opinion of the type described in subparagraphs (A)
through (C) of section 2103(c)(4).
‘‘(C) CONTINUOUS
PRESCRIPTION
DRUG
COV-
ERAGE.—An individual is considered for purposes of
this part to be maintaining continuous prescription
drug coverage on and after the date the individual first
qualifies to elect prescription drug coverage under this
part if the individual establishes that as of such date
the individual is covered under any of the following pre-
scription drug coverage and before the date that is the
last day of the 63-day period that begins on the date
of termination of the particular prescription drug cov-
erage involved (regardless of whether the individual
subsequently obtains any of the following prescription
drug coverage):
‘‘(i) COVERAGE UNDER PRESCRIPTION DRUG
PLAN
OR
MEDICARE+CHOICE
PLAN.—Qualified
prescription drug coverage under a prescription
drug plan or under a Medicare+Choice plan.
‘‘(ii) MEDICAID
PRESCRIPTION
DRUG
COV-
ERAGE.—Prescription drug coverage under a med-
icaid plan under title XIX, including through the
Program of All-inclusive Care for the Elderly
(PACE) under section 1934, through a social
health maintenance organization (referred to in
section 4104(c) of the Balanced Budget Act of
1997), or through a Medicare+Choice project that
demonstrates the application of capitation payment
rates for frail elderly medicare beneficiaries
through the use of a interdisciplinary team and
through the provision of primary care services to
such beneficiaries by means of such a team at the
nursing facility involved.
‘‘(iii) PRESCRIPTION DRUG COVERAGE UNDER
GROUP HEALTH PLAN.—Any outpatient prescrip-
tion drug coverage under a group health plan, in-
cluding a health benefits plan under the Federal
Employees Health Benefit Plan under chapter 89
of title 5, United States Code, and a qualified re-
tiree prescription drug plan as defined in section
1860H(f)(1), but only if (subject to subparagraph
(E)(ii)) the coverage provides benefits at least
equivalent to the benefits under a qualified pre-
scription drug plan.
‘‘(iv) PRESCRIPTION DRUG COVERAGE UNDER
CERTAIN
MEDIGAP
POLICIES.—Coverage under a
medicare supplemental policy under section 1882
that provides benefits for prescription drugs
(whether or not such coverage conforms to the
standards for packages of benefits under section
1882(p)(1)), but only if the policy was in effect on
January 1, 2005, and if (subject to subparagraph
(E)(ii)) the coverage provides benefits at least
equivalent to the benefits under a qualified pre-
scription drug plan.
‘‘(v) STATE
PHARMACEUTICAL
ASSISTANCE
PROGRAM.—Coverage of prescription drugs under a
State pharmaceutical assistance program, but only
if (subject to subparagraph (E)(ii)) the coverage
provides benefits at least equivalent to the benefits
under a qualified prescription drug plan.
‘‘(vi) VETERANS’ COVERAGE OF PRESCRIPTION
DRUGS.—Coverage of prescription drugs for vet-
erans under chapter 17 of title 38, United States
Code, but only if (subject to subparagraph (E)(ii))
the coverage provides benefits at least equivalent to
the benefits under a qualified prescription drug
plan.
‘‘(D) CERTIFICATION.—For purposes of carrying
out this paragraph, the certifications of the type de-
scribed in sections 2701(e) of the Public Health Service
Act and in section 9801(e) of the Internal Revenue
Code shall also include a statement for the period of
coverage of whether the individual involved had pre-
scription drug coverage described in subparagraph (C).
‘‘(E) DISCLOSURE.—
‘‘(i) IN
GENERAL.—Each entity that offers
coverage of the type described in clause (iii), (iv),
(v), or (vi) of subparagraph (C) shall provide for
disclosure, consistent with standards established by
the Administrator, of whether such coverage pro-
vides benefits at least equivalent to the benefits
under a qualified prescription drug plan.
‘‘(ii) WAIVER OF LIMITATIONS.—An individual
may apply to the Administrator to waive the re-
quirement that coverage of such type provide bene-
fits at least equivalent to the benefits under a
qualified prescription drug plan, if the individual
establishes that the individual was not adequately
informed that such coverage did not provide such
level of benefits.
‘‘(F) CONSTRUCTION.—Nothing in this section
shall be construed as preventing the disenrollment of
an individual from a prescription drug plan or a
Medicare+Choice plan based on the termination of an
election described in section 1851(g)(3), including for
non-payment of premiums or for other reasons speci-
fied in subsection (d)(3), which takes into account a
grace period described in section 1851(g)(3)(B)(i).
‘‘(3) NONDISCRIMINATION.—A PDP sponsor offering
a prescription drug plan shall not establish a service area
in a manner that would discriminate based on health or
economic status of potential enrollees.
‘‘(d) EFFECTIVE DATE OF ELECTIONS.—
‘‘(1) IN GENERAL.—Except as provided in this section,
the Administrator shall provide that elections under sub-
section (b) take effect at the same time as the Adminis-
trator provides that similar elections under section 1851(e)
take effect under section 1851(f).
‘‘(2) NO ELECTION EFFECTIVE BEFORE 2005.—In no
case shall any election take effect before January 1, 2005.
‘‘(3) TERMINATION.—The Administrator shall provide
for the termination of an election in the case of—
‘‘(A) termination of coverage under both part A
and part B; and
‘‘(B) termination of elections described in section
1851(g)(3) (including failure to pay required pre-
miums).
‘‘SEC. 1860B. REQUIREMENTS FOR QUALIFIED PRE-
SCRIPTION DRUG COVERAGE.
‘‘(a) REQUIREMENTS.—
‘‘(1) IN GENERAL.—For purposes of this part and
part C, the term ‘qualified prescription drug coverage’
means either of the following:
‘‘(A) STANDARD COVERAGE WITH ACCESS TO NE-
GOTIATED PRICES.—Standard coverage (as defined in
subsection (b)) and access to negotiated prices under
subsection (d).
‘‘(B) ACTUARIALLY EQUIVALENT COVERAGE WITH
ACCESS TO NEGOTIATED PRICES.—Coverage of covered
outpatient drugs which meets the alternative coverage
requirements of subsection (c) and access to negotiated
prices under subsection (d), but only if it is approved
by the Administrator, as provided under subsection (c).
‘‘(2) PERMITTING
ADDITIONAL
OUTPATIENT
PRE-
SCRIPTION DRUG COVERAGE.—
‘‘(A) IN GENERAL.—Subject to subparagraph (B),
nothing in this part shall be construed as preventing
qualified prescription drug coverage from including cov-
erage of covered outpatient drugs that exceeds the cov-
erage required under paragraph (1), but any such addi-
tional coverage shall be limited to coverage of covered
outpatient drugs.
‘‘(B) DISAPPROVAL
AUTHORITY.—The Adminis-
trator shall review the offering of qualified prescription
drug coverage under this part or part C. If the Admin-
istrator finds that, in the case of a qualified prescrip-
tion drug coverage under a prescription drug plan or
a Medicare+Choice plan, that the organization or spon-
sor offering the coverage is engaged in activities in-
tended to discourage enrollment of classes of eligible
medicare beneficiaries obtaining coverage through the
plan on the basis of their higher likelihood of utilizing
prescription drug coverage, the Administrator may ter-
minate the contract with the sponsor or organization
under this part or part C.
‘‘(3) APPLICATION
OF
SECONDARY
PAYOR
PROVI-
SIONS.—The provisions of section 1852(a)(4) shall apply
under this part in the same manner as they apply under
part C.
‘‘(b) STANDARD COVERAGE.—For purposes of this part,
the ‘standard coverage’ is coverage of covered outpatient drugs
(as defined in subsection (f)) that meets the following require-
ments:
‘‘(1) DEDUCTIBLE.—The coverage has an annual
deductible—
‘‘(A) for 2005, that is equal to $250; or
‘‘(B) for a subsequent year, that is equal to the
amount specified under this paragraph for the previous
year increased by the percentage specified in paragraph
(5) for the year involved.
Any amount determined under subparagraph (B) that is
not a multiple of $10 shall be rounded to the nearest mul-
tiple of $10.
‘‘(2) LIMITS ON COST-SHARING.—
‘‘(A) IN GENERAL.—The coverage has cost-sharing
(for costs above the annual deductible specified in para-
graph (1) and up to the initial coverage limit under
paragraph (3)) as follows:
‘‘(i) FIRST
COPAYMENT
RANGE.—For costs
above the annual deductible specified in paragraph
(1) and up to amount specified in subparagraph
(C), the cost-sharing—
‘‘(I) is equal to 20 percent; or
‘‘(II) is actuarially equivalent (using proc-
esses established under subsection (e)) to an
average expected payment of 20 percent of
such costs.
‘‘(ii) SECONDARY
COPAYMENT
RANGE.—For
costs above the amount specified in subparagraph
(C) and up to the initial coverage limit, the cost-
sharing—
‘‘(I) is equal to 50 percent; or
‘‘(II) is actuarially consistent (using proc-
esses established under subsection (e)) with an
average expected payment of 50 percent of
such costs.
‘‘(B) USE OF TIERED COPAYMENTS.—Nothing in
this part shall be construed as preventing a PDP spon-
sor from applying tiered copayments, so long as such
tiered copayments are consistent with subparagraph
(A).
‘‘(C) 
INITIAL
COPAYMENT
THRESHOLD.—The
amount specified in this subparagraph—
‘‘(i) for 2005, is equal to $1,000; or
‘‘(ii) for a subsequent year, is equal to the
amount specified in this subparagraph for the pre-
vious year, increased by the annual percentage in-
crease described in paragraph (5) for the year in-
volved.
Any amount determined under clause (ii) that is not a
multiple of $10 shall be rounded to the nearest mul-
tiple of $10.
‘‘(3) INITIAL COVERAGE LIMIT.—Subject to paragraph
(4), the coverage has an initial coverage limit on the max-
imum costs that may be recognized for payment purposes
(above the annual deductible)—
‘‘(A) for 2005, that is equal to $2,000; or
‘‘(B) for a subsequent year, that is equal to the
amount specified in this paragraph for the previous
year, increased by the annual percentage increase de-
scribed in paragraph (5) for the year involved.
Any amount determined under subparagraph (B) that is
not a multiple of $25 shall be rounded to the nearest mul-
tiple of $25.
‘‘(4) CATASTROPHIC PROTECTION.—
‘‘(A) IN
GENERAL.—Notwithstanding paragraph
(3), the coverage provides benefits with no cost-sharing
after the individual has incurred costs (as described in
subparagraph (C)) for covered outpatient drugs in a
year equal to the annual out-of-pocket threshold speci-
fied in subparagraph (B).
‘‘(B) ANNUAL OUT-OF-POCKET THRESHOLD.—For
purposes of this part, the ‘annual out-of-pocket thresh-
old’ specified in this subparagraph—
‘‘(i) for 2005, is equal to $4,500; or
‘‘(ii) for a subsequent year, is equal to the
amount specified in this subparagraph for the pre-
vious year, increased by the annual percentage in-
crease described in paragraph (5) for the year in-
volved.
Any amount determined under clause (ii) that is not a
multiple of $100 shall be rounded to the nearest mul-
tiple of $100.
‘‘(C) APPLICATION.—In applying subparagraph
(A)—
‘‘(i) incurred costs shall only include costs in-
curred for the annual deductible (described in para-
graph (1)), cost-sharing (described in paragraph
(2)), and amounts for which benefits are not pro-
vided because of the application of the initial cov-
erage limit described in paragraph (3); and
‘‘(ii) such costs shall be treated as incurred
only if they are paid by the individual, under sec-
tion 1860G, or under title XIX and the individual
is not reimbursed (through insurance or otherwise)
by another person for such costs.
‘‘(5) ANNUAL PERCENTAGE INCREASE.—For purposes
of this part, the annual percentage increase specified in
this paragraph for a year is equal to the annual percentage
increase in average per capita aggregate expenditures for
covered outpatient drugs in the United States for medicare
beneficiaries, as determined by the Administrator for the
12-month period ending in July of the previous year.
‘‘(c) ALTERNATIVE COVERAGE REQUIREMENTS.—A pre-
scription drug plan or Medicare+Choice plan may provide a
different prescription drug benefit design from the standard
coverage described in subsection (b) so long as the following re-
quirements are met and the plan applies for, and receives, the
approval of the Administrator for such benefit design:
‘‘(1) ASSURING AT LEAST ACTUARIALLY EQUIVALENT
COVERAGE.—
‘‘(A) ASSURING
EQUIVALENT
VALUE
OF
TOTAL
COVERAGE.—The actuarial value of the total coverage
(as determined under subsection (e)) is at least equal
to the actuarial value (as so determined) of standard
coverage.
‘‘(B) 
ASSURING
EQUIVALENT
UNSUBSIDIZED
VALUE OF COVERAGE.—The unsubsidized value of the
coverage is at least equal to the unsubsidized value of
standard coverage. For purposes of this subparagraph,
the unsubsidized value of coverage is the amount by
which the actuarial value of the coverage (as deter-
mined under subsection (e)) exceeds the actuarial value
of the subsidy payments under section 1860H with re-
spect to such coverage.
‘‘(C) ASSURING STANDARD PAYMENT FOR COSTS
AT
INITIAL
COVERAGE
LIMIT.—The coverage is de-
signed, based upon an actuarially representative pat-
tern of utilization (as determined under subsection (e)),
to provide for the payment, with respect to costs in-
curred that are equal to the initial coverage limit under
subsection (b)(3), of an amount equal to at least the
sum of the following products:
‘‘(i) FIRST COPAYMENT RANGE.—The product
of—
‘‘(I) the amount by which the initial co-
payment threshold described in subsection
(b)(2)(C) exceeds the deductible described in
subsection (b)(1); and
‘‘(II) 100 percent minus the cost-sharing
percentage 
specified 
in 
subsection
(b)(2)(A)(i)(I).
‘‘(ii) SECONDARY
COPAYMENT
RANGE.—The
product of—
‘‘(I) the amount by which the initial cov-
erage limit described in subsection (b)(3) ex-
ceeds the initial copayment threshold described
in subsection (b)(2)(C); and
‘‘(II) 100 percent minus the cost-sharing
percentage 
specified 
in 
subsection
(b)(2)(A)(ii)(I).
‘‘(2) CATASTROPHIC PROTECTION.—The coverage pro-
vides for beneficiaries the catastrophic protection described
in subsection (b)(4).
‘‘(d) ACCESS TO NEGOTIATED PRICES.—
‘‘(1) IN GENERAL.—Under qualified prescription drug
coverage offered by a PDP sponsor or a Medicare+Choice
organization, the sponsor or organization shall provide
beneficiaries with access to negotiated prices (including ap-
plicable discounts) used for payment for covered outpatient
drugs, regardless of the fact that no benefits may be pay-
able under the coverage with respect to such drugs because
of the application of cost-sharing or an initial coverage
limit (described in subsection (b)(3)). Insofar as a State
elects to provide medical assistance under title XIX for a
drug based on the prices negotiated by a prescription drug
plan under this part, the requirements of section 1927 shall
not apply to such drugs.
‘‘(2) 
DISCLOSURE.—The 
PDP 
sponsor 
or
Medicare+Choice organization shall disclose to the Admin-
istrator (in a manner specified by the Administrator) the
extent to which discounts or rebates made available to the
sponsor or organization by a manufacturer are passed
through to enrollees through pharmacies and other dis-
pensers 
or 
otherwise. 
The 
provisions 
of 
section
1927(b)(3)(D) shall apply to information disclosed to the
Administrator under this paragraph in the same manner as
such provisions apply to information disclosed under such
section.
‘‘(e) ACTUARIAL VALUATION; DETERMINATION
OF AN-
NUAL PERCENTAGE INCREASES.—
‘‘(1) PROCESSES.—For purposes of this section, the
Administrator shall establish processes and methods—
‘‘(A) for determining the actuarial valuation of
prescription drug coverage, including—
‘‘(i) an actuarial valuation of standard cov-
erage and of the reinsurance subsidy payments
under section 1860H;
‘‘(ii) the use of generally accepted actuarial
principles and methodologies; and
‘‘(iii) applying the same methodology for de-
terminations of alternative coverage under sub-
section (c) as is used with respect to determina-
tions of standard coverage under subsection (b);
and
‘‘(B) for determining annual percentage increases
described in subsection (b)(5).
‘‘(2) USE OF OUTSIDE ACTUARIES.—Under the proc-
esses under paragraph (1)(A), PDP sponsors and
Medicare+Choice organizations may use actuarial opinions
certified by independent, qualified actuaries to establish ac-
tuarial values.
‘‘(f) COVERED OUTPATIENT DRUGS DEFINED.—
‘‘(1) IN GENERAL.—Except as provided in this sub-
section, for purposes of this part, the term ‘covered out-
patient drug’ means—
‘‘(A) a drug that may be dispensed only upon a
prescription and that is described in subparagraph
(A)(i) or (A)(ii) of section 1927(k)(2); or
‘‘(B) a biological product described in clauses (i)
through (iii) of subparagraph (B) of such section or in-
sulin described in subparagraph (C) of such section,
and such term includes a vaccine licensed under section
351 of the Public Health Service Act and any use of a cov-
ered outpatient drug for a medically accepted indication (as
defined in section 1927(k)(6)).
‘‘(2) EXCLUSIONS.—
‘‘(A) IN GENERAL.—Such term does not include
drugs or classes of drugs, or their medical uses, which
may be excluded from coverage or otherwise restricted
under section 1927(d)(2), other than subparagraph (E)
thereof (relating to smoking cessation agents), or under
section 1927(d)(3).
‘‘(B) AVOIDANCE OF DUPLICATE COVERAGE.—A
drug prescribed for an individual that would otherwise
be a covered outpatient drug under this part shall not
be so considered if payment for such drug is available
under part A or B for an individual entitled to benefits
under part A and enrolled under part B.
‘‘(3) APPLICATION OF FORMULARY RESTRICTIONS.—A
drug prescribed for an individual that would otherwise be
a covered outpatient drug under this part shall not be so
considered under a plan if the plan excludes the drug under
a formulary and such exclusion is not successfully appealed
under section 1860C(f)(2).
‘‘(4) APPLICATION
OF
GENERAL
EXCLUSION
PROVI-
SIONS.—A prescription drug plan or Medicare+Choice plan
may exclude from qualified prescription drug coverage any
covered outpatient drug—
‘‘(A) for which payment would not be made if sec-
tion 1862(a) applied to part D; or
‘‘(B) which are not prescribed in accordance with
the plan or this part.
Such exclusions are determinations subject to reconsider-
ation and appeal pursuant to section 1860C(f).
‘‘SEC. 1860C. BENEFICIARY PROTECTIONS FOR QUALI-
FIED PRESCRIPTION DRUG COVERAGE.
‘‘(a) GUARANTEED ISSUE, COMMUNITY-RELATED PRE-
MIUMS, 
ACCESS
TO
NEGOTIATED
PRICES, 
AND
NON-
DISCRIMINATION.—For provisions requiring guaranteed issue,
community-rated premiums, access to negotiated prices, and
nondiscrimination, see sections 1860A(c)(1), 1860A(c)(2),
1860B(d), and 1860F(b), respectively.
‘‘(b) DISSEMINATION OF INFORMATION.—
‘‘(1) GENERAL INFORMATION.—A PDP sponsor shall
disclose, in a clear, accurate, and standardized form to
each enrollee with a prescription drug plan offered by the
sponsor under this part at the time of enrollment and at
least annually thereafter, the information described in sec-
tion 1852(c)(1) relating to such plan. Such information in-
cludes the following:
‘‘(A) Access to covered outpatient drugs, including
access through pharmacy networks.
‘‘(B) How any formulary used by the sponsor
functions.
‘‘(C) Co-payments and deductible requirements,
including the identification of the tiered or other co-
payment level applicable to each drug (or class of
drugs).
‘‘(D) Grievance and appeals procedures.
‘‘(2) DISCLOSURE UPON REQUEST OF GENERAL COV-
ERAGE, UTILIZATION, AND
GRIEVANCE
INFORMATION.—
Upon request of an individual eligible to enroll under a pre-
scription drug plan, the PDP sponsor shall provide the in-
formation described in section 1852(c)(2) (other than sub-
paragraph (D)) to such individual.
‘‘(3) RESPONSE TO BENEFICIARY QUESTIONS.—Each
PDP sponsor offering a prescription drug plan shall have
a mechanism for providing specific information to enrollees
upon request. The sponsor shall make available on a timely
basis, through an Internet website and in writing upon re-
quest, information on specific changes in its formulary.
‘‘(4) CLAIMS INFORMATION.—Each PDP sponsor of-
fering a prescription drug plan must furnish to enrolled in-
dividuals in a form easily understandable to such individ-
uals an explanation of benefits (in accordance with section
1806(a) or in a comparable manner) and a notice of the
benefits in relation to initial coverage limit and annual out-
of-pocket threshold for the current year, whenever prescrip-
tion drug benefits are provided under this part (except that
such notice need not be provided more often than monthly).
‘‘(c) ACCESS TO COVERED BENEFITS.—
‘‘(1) ASSURING PHARMACY ACCESS.—
‘‘(A) IN GENERAL.—The PDP sponsor of the pre-
scription drug plan shall secure the participation in its
network of a sufficient number of pharmacies that dis-
pense (other than by mail order) drugs directly to pa-
tients to ensure convenient access (as determined by
the Administrator and including adequate emergency
access) for enrolled beneficiaries, in accordance with
standards established under section 1860D(e) that en-
sure such convenient access.
‘‘(B) USE
OF
POINT-OF-SERVICE
SYSTEM.—A
PDP sponsor shall establish an optional point-of-service
method of operation under which—
‘‘(i) the plan provides access to any or all
pharmacies that are not participating pharmacies
in its network; and
‘‘(ii) the plan may charge beneficiaries through
adjustments in premiums and copayments any ad-
ditional costs associated with the point-of-service
option.
The additional copayments so charged shall not count
toward the application of section 1860B(b).
‘‘(2) USE OF STANDARDIZED TECHNOLOGY.—
‘‘(A) IN GENERAL.—The PDP sponsor of a pre-
scription drug plan shall issue (and reissue, as appro-
priate) such a card (or other technology) that may be
used by an enrolled beneficiary to assure access to ne-
gotiated prices under section 1860B(d) for the pur-
chase of prescription drugs for which coverage is not
otherwise provided under the prescription drug plan.
‘‘(B) STANDARDS.—
‘‘(i) DEVELOPMENT.—The Administrator shall
provide for the development of national standards
relating to a standardized format for the card or
other technology referred to in subparagraph (A).
Such standards shall be compatible with standards
established under part C of title XI.
‘‘(ii) 
APPLICATION
OF
ADVISORY
TASK
FORCE.—The advisory task force established under
subsection (d)(3)(B)(ii) shall provide recommenda-
tions to the Administrator under such subsection
regarding the standards developed under clause (i).
‘‘(3) REQUIREMENTS ON DEVELOPMENT AND APPLICA-
TION OF FORMULARIES.—If a PDP sponsor of a prescrip-
tion drug plan uses a formulary, the following requirements
must be met:
‘‘(A) PHARMACY AND THERAPEUTIC (P&T) COM-
MITTEE.—The sponsor must establish a pharmacy and
therapeutic committee that develops and reviews the
formulary. Such committee shall include at least one
physician and at least one pharmacist both with exper-
tise in the care of elderly or disabled persons and a ma-
jority of its members shall consist of individuals who
are a physician or a pharmacist (or both).
‘‘(B) FORMULARY DEVELOPMENT.—In developing
and reviewing the formulary, the committee shall base
clinical decisions on the strength of scientific evidence
and standards of practice, including assessing peer-re-
viewed medical literature, such as randomized clinical
trials, pharmacoeconomic studies, outcomes research
data, and such other information as the committee de-
termines to be appropriate.
‘‘(C) INCLUSION OF DRUGS IN ALL THERAPEUTIC
CATEGORIES.—The formulary must include drugs with-
in each therapeutic category and class of covered out-
patient drugs (although not necessarily for all drugs
within such categories and classes).
‘‘(D) PROVIDER
EDUCATION.—The committee
shall establish policies and procedures to educate and
inform health care providers concerning the formulary.
‘‘(E) NOTICE
BEFORE
REMOVING
DRUGS
FROM
FORMULARY.—Any removal of a drug from a formulary
shall take effect only after appropriate notice is made
available to beneficiaries and physicians.
‘‘(F) GRIEVANCES AND APPEALS RELATING TO AP-
PLICATION OF FORMULARIES.—For provisions relating
to grievances and appeals of coverage, see subsections
(e) and (f).
‘‘(d) COST AND UTILIZATION MANAGEMENT; QUALITY AS-
SURANCE; MEDICATION THERAPY MANAGEMENT PROGRAM.—
‘‘(1) IN GENERAL.—The PDP sponsor shall have in
place with respect to covered outpatient drugs—
‘‘(A) an effective cost and drug utilization man-
agement program, including medically appropriate in-
centives to use generic drugs and therapeutic inter-
change, when appropriate;
‘‘(B) quality assurance measures and systems to
reduce medical errors and adverse drug interactions,
including a medication therapy management program
described in paragraph (2) and for years beginning
with 2006, an electronic prescription program described
in paragraph (3); and
‘‘(C) a program to control fraud, abuse, and
waste.
Nothing in this section shall be construed as impairing a
PDP sponsor from applying cost management tools (includ-
ing differential payments) under all methods of operation.
‘‘(2) MEDICATION
THERAPY
MANAGEMENT
PRO-
GRAM.—
‘‘(A) IN GENERAL.—A medication therapy man-
agement program described in this paragraph is a pro-
gram of drug therapy management and medication ad-
ministration that is designed to assure, with respect to
beneficiaries with chronic diseases (such as diabetes,
asthma, hypertension, and congestive heart failure) or
multiple prescriptions, that covered outpatient drugs
under the prescription drug plan are appropriately used
to achieve therapeutic goals and reduce the risk of ad-
verse events, including adverse drug interactions.
‘‘(B) ELEMENTS.—Such program may include—
‘‘(i) enhanced beneficiary understanding of
such appropriate use through beneficiary education,
counseling, and other appropriate means;
‘‘(ii) increased beneficiary adherence with pre-
scription medication regimens through medication
refill reminders, special packaging, and other ap-
propriate means; and
‘‘(iii) detection of patterns of overuse and
underuse of prescription drugs.
‘‘(C) DEVELOPMENT OF PROGRAM IN COOPERA-
TION
WITH
LICENSED
PHARMACISTS.—The program
shall be developed in cooperation with licensed phar-
macists and physicians.
‘‘(D) CONSIDERATIONS IN PHARMACY FEES.—The
PDP sponsor of a prescription drug program shall take
into account, in establishing fees for pharmacists and
others providing services under the medication therapy
management program, the resources and time used in
implementing the program.
‘‘(3) ELECTRONIC PRESCRIPTION PROGRAM.—
‘‘(A) IN
GENERAL.—An electronic prescription
drug program described in this paragraph is a program
that includes at least the following components, con-
sistent with national standards established under sub-
paragraph (B):
‘‘(i) ELECTRONIC TRANSMITTAL OF PRESCRIP-
TIONS.—Prescriptions are only received electroni-
cally, except in emergency cases and other excep-
tional circumstances recognized by the Adminis-
trator.
‘‘(ii) PROVISION
OF
INFORMATION
TO
PRE-
SCRIBING HEALTH CARE PROFESSIONAL.—The pro-
gram provides, upon transmittal of a prescription
by a prescribing health care professional, for trans-
mittal by the pharmacist to the professional of in-
formation that includes—
‘‘(I) information (to the extent available
and feasible) on the drugs being prescribed for
that patient and other information relating to
the medical history or condition of the patient
that may be relevant to the appropriate pre-
scription for that patient;
‘‘(II) cost-effective alternatives (if any) for
the use of the drug prescribed; and
‘‘(III) information on the drugs included
in the applicable formulary.
To the extent feasible, such program shall permit
the prescribing health care professional to provide
(and be provided) related information on an inter-
active, real-time basis.
‘‘(B) STANDARDS.—
‘‘(i) DEVELOPMENT.—The Administrator shall
provide for the development of national standards
relating to the electronic prescription drug program
described in subparagraph (A). Such standards
shall be compatible with standards established
under part C of title XI.
‘‘(ii) ADVISORY TASK FORCE.—In developing
such standards and the standards described in sub-
section (c)(2)(B)(i) the Administrator shall estab-
lish a task force that includes representatives of
physicians, hospitals, pharmacists, and technology
experts and representatives of the Departments of
Veterans Affairs and Defense and other appro-
priate Federal agencies to provide recommenda-
tions to the Administrator on such standards, in-
cluding recommendations relating to the following:
‘‘(I) The range of available computerized
prescribing software and hardware and their
costs to develop and implement.
‘‘(II) The extent to which such systems re-
duce medication errors and can be readily im-
plemented by physicians and hospitals.
‘‘(III) Efforts to develop a common soft-
ware platform for computerized prescribing.
‘‘(IV) The cost of implementing such sys-
tems in the range of hospital and physician of-
fice settings, including hardware, software, and
training costs.
‘‘(V) Implementation issues as they relate
to part C of title XI, and current Federal and
State prescribing laws and regulations and
their impact on implementation of computer-
ized prescribing.
‘‘(iii) DEADLINES.—
‘‘(I) The Administrator shall constitute
the task force under clause (ii) by not later
than April 1, 2003.
‘‘(II) Such task force shall submit rec-
ommendations to Administrator by not later
than January 1, 2004.
‘‘(III) The Administrator shall develop and
promulgate the national standards referred to
in clause (ii) by not later than July 1, 2004.
‘‘(C) REFERENCE
TO
AVAILABILITY
OF
GRANT
FUNDS.—Grant funds are authorized under section
399O of the Public Health Service Act to provide as-
sistance to health care providers in implementing elec-
tronic prescription drug programs.
‘‘(4) 
TREATMENT
OF
ACCREDITATION.—Section
1852(e)(4) (relating to treatment of accreditation) shall
apply to prescription drug plans under this part with re-
spect to the following requirements, in the same manner as
they apply to Medicare+Choice plans under part C with re-
spect to the requirements described in a clause of section
1852(e)(4)(B):
‘‘(A) Paragraph (1) (including quality assurance),
including medication therapy management program
under paragraph (2).
‘‘(B) Subsection (c)(1) (relating to access to cov-
ered benefits).
‘‘(C) Subsection (g) (relating to confidentiality and
accuracy of enrollee records).
‘‘(5) PUBLIC
DISCLOSURE
OF
PHARMACEUTICAL
PRICES
FOR
EQUIVALENT
DRUGS.—Each PDP sponsor
shall provide that each pharmacy or other dispenser that
arranges for the dispensing of a covered outpatient drug
shall inform the beneficiary at the time of purchase of the
drug of any differential between the price of the prescribed
drug to the enrollee and the price of the lowest cost generic
drug covered under the plan that is therapeutically equiva-
lent and bioequivalent.
‘‘(e) GRIEVANCE MECHANISM, COVERAGE DETERMINA-
TIONS, AND RECONSIDERATIONS.—
‘‘(1) IN GENERAL.—Each PDP sponsor shall provide
meaningful procedures for hearing and resolving grievances
between the organization (including any entity or individual
through which the sponsor provides covered benefits) and
enrollees with prescription drug plans of the sponsor under
this part in accordance with section 1852(f).
‘‘(2) APPLICATION
OF
COVERAGE
DETERMINATION
AND
RECONSIDERATION
PROVISIONS.—A PDP sponsor
shall meet the requirements of paragraphs (1) through (3)
of section 1852(g) with respect to covered benefits under
the prescription drug plan it offers under this part in the
same 
manner 
as 
such 
requirements 
apply 
to 
a
Medicare+Choice organization with respect to benefits it
offers under a Medicare+Choice plan under part C.
‘‘(3) REQUEST FOR REVIEW OF TIERED FORMULARY
DETERMINATIONS.—In the case of a prescription drug plan
offered by a PDP sponsor that provides for tiered cost-
sharing for drugs included within a formulary and provides
lower cost-sharing for preferred drugs included within the
formulary, an individual who is enrolled in the plan may re-
quest coverage of a nonpreferred drug under the terms ap-
plicable for preferred drugs if the prescribing physician de-
termines that the preferred drug for treatment of the same
condition is not as effective for the individual or has ad-
verse effects for the individual.
‘‘(f) APPEALS.—
‘‘(1) IN GENERAL.—Subject to paragraph (2), a PDP
sponsor shall meet the requirements of paragraphs (4) and
(5) of section 1852(g) with respect to drugs not included
on any formulary in the same manner as such requirements
apply to a Medicare+Choice organization with respect to
benefits it offers under a Medicare+Choice plan under part
C.
‘‘(2) FORMULARY
DETERMINATIONS.—An individual
who is enrolled in a prescription drug plan offered by a
PDP sponsor may appeal to obtain coverage for a covered
outpatient drug that is not on a formulary of the sponsor
if the prescribing physician determines that the formulary
drug for treatment of the same condition is not as effective
for the individual or has adverse effects for the individual.
‘‘(g) CONFIDENTIALITY
AND ACCURACY
OF ENROLLEE
RECORDS.—A PDP sponsor shall meet the requirements of sec-
tion 1852(h) with respect to enrollees under this part in the
same 
manner 
as 
such 
requirements 
apply 
to 
a
Medicare+Choice organization with respect to enrollees under
part C.
‘‘SEC. 1860D. REQUIREMENTS FOR PRESCRIPTION DRUG
PLAN (PDP) SPONSORS; CONTRACTS; ESTAB-
LISHMENT OF STANDARDS.
‘‘(a) GENERAL REQUIREMENTS.—Each PDP sponsor of a
prescription drug plan shall meet the following requirements:
‘‘(1) LICENSURE.—Subject to subsection (c), the spon-
sor is organized and licensed under State law as a risk-
bearing entity eligible to offer health insurance or health
benefits coverage in each State in which it offers a pre-
scription drug plan.
‘‘(2) ASSUMPTION OF FINANCIAL RISK.—
‘‘(A) IN GENERAL.—Subject to subparagraph (B)
and section 1860E(d)(2), the entity assumes full finan-
cial risk on a prospective basis for qualified prescrip-
tion drug coverage that it offers under a prescription
drug plan and that is not covered under section
1860H.
‘‘(B) REINSURANCE PERMITTED.—The entity may
obtain insurance or make other arrangements for the
cost of coverage provided to any enrolled member under
this part.
‘‘(3) SOLVENCY FOR UNLICENSED SPONSORS.—In the
case of a sponsor that is not described in paragraph (1),
the sponsor shall meet solvency standards established by
the Administrator under subsection (d).
‘‘(b) CONTRACT REQUIREMENTS.—
‘‘(1) IN GENERAL.—The Administrator shall not per-
mit the election under section 1860A of a prescription drug
plan offered by a PDP sponsor under this part, and the
sponsor shall not be eligible for payments under section
1860G or 1860H, unless the Administrator has entered
into a contract under this subsection with the sponsor with
respect to the offering of such plan. Such a contract with
a sponsor may cover more than one prescription drug plan.
Such contract shall provide that the sponsor agrees to com-
ply with the applicable requirements and standards of this
part and the terms and conditions of payment as provided
for in this part.
‘‘(2) NEGOTIATION
REGARDING
TERMS
AND
CONDI-
TIONS.—The Administrator shall have the same authority
to negotiate the terms and conditions of prescription drug
plans under this part as the Director of the Office of Per-
sonnel Management has with respect to health benefits
plans under chapter 89 of title 5, United States Code. In
negotiating the terms and conditions regarding premiums
for 
which 
information 
is 
submitted 
under 
section
1860F(a)(2), the Administrator shall take into account the
subsidy payments under section 1860H and the adjusted
community rate (as defined in section 1854(f)(3)) for the
benefits covered.
‘‘(3) INCORPORATION OF CERTAIN MEDICARE+CHOICE
CONTRACT
REQUIREMENTS.—The following provisions of
section 1857 shall apply, subject to subsection (c)(5), to
contracts under this section in the same manner as they
apply to contracts under section 1857(a):
‘‘(A) MINIMUM
ENROLLMENT.—Paragraphs (1)
and (3) of section 1857(b).
‘‘(B) CONTRACT PERIOD AND EFFECTIVENESS.—
Paragraphs (1) through (3) and (5) of section 1857(c).
‘‘(C) PROTECTIONS AGAINST FRAUD AND BENE-
FICIARY PROTECTIONS.—Section 1857(d).
‘‘(D) ADDITIONAL
CONTRACT
TERMS.—Section
1857(e); except that in applying section 1857(e)(2)
under this part—
‘‘(i) such section shall be applied separately to
costs relating to this part (from costs under part
C);
‘‘(ii) in no case shall the amount of the fee es-
tablished under this subparagraph for a plan ex-
ceed 20 percent of the maximum amount of the fee
that may be established under subparagraph (B) of
such section; and
‘‘(iii) no fees shall be applied under this sub-
paragraph with respect to Medicare+Choice plans.
‘‘(E) 
INTERMEDIATE
SANCTIONS.—Section
1857(g).
‘‘(F) PROCEDURES
FOR
TERMINATION.—Section
1857(h).
‘‘(4) RULES
OF
APPLICATION
FOR
INTERMEDIATE
SANCTIONS.—In applying paragraph (3)(E)—
‘‘(A) the reference in section 1857(g)(1)(B) to sec-
tion 1854 is deemed a reference to this part; and
‘‘(B) the reference in section 1857(g)(1)(F) to sec-
tion 1852(k)(2)(A)(ii) shall not be applied.
‘‘(c) WAIVER OF CERTAIN REQUIREMENTS TO EXPAND
CHOICE.—
‘‘(1) IN GENERAL.—In the case of an entity that seeks
to offer a prescription drug plan in a State, the Adminis-
trator shall waive the requirement of subsection (a)(1) that
the entity be licensed in that State if the Administrator de-
termines, based on the application and other evidence pre-
sented to the Administrator, that any of the grounds for
approval of the application described in paragraph (2) has
been met.
‘‘(2) GROUNDS FOR APPROVAL.—The grounds for ap-
proval under this paragraph are the grounds for approval
described in subparagraph (B), (C), and (D) of section
1855(a)(2), and also include the application by a State of
any grounds other than those required under Federal law.
‘‘(3) APPLICATION
OF
WAIVER
PROCEDURES.—With
respect to an application for a waiver (or a waiver granted)
under this subsection, the provisions of subparagraphs (E),
(F), and (G) of section 1855(a)(2) shall apply.
‘‘(4) LICENSURE DOES NOT SUBSTITUTE FOR OR CON-
STITUTE CERTIFICATION.—The fact that an entity is li-
censed in accordance with subsection (a)(1) does not deem
the entity to meet other requirements imposed under this
part for a PDP sponsor.
‘‘(5) REFERENCES
TO
CERTAIN
PROVISIONS.—For
purposes of this subsection, in applying provisions of sec-
tion 1855(a)(2) under this subsection to prescription drug
plans and PDP sponsors—
‘‘(A) any reference to a waiver application under
section 1855 shall be treated as a reference to a waiver
application under paragraph (1); and
‘‘(B) any reference to solvency standards shall be
treated as a reference to solvency standards established
under subsection (d).
‘‘(d) SOLVENCY STANDARDS FOR NON-LICENSED SPON-
SORS.—
‘‘(1) ESTABLISHMENT.—The Administrator shall es-
tablish, by not later than October 1, 2003, financial sol-
vency and capital adequacy standards that an entity that
does not meet the requirements of subsection (a)(1) must
meet to qualify as a PDP sponsor under this part.
‘‘(2) COMPLIANCE
WITH
STANDARDS.—Each PDP
sponsor that is not licensed by a State under subsection
(a)(1) and for which a waiver application has been ap-
proved under subsection (c) shall meet solvency and capital
adequacy standards established under paragraph (1). The
Administrator shall establish certification procedures for
such PDP sponsors with respect to such solvency standards
in the manner described in section 1855(c)(2).
‘‘(e) OTHER STANDARDS.—The Administrator shall estab-
lish by regulation other standards (not described in subsection
(d)) for PDP sponsors and plans consistent with, and to carry
out, this part. The Administrator shall publish such regulations
by October 1, 2003.
‘‘(f) RELATION TO STATE LAWS.—
‘‘(1) IN GENERAL.—The standards established under
this part shall supersede any State law or regulation (other
than State licensing laws or State laws relating to plan sol-
vency, except as provided in subsection (d)) with respect to
prescription drug plans which are offered by PDP sponsors
under this part.
‘‘(2) PROHIBITION OF STATE IMPOSITION OF PREMIUM
TAXES.—No State may impose a premium tax or similar
tax with respect to premiums paid to PDP sponsors for
prescription drug plans under this part, or with respect to
any payments made to such a sponsor by the Administrator
under this part.
‘‘SEC. 1860E. PROCESS FOR BENEFICIARIES TO SELECT
QUALIFIED 
PRESCRIPTION 
DRUG 
COV-
ERAGE.
‘‘(a) IN GENERAL.—The Administrator shall establish a
process for the selection of the prescription drug plan or
Medicare+Choice plan which offer qualified prescription drug
coverage through which eligible individuals elect qualified pre-
scription drug coverage under this part.
‘‘(b) ELEMENTS.—Such process shall include the fol-
lowing:
‘‘(1) Annual, coordinated election periods, in which
such individuals can change the qualifying plans through
which they obtain coverage, in accordance with section
1860A(b)(2).
‘‘(2) Active dissemination of information to promote
an informed selection among qualifying plans based upon
price, quality, and other features, in the manner described
in (and in coordination with) section 1851(d), including the
provision of annual comparative information, maintenance
of a toll-free hotline, and the use of non-Federal entities.
‘‘(3) Coordination of elections through filing with a
Medicare+Choice organization or a PDP sponsor, in the
manner described in (and in coordination with) section
1851(c)(2).
‘‘(c) MEDICARE+CHOICE ENROLLEE IN PLAN OFFERING
PRESCRIPTION DRUG COVERAGE MAY ONLY OBTAIN BENE-
FITS THROUGH
THE PLAN.—An individual who is enrolled
under a Medicare+Choice plan that offers qualified prescrip-
tion drug coverage may only elect to receive qualified prescrip-
tion drug coverage under this part through such plan.
‘‘(d) ASSURING ACCESS TO A CHOICE OF QUALIFIED PRE-
SCRIPTION DRUG COVERAGE.—
‘‘(1) CHOICE
OF
AT
LEAST
TWO
PLANS
IN
EACH
AREA.—
‘‘(A) IN GENERAL.—The Administrator shall as-
sure that each individual who is entitled to benefits
under part A or enrolled under part B and who is re-
siding in an area in the United States has available,
consistent with subparagraph (B), a choice of enroll-
ment in at least two qualifying plans (as defined in
paragraph (5)) in the area in which the individual re-
sides, at least one of which is a prescription drug plan.
‘‘(B) REQUIREMENT FOR DIFFERENT PLAN SPON-
SORS.—The requirement in subparagraph (A) is not
satisfied with respect to an area if only one PDP spon-
sor or Medicare+Choice organization offers all the
qualifying plans in the area.
‘‘(2) GUARANTEEING ACCESS TO COVERAGE.—In order
to assure access under paragraph (1) and consistent with
paragraph (3), the Administrator may provide financial in-
centives (including partial underwriting of risk) for a PDP
sponsor to expand the service area under an existing pre-
scription drug plan to adjoining or additional areas or to
establish such a plan (including offering such a plan on a
regional or nationwide basis), but only so long as (and to
the extent) necessary to assure the access guaranteed
under paragraph (1).
‘‘(3) LIMITATION ON AUTHORITY.—In exercising au-
thority under this subsection, the Administrator—
‘‘(A) shall not provide for the full underwriting of
financial risk for any PDP sponsor;
‘‘(B) shall not provide for any underwriting of fi-
nancial risk for a public PDP sponsor with respect to
the offering of a nationwide prescription drug plan; and
‘‘(C) shall seek to maximize the assumption of fi-
nancial risk by PDP sponsors or Medicare+Choice or-
ganizations.
‘‘(4) REPORTS.—The Administrator shall, in each an-
nual report to Congress under section 1808(f), include in-
formation on the exercise of authority under this sub-
section. The Administrator also shall include such rec-
ommendations as may be appropriate to minimize the exer-
cise of such authority, including minimizing the assumption
of financial risk.
‘‘(5) QUALIFYING PLAN DEFINED.—For purposes of
this subsection, the term ‘qualifying plan’ means a pre-
scription drug plan or a Medicare+Choice plan that in-
cludes qualified prescription drug coverage.
‘‘SEC. 1860F. SUBMISSION OF BIDS.
‘‘(a) SUBMISSION
OF BIDS
AND RELATED INFORMA-
TION.—
‘‘(1) IN GENERAL.—Each PDP sponsor shall submit
to the Administrator information of the type described in
paragraph (2) in the same manner as information is sub-
mitted by a Medicare+Choice organization under section
1854(a)(1).
‘‘(2) TYPE OF INFORMATION.—The information de-
scribed in this paragraph is the following:
‘‘(A) Information on the qualified prescription
drug coverage to be provided.
‘‘(B) Information on the actuarial value of the cov-
erage.
‘‘(C) Information on the bid for the coverage, in-
cluding an actuarial certification of—
‘‘(i) the actuarial basis for such bid;
‘‘(ii) the portion of such bid attributable to
benefits in excess of standard coverage; and
‘‘(iii) the reduction in such bid resulting from
the subsidy payments provided under section
1860H.
‘‘(D) Such other information as the Administrator
may require to carry out this part.
‘‘(3) REVIEW.—The Administrator shall review the in-
formation filed under paragraph (2) for the purpose of con-
ducting negotiations under section 1860D(b)(2).
‘‘(b) UNIFORM BID.—
‘‘(1) IN GENERAL.—The bid for a prescription drug
plan under this section may not vary among individuals en-
rolled in the plan in the same service area.
‘‘(2) CONSTRUCTION.—Nothing in paragraph (1) shall
be construed as preventing the imposition of a late enroll-
ment penalty under section 1860A(c)(2)(B).
‘‘(c) COLLECTION.—
‘‘(1) USE OF ELECTRONIC FUNDS TRANSFER MECHA-
NISM OR, AT BENEFICIARY’S OPTION, WITHHOLDING FROM
SOCIAL SECURITY PAYMENT.—In accordance with regula-
tions, a PDP sponsor may encourage that enrollees under
a plan make payment of the premium established by the
plan under this part through an electronic funds transfer
mechanism, such as automatic charges of an account at a
financial institution or a credit or debit card account, or,
at the option of an enrollee, through withholding from ben-
efit payments in the manner provided under section 1840
with respect to monthly premiums under section 1839. All
such amounts shall be credited to the Medicare Prescrip-
tion Drug Trust Fund.
‘‘(2) OFFSETTING.—Reductions in premiums for cov-
erage under parts A and B as a result of a selection of a
Medicare+Choice plan may be used to reduce the premium
otherwise imposed under paragraph (1).
‘‘(3) PAYMENT OF PLANS.—PDP plans shall receive
payment based on bid amounts in the same manner as
Medicare+Choice organizations receive payment based on
bid amounts under section 1853(a)(1)(A)(ii) except that
such payment shall be made from the Medicare Prescrip-
tion Drug Trust Fund.
‘‘(d) ACCEPTANCE
OF BENCHMARK AMOUNT
AS FULL
PREMIUM FOR SUBSIDIZED LOW-INCOME INDIVIDUALS IF NO
STANDARD (OR EQUIVALENT) COVERAGE IN AN AREA.—