H. R. 3590—344 
‘‘(2) the Secretary determines that in the period beginning 
on July 1, 2010, and ending on December 31, 2010, there 
were extenuating circumstances. 
‘‘(d) DEFINITION OF MANUFACTURER.—In this section, the term 
‘manufacturer’ has the meaning given such term in section 1860D– 
14A(g)(5).’’. 
(b) MEDICARE COVERAGE GAP DISCOUNT PROGRAM.—Part D 
of title XVIII of the Social Security Act (42 U.S.C. 1395w–101) 
is amended by inserting after section 1860D–14 the following new 
section: 
‘‘MEDICARE COVERAGE GAP DISCOUNT PROGRAM 
‘‘SEC. 1860D–14A. (a) ESTABLISHMENT.—The Secretary shall 
establish a Medicare coverage gap discount program (in this section 
referred to as the ‘program’) by not later than July 1, 2010. Under 
the program, the Secretary shall enter into agreements described 
in subsection (b) with manufacturers and provide for the perform-
ance of the duties described in subsection (c)(1). The Secretary 
shall establish a model agreement for use under the program by 
not later than April 1, 2010, in consultation with manufacturers, 
and allow for comment on such model agreement. 
‘‘(b) TERMS OF AGREEMENT.— 
‘‘(1) IN GENERAL.— 
‘‘(A) AGREEMENT.—An agreement under this section 
shall require the manufacturer to provide applicable bene-
ficiaries access to discounted prices for applicable drugs 
of the manufacturer. 
‘‘(B) PROVISION OF DISCOUNTED PRICES AT THE POINT- 
OF-SALE.—Except as provided in subsection (c)(1)(A)(iii), 
such discounted prices shall be provided to the applicable 
beneficiary at the pharmacy or by the mail order service 
at the point-of-sale of an applicable drug. 
‘‘(C) TIMING OF AGREEMENT.— 
‘‘(i) SPECIAL
RULE
FOR
2010
AND
2011.—In order 
for an agreement with a manufacturer to be in effect 
under this section with respect to the period beginning 
on July 1, 2010, and ending on December 31, 2011, 
the manufacturer shall enter into such agreement not 
later than May 1, 2010. 
‘‘(ii) 2012 AND SUBSEQUENT YEARS.—In order for 
an agreement with a manufacturer to be in effect under 
this section with respect to plan year 2012 or a subse-
quent plan year, the manufacturer shall enter into 
such agreement (or such agreement shall be renewed 
under paragraph (4)(A)) not later than January 30 
of the preceding year. 
‘‘(2) PROVISION OF APPROPRIATE DATA.—Each manufacturer 
with an agreement in effect under this section shall collect 
and have available appropriate data, as determined by the 
Secretary, to ensure that it can demonstrate to the Secretary 
compliance with the requirements under the program. 
‘‘(3) COMPLIANCE WITH REQUIREMENTS FOR ADMINISTRATION 
OF PROGRAM.—Each manufacturer with an agreement in effect 
under this section shall comply with requirements imposed 
by the Secretary or a third party with a contract under sub-
section (d)(3), as applicable, for purposes of administering the
H. R. 3590—345 
program, including any determination under clause (i) of sub-
section (c)(1)(A) or procedures established under such sub-
section (c)(1)(A). 
‘‘(4) LENGTH OF AGREEMENT.— 
‘‘(A) IN GENERAL.—An agreement under this section 
shall be effective for an initial period of not less than 
18 months and shall be automatically renewed for a period 
of not less than 1 year unless terminated under subpara-
graph (B). 
‘‘(B) TERMINATION.— 
‘‘(i) BY THE SECRETARY.—The Secretary may pro-
vide for termination of an agreement under this section 
for a knowing and willful violation of the requirements 
of the agreement or other good cause shown. Such 
termination shall not be effective earlier than 30 days 
after the date of notice to the manufacturer of such 
termination. The Secretary shall provide, upon request, 
a manufacturer with a hearing concerning such a 
termination, and such hearing shall take place prior 
to the effective date of the termination with sufficient 
time for such effective date to be repealed if the Sec-
retary determines appropriate. 
‘‘(ii) BY A MANUFACTURER.—A manufacturer may 
terminate an agreement under this section for any 
reason. Any such termination shall be effective, with 
respect to a plan year— 
‘‘(I) if the termination occurs before January 
30 of a plan year, as of the day after the end 
of the plan year; and 
‘‘(II) if the termination occurs on or after 
January 30 of a plan year, as of the day after 
the end of the succeeding plan year. 
‘‘(iii) EFFECTIVENESS OF TERMINATION.—Any termi-
nation under this subparagraph shall not affect dis-
counts for applicable drugs of the manufacturer that 
are due under the agreement before the effective date 
of its termination. 
‘‘(iv) NOTICE TO THIRD PARTY.—The Secretary shall 
provide notice of such termination to a third party 
with a contract under subsection (d)(3) within not less 
than 30 days before the effective date of such termi-
nation. 
‘‘(c) DUTIES DESCRIBED AND SPECIAL RULE FOR SUPPLEMENTAL 
BENEFITS.— 
‘‘(1) DUTIES DESCRIBED.—The duties described in this sub-
section are the following: 
‘‘(A) ADMINISTRATION OF PROGRAM.—Administering the 
program, including— 
‘‘(i) the determination of the amount of the dis-
counted price of an applicable drug of a manufacturer; 
‘‘(ii) except as provided in clause (iii), the establish-
ment of procedures under which discounted prices are 
provided to applicable beneficiaries at pharmacies or 
by mail order service at the point-of-sale of an 
applicable drug; 
‘‘(iii) in the case where, during the period beginning 
on July 1, 2010, and ending on December 31, 2011,
H. R. 3590—346 
it is not practicable to provide such discounted prices 
at the point-of-sale (as described in clause (ii)), the 
establishment of procedures to provide such discounted 
prices as soon as practicable after the point-of-sale; 
‘‘(iv) the establishment of procedures to ensure 
that, not later than the applicable number of calendar 
days after the dispensing of an applicable drug by 
a pharmacy or mail order service, the pharmacy or 
mail order service is reimbursed for an amount equal 
to the difference between— 
‘‘(I) the negotiated price of the applicable drug; 
and 
‘‘(II) the discounted price of the applicable 
drug; 
‘‘(v) the establishment of procedures to ensure that 
the discounted price for an applicable drug under this 
section is applied before any coverage or financial 
assistance under other health benefit plans or pro-
grams that provide coverage or financial assistance 
for the purchase or provision of prescription drug cov-
erage on behalf of applicable beneficiaries as the Sec-
retary may specify; 
‘‘(vi) the establishment of procedures to implement 
the special rule for supplemental benefits under para-
graph (2); and 
‘‘(vii) providing a reasonable dispute resolution 
mechanism to resolve disagreements between manufac-
turers, applicable beneficiaries, and the third party 
with a contract under subsection (d)(3). 
‘‘(B) MONITORING COMPLIANCE.— 
‘‘(i) IN
GENERAL.—The Secretary shall monitor 
compliance by a manufacturer with the terms of an 
agreement under this section. 
‘‘(ii) NOTIFICATION.—If a third party with a con-
tract under subsection (d)(3) determines that the 
manufacturer is not in compliance with such agree-
ment, the third party shall notify the Secretary of 
such noncompliance for appropriate enforcement under 
subsection (e). 
‘‘(C) COLLECTION OF DATA FROM PRESCRIPTION DRUG 
PLANS AND MA–PD PLANS.—The Secretary may collect appro-
priate data from prescription drug plans and MA–PD plans 
in a timeframe that allows for discounted prices to be 
provided for applicable drugs under this section. 
‘‘(2) SPECIAL RULE FOR SUPPLEMENTAL BENEFITS.—For plan 
year 2010 and each subsequent plan year, in the case where 
an applicable beneficiary has supplemental benefits with 
respect to applicable drugs under the prescription drug plan 
or MA–PD plan that the applicable beneficiary is enrolled in, 
the applicable beneficiary shall not be provided a discounted 
price for an applicable drug under this section until after such 
supplemental benefits have been applied with respect to the 
applicable drug. 
‘‘(d) ADMINISTRATION.— 
‘‘(1) IN GENERAL.—Subject to paragraph (2), the Secretary 
shall provide for the implementation of this section, including 
the performance of the duties described in subsection (c)(1).
H. R. 3590—347 
‘‘(2) LIMITATION.— 
‘‘(A) IN GENERAL.—Subject to subparagraph (B), in pro-
viding for such implementation, the Secretary shall not 
receive or distribute any funds of a manufacturer under 
the program. 
‘‘(B) EXCEPTION.—The limitation under subparagraph 
(A) shall not apply to the Secretary with respect to drugs 
dispensed during the period beginning on July 1, 2010, 
and ending on December 31, 2010, but only if the Secretary 
determines that the exception to such limitation under 
this subparagraph is necessary in order for the Secretary 
to begin implementation of this section and provide 
applicable beneficiaries timely access to discounted prices 
during such period. 
‘‘(3) CONTRACT WITH THIRD PARTIES.—The Secretary shall 
enter into a contract with 1 or more third parties to administer 
the requirements established by the Secretary in order to carry 
out this section. At a minimum, the contract with a third 
party under the preceding sentence shall require that the third 
party— 
‘‘(A) receive and transmit information between the Sec-
retary, manufacturers, and other individuals or entities 
the Secretary determines appropriate; 
‘‘(B) receive, distribute, or facilitate the distribution 
of funds of manufacturers to appropriate individuals or 
entities in order to meet the obligations of manufacturers 
under agreements under this section; 
‘‘(C) provide adequate and timely information to manu-
facturers, consistent with the agreement with the manufac-
turer under this section, as necessary for the manufacturer 
to fulfill its obligations under this section; and 
‘‘(D) permit manufacturers to conduct periodic audits, 
directly or through contracts, of the data and information 
used by the third party to determine discounts for 
applicable drugs of the manufacturer under the program. 
‘‘(4) PERFORMANCE
REQUIREMENTS.—The Secretary shall 
establish performance requirements for a third party with a 
contract under paragraph (3) and safeguards to protect the 
independence and integrity of the activities carried out by the 
third party under the program under this section. 
‘‘(5) IMPLEMENTATION.—The Secretary may implement the 
program under this section by program instruction or otherwise. 
‘‘(6) ADMINISTRATION.—Chapter 35 of title 44, United States 
Code, shall not apply to the program under this section. 
‘‘(e) ENFORCEMENT.— 
‘‘(1) AUDITS.—Each manufacturer with an agreement in 
effect under this section shall be subject to periodic audit by 
the Secretary. 
‘‘(2) CIVIL MONEY PENALTY.— 
‘‘(A) IN GENERAL.—The Secretary shall impose a civil 
money penalty on a manufacturer that fails to provide 
applicable beneficiaries discounts for applicable drugs of 
the manufacturer in accordance with such agreement for 
each such failure in an amount the Secretary determines 
is commensurate with the sum of—