘‘(4) CERTAIN RULES TO APPLY.—Rules similar to the fol-
lowing rules shall apply for purposes of this section:
‘‘(A) Section 219(d)(2) (relating to no deduction for roll-
overs).
‘‘(B) Section 219(f)(3) (relating to time when contribu-
tions deemed made).
‘‘(C) Except as provided in section 106(d), section
219(f)(5) (relating to employer payments).
‘‘(D) Section 408(g) (relating to community property
laws).
‘‘(E) Section 408(h) (relating to custodial accounts).
‘‘(e) TAX TREATMENT OF ACCOUNTS.—
‘‘(1) IN GENERAL.—A health savings account is exempt from
taxation under this subtitle unless such account has ceased
to be a health savings account. Notwithstanding the preceding
sentence, any such account is subject to the taxes imposed
by section 511 (relating to imposition of tax on unrelated busi-
ness income of charitable, etc. organizations).
H. R. 1—409
‘‘(2) ACCOUNT TERMINATIONS.—Rules similar to the rules
of paragraphs (2) and (4) of section 408(e) shall apply to health
savings accounts, and any amount treated as distributed under
such rules shall be treated as not used to pay qualified medical
expenses.
‘‘(f) TAX TREATMENT OF DISTRIBUTIONS.—
‘‘(1) AMOUNTS USED FOR QUALIFIED MEDICAL EXPENSES.—
Any amount paid or distributed out of a health savings account
which is used exclusively to pay qualified medical expenses
of any account beneficiary shall not be includible in gross
income.
‘‘(2) INCLUSION OF AMOUNTS NOT USED FOR QUALIFIED MED-
ICAL EXPENSES.—Any amount paid or distributed out of a health
savings account which is not used exclusively to pay the quali-
fied medical expenses of the account beneficiary shall be
included in the gross income of such beneficiary.
‘‘(3) EXCESS CONTRIBUTIONS RETURNED BEFORE DUE DATE
OF RETURN.—
‘‘(A) IN GENERAL.—If any excess contribution is contrib-
uted for a taxable year to any health savings account
of an individual, paragraph (2) shall not apply to distribu-
tions from the health savings accounts of such individual
(to the extent such distributions do not exceed the aggre-
gate excess contributions to all such accounts of such indi-
vidual for such year) if—
‘‘(i) such distribution is received by the individual
on or before the last day prescribed by law (including
extensions of time) for filing such individual’s return
for such taxable year, and
‘‘(ii) such distribution is accompanied by the
amount of net income attributable to such excess con-
tribution.
Any net income described in clause (ii) shall be included
in the gross income of the individual for the taxable year
in which it is received.
‘‘(B) EXCESS CONTRIBUTION.—For purposes of subpara-
graph (A), the term ‘excess contribution’ means any con-
tribution (other than a rollover contribution described in
paragraph (5) or section 220(f)(5)) which is neither exclud-
able from gross income under section 106(d) nor deductible
under this section.
‘‘(4) ADDITIONAL
TAX
ON
DISTRIBUTIONS
NOT
USED
FOR
QUALIFIED MEDICAL EXPENSES.—
‘‘(A) IN GENERAL.—The tax imposed by this chapter
on the account beneficiary for any taxable year in which
there is a payment or distribution from a health savings
account of such beneficiary which is includible in gross
income under paragraph (2) shall be increased by 10 per-
cent of the amount which is so includible.
‘‘(B) EXCEPTION FOR DISABILITY OR DEATH.—Subpara-
graph (A) shall not apply if the payment or distribution
is made after the account beneficiary becomes disabled
within the meaning of section 72(m)(7) or dies.
‘‘(C) EXCEPTION FOR DISTRIBUTIONS AFTER MEDICARE
ELIGIBILITY.—Subparagraph (A) shall not apply to any pay-
ment or distribution after the date on which the account
H. R. 1—410
beneficiary attains the age specified in section 1811 of
the Social Security Act.
‘‘(5) ROLLOVER CONTRIBUTION.—An amount is described in
this paragraph as a rollover contribution if it meets the require-
ments of subparagraphs (A) and (B).
‘‘(A) IN GENERAL.—Paragraph (2) shall not apply to
any amount paid or distributed from a health savings
account to the account beneficiary to the extent the amount
received is paid into a health savings account for the benefit
of such beneficiary not later than the 60th day after the
day on which the beneficiary receives the payment or dis-
tribution.
‘‘(B) LIMITATION.—This paragraph shall not apply to
any amount described in subparagraph (A) received by
an individual from a health savings account if, at any
time during the 1-year period ending on the day of such
receipt, such individual received any other amount
described in subparagraph (A) from a health savings
account which was not includible in the individual’s gross
income because of the application of this paragraph.
‘‘(6) COORDINATION WITH MEDICAL EXPENSE DEDUCTION.—
For purposes of determining the amount of the deduction under
section 213, any payment or distribution out of a health savings
account for qualified medical expenses shall not be treated
as an expense paid for medical care.
‘‘(7) TRANSFER
OF
ACCOUNT
INCIDENT
TO
DIVORCE.—The
transfer of an individual’s interest in a health savings account
to an individual’s spouse or former spouse under a divorce
or separation instrument described in subparagraph (A) of sec-
tion 71(b)(2) shall not be considered a taxable transfer made
by such individual notwithstanding any other provision of this
subtitle, and such interest shall, after such transfer, be treated
as a health savings account with respect to which such spouse
is the account beneficiary.
‘‘(8) TREATMENT AFTER DEATH OF ACCOUNT BENEFICIARY.—
‘‘(A) TREATMENT
IF
DESIGNATED
BENEFICIARY
IS
SPOUSE.—If the account beneficiary’s surviving spouse
acquires such beneficiary’s interest in a health savings
account by reason of being the designated beneficiary of
such account at the death of the account beneficiary, such
health savings account shall be treated as if the spouse
were the account beneficiary.
‘‘(B) OTHER CASES.—
‘‘(i) IN GENERAL.—If, by reason of the death of
the account beneficiary, any person acquires the
account beneficiary’s interest in a health savings
account in a case to which subparagraph (A) does
not apply—
‘‘(I) such account shall cease to be a health
savings account as of the date of death, and
‘‘(II) an amount equal to the fair market value
of the assets in such account on such date shall
be includible if such person is not the estate of
such beneficiary, in such person’s gross income
for the taxable year which includes such date,
or if such person is the estate of such beneficiary,
H. R. 1—411
in such beneficiary’s gross income for the last tax-
able year of such beneficiary.
‘‘(ii) SPECIAL RULES.—
‘‘(I) REDUCTION OF INCLUSION FOR PREDEATH
EXPENSES.—The amount includible in gross income
under clause (i) by any person (other than the
estate) shall be reduced by the amount of qualified
medical expenses which were incurred by the
decedent before the date of the decedent’s death
and paid by such person within 1 year after such
date.
‘‘(II) DEDUCTION
FOR
ESTATE
TAXES.—An
appropriate deduction shall be allowed under sec-
tion 691(c) to any person (other than the decedent
or the decedent’s spouse) with respect to amounts
included in gross income under clause (i) by such
person.
‘‘(g) COST-OF-LIVING ADJUSTMENT.—
‘‘(1) IN GENERAL.—Each dollar amount in subsections (b)(2)
and (c)(2)(A) shall be increased by an amount equal to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which such taxable
year begins determined by substituting for ‘calendar year
1992’ in subparagraph (B) thereof—
‘‘(i) except as provided in clause (ii), ‘calendar year
1997’, and
‘‘(ii) in the case of each dollar amount in subsection
(c)(2)(A), ‘calendar year 2003’.
‘‘(2) ROUNDING.—If any increase under paragraph (1) is
not a multiple of $50, such increase shall be rounded to the
nearest multiple of $50.
‘‘(h) REPORTS.—The Secretary may require—
‘‘(1) the trustee of a health savings account to make such
reports regarding such account to the Secretary and to the
account beneficiary with respect to contributions, distributions,
the return of excess contributions, and such other matters
as the Secretary determines appropriate, and
‘‘(2) any person who provides an individual with a high
deductible health plan to make such reports to the Secretary
and to the account beneficiary with respect to such plan as
the Secretary determines appropriate.
The reports required by this subsection shall be filed at such time
and in such manner and furnished to such individuals at such
time and in such manner as may be required by the Secretary.’’.
(b) DEDUCTION
ALLOWED
WHETHER
OR
NOT
INDIVIDUAL
ITEMIZES OTHER DEDUCTIONS.—Subsection (a) of section 62 of such
Code is amended by inserting after paragraph (18) the following
new paragraph:
‘‘(19) HEALTH SAVINGS ACCOUNTS.—The deduction allowed
by section 223.’’.
(c) ROLLOVERS
FROM ARCHER MSAS PERMITTED.—Subpara-
graph (A) of section 220(f)(5) of such Code (relating to rollover
contribution) is amended by inserting ‘‘or a health savings account
(as defined in section 223(d))’’ after ‘‘paid into an Archer MSA’’.
(d) EXCLUSIONS
FOR EMPLOYER CONTRIBUTIONS
TO HEALTH
SAVINGS ACCOUNTS.—
H. R. 1—412
(1) EXCLUSION
FROM
INCOME
TAX.—Section 106 of such
Code (relating to contributions by employer to accident and
health plans) is amended by adding at the end the following
new subsection:
‘‘(d) CONTRIBUTIONS TO HEALTH SAVINGS ACCOUNTS.—
‘‘(1) IN GENERAL.—In the case of an employee who is an
eligible individual (as defined in section 223(c)(1)), amounts
contributed by such employee’s employer to any health savings
account (as defined in section 223(d)) of such employee shall
be treated as employer-provided coverage for medical expenses
under an accident or health plan to the extent such amounts
do not exceed the limitation under section 223(b) (determined
without regard to this subsection) which is applicable to such
employee for such taxable year.
‘‘(2) SPECIAL RULES.—Rules similar to the rules of para-
graphs (2), (3), (4), and (5) of subsection (b) shall apply for
purposes of this subsection.
‘‘(3) CROSS REFERENCE.—
‘‘For penalty on failure by employer to make comparable con-
tributions to the health savings accounts of comparable employees,
see section 4980G.’’.
(2) EXCLUSION FROM EMPLOYMENT TAXES.—
(A) RAILROAD RETIREMENT TAX.—Subsection (e) of sec-
tion 3231 of such Code is amended by adding at the end
the following new paragraph:
‘‘(11) HEALTH SAVINGS ACCOUNT CONTRIBUTIONS.—The term
‘compensation’ shall not include any payment made to or for
the benefit of an employee if at the time of such payment
it is reasonable to believe that the employee will be able to
exclude such payment from income under section 106(d).’’.
(B) UNEMPLOYMENT
TAX.—Subsection (b) of section
3306 of such Code is amended by striking ‘‘or’’ at the
end of paragraph (16), by striking the period at the end
of paragraph (17) and inserting ‘‘; or’’, and by inserting
after paragraph (17) the following new paragraph:
‘‘(18) any payment made to or for the benefit of an employee
if at the time of such payment it is reasonable to believe
that the employee will be able to exclude such payment from
income under section 106(d).’’.
(C) WITHHOLDING TAX.—Subsection (a) of section 3401
of such Code is amended by striking ‘‘or’’ at the end of
paragraph (20), by striking the period at the end of para-
graph (21) and inserting ‘‘; or’’, and by inserting after
paragraph (21) the following new paragraph:
‘‘(22) any payment made to or for the benefit of an employee
if at the time of such payment it is reasonable to believe
that the employee will be able to exclude such payment from
income under section 106(d).’’.
(3) EMPLOYER CONTRIBUTIONS REQUIRED TO BE SHOWN ON
W–2.—Subsection (a) of section 6051 of such Code is amended
by striking ‘‘and’’ at the end of paragraph (10), by striking
the period at the end of paragraph (11) and inserting ‘‘, and’’,
and by inserting after paragraph (11) the following new para-
graph:
H. R. 1—413
‘‘(12) the amount contributed to any health savings account
(as defined in section 223(d)) of such employee or such
employee’s spouse.’’.
(4) PENALTY
FOR
FAILURE
OF
EMPLOYER
TO
MAKE
COM-
PARABLE HEALTH SAVINGS ACCOUNT CONTRIBUTIONS.—
(A) IN GENERAL.—Chapter 43 of such Code is amended
by adding after section 4980F the following new section:
‘‘SEC. 4980G. FAILURE OF EMPLOYER TO MAKE COMPARABLE HEALTH
SAVINGS ACCOUNT CONTRIBUTIONS.
‘‘(a) GENERAL RULE.—In the case of an employer who makes
a contribution to the health savings account of any employee during
a calendar year, there is hereby imposed a tax on the failure
of such employer to meet the requirements of subsection (b) for
such calendar year.
‘‘(b) RULES
AND
REQUIREMENTS.—Rules and requirements
similar to the rules and requirements of section 4980E shall apply
for purposes of this section.
‘‘(c) REGULATIONS.—The Secretary shall issue regulations to
carry out the purposes of this section, including regulations pro-
viding special rules for employers who make contributions to Archer
MSAs and health savings accounts during the calendar year.’’.
(B) CLERICAL AMENDMENT.—The table of sections for
chapter 43 of such Code is amended by adding after the
item relating to section 4980F the following new item:
‘‘Sec. 4980G. Failure of employer to make comparable health savings account con-
tributions.’’.
(e) TAX ON EXCESS CONTRIBUTIONS.—Section 4973 of such Code
(relating to tax on excess contributions to certain tax-favored
accounts and annuities) is amended—
(1) by striking ‘‘or’’ at the end of subsection (a)(3), by
inserting ‘‘or’’ at the end of subsection (a)(4), and by inserting
after subsection (a)(4) the following new paragraph:
‘‘(5) a health savings account (within the meaning of section
223(d)),’’, and
(2) by adding at the end the following new subsection:
‘‘(g) EXCESS CONTRIBUTIONS TO HEALTH SAVINGS ACCOUNTS.—
For purposes of this section, in the case of health savings accounts
(within the meaning of section 223(d)), the term ‘excess contribu-
tions’ means the sum of—
‘‘(1) the aggregate amount contributed for the taxable year
to the accounts (other than a rollover contribution described
in section 220(f)(5) or 223(f)(5)) which is neither excludable
from gross income under section 106(d) nor allowable as a
deduction under section 223 for such year, and
‘‘(2) the amount determined under this subsection for the
preceding taxable year, reduced by the sum of—
‘‘(A) the distributions out of the accounts which were
included in gross income under section 223(f)(2), and
‘‘(B) the excess (if any) of—
‘‘(i) the maximum amount allowable as a deduction
under section 223(b) (determined without regard to
section 106(d)) for the taxable year, over
‘‘(ii) the amount contributed to the accounts for
the taxable year.
H. R. 1—414
For purposes of this subsection, any contribution which is distrib-
uted out of the health savings account in a distribution to which
section 223(f)(3) applies shall be treated as an amount not contrib-
uted.’’.
(f) TAX ON PROHIBITED TRANSACTIONS.—
(1) Section 4975 of such Code (relating to tax on prohibited
transactions) is amended by adding at the end of subsection
(c) the following new paragraph:
‘‘(6) SPECIAL RULE FOR HEALTH SAVINGS ACCOUNTS.—An
individual for whose benefit a health savings account (within
the meaning of section 223(d)) is established shall be exempt
from the tax imposed by this section with respect to any trans-
action concerning such account (which would otherwise be tax-
able under this section) if, with respect to such transaction,
the account ceases to be a health savings account by reason
of the application of section 223(e)(2) to such account.’’.
(2) Paragraph (1) of section 4975(e) of such Code is
amended by redesignating subparagraphs (E) and (F) as sub-
paragraphs (F) and (G), respectively, and by inserting after
subparagraph (D) the following new subparagraph:
‘‘(E) a health savings account described in section
223(d),’’.
(g) FAILURE
TO
PROVIDE
REPORTS
ON
HEALTH
SAVINGS
ACCOUNTS.—Paragraph (2) of section 6693(a) of such Code (relating
to reports) is amended by redesignating subparagraphs (C) and
(D) as subparagraphs (D) and (E), respectively, and by inserting
after subparagraph (B) the following new subparagraph:
‘‘(C) 
section 
223(h) 
(relating 
to 
health 
savings
accounts),’’.
(h) EXCEPTION FROM CAPITALIZATION OF POLICY ACQUISITION
EXPENSES.—Subparagraph (B) of section 848(e)(1) of such Code
(defining specified insurance contract) is amended by striking ‘‘and’’
at the end of clause (iii), by striking the period at the end of
clause (iv) and inserting ‘‘, and’’, and by adding at the end the
following new clause:
‘‘(v) any contract which is a health savings account
(as defined in section 223(d)).’’.
(i) HEALTH SAVINGS ACCOUNTS MAY BE OFFERED UNDER CAFE-
TERIA PLANS.—Paragraph (2) of section 125(d) (relating to cafeteria
plan defined) is amended by adding at the end the following new
subparagraph:
‘‘(D) EXCEPTION
FOR
HEALTH
SAVINGS
ACCOUNTS.—
Subparagraph (A) shall not apply to a plan to the extent
of amounts which a covered employee may elect to have
the employer pay as contributions to a health savings
account established on behalf of the employee.’’.
(j) CLERICAL AMENDMENT.—The table of sections for part VII
of subchapter B of chapter 1 of such Code is amended by striking
the last item and inserting the following:
‘‘Sec. 223. Health savings accounts.
‘‘Sec. 224. Cross reference.’’.
(k) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years beginning after December 31, 2003.
H. R. 1—415
SEC. 1202. EXCLUSION FROM GROSS INCOME OF CERTAIN FEDERAL
SUBSIDIES FOR PRESCRIPTION DRUG PLANS.
(a) IN GENERAL.—Part III of subchapter B of chapter 1 of
the Internal Revenue Code of 1986 is amended by inserting after
section 139 the following new section:
‘‘SEC. 139A. FEDERAL SUBSIDIES FOR PRESCRIPTION DRUG PLANS.
‘‘Gross income shall not include any special subsidy payment
received under section 1860D–22 of the Social Security Act. This
section shall not be taken into account for purposes of determining
whether any deduction is allowable with respect to any cost taken
into account in determining such payment.’’.
(b) ALTERNATIVE MINIMUM TAX RELIEF.—Section 56(g)(4)(B) of
such Code is amended by inserting ‘‘or 139A’’ after ‘‘section 114’’.
(c) CONFORMING AMENDMENT.—The table of sections for part
III of subchapter B of chapter 1 of such Code is amended by
inserting after the item relating to section 139 the following new
item:
‘‘Sec. 139A. Federal subsidies for prescription drug plans.’’.
(d) EFFECTIVE DATE.—The amendments made by this section
shall apply to taxable years ending after the date of the enactment
of this Act.
SEC. 1203. EXCEPTION TO INFORMATION REPORTING REQUIREMENTS
RELATED TO CERTAIN HEALTH ARRANGEMENTS.
(a) IN GENERAL.—Section 6041 of the Internal Revenue Code
of 1986 (relating to information at source) is amended by adding
at the end the following new subsection:
‘‘(f) SECTION DOES NOT APPLY TO CERTAIN HEALTH ARRANGE-
MENTS.—This section shall not apply to any payment for medical
care (as defined in section 213(d)) made under—
‘‘(1) a flexible spending arrangement (as defined in section
106(c)(2)), or
‘‘(2) a health reimbursement arrangement which is treated
as employer-provided coverage under an accident or health
plan for purposes of section 106.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to payments made after December 31, 2002.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.