‘‘(c) ALLOTMENTS TO TERRITORIES.—
‘‘(1) IN GENERAL.—Of the amount available for
allotment under subsection (a) for a fiscal year, the
Secretary shall allot 0.25 percent among each of the
commonwealths and territories described in para-
graph (3) in the same proportion as the percentage
specified in paragraph (2) for such commonwealth or
territory bears to the sum of such percentages for all
such commonwealths or territories so described.
‘‘(2) PERCENTAGE.—The percentage specified
in this paragraph for—
‘‘(A) Puerto Rico is 91.6 percent;
‘‘(B) Guam is 3.5 percent;
‘‘(C) the United States Virgin Islands is
2.6 percent;
‘‘(D) American Samoa is 1.2 percent; and
‘‘(E) the Northern Mariana Islands is 1.1
percent.
‘‘(3) COMMONWEALTHS AND TERRITORIES.—A
commonwealth or territory described in this para-
graph is any of the following if it has an outpatient
prescription drug assistance plan approved under
this title:
‘‘(A) Puerto Rico.
‘‘(B) Guam.
‘‘(C) The United States Virgin Islands.
‘‘(D) American Samoa.
‘‘(E) The Northern Mariana Islands.
‘‘(d) TRANSFER
OF CERTAIN ALLOTMENTS
AND
PORTIONS OF ALLOTMENTS.—
‘‘(1) TRANSFER AND REDISTRIBUTION.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), not later than 30 days after the date
described in paragraph (2)—
‘‘(i) 90 percent of the allotment deter-
mined for a fiscal year under subsection
(b) or (c) for a State shall be transferred
and made available in such fiscal year to
the Secretary, acting through the Adminis-
trator of the Health Care Financing Ad-
ministration, for purposes of carrying out
the default program established under sec-
tion 2209; and
‘‘(ii) 10 percent of such allotment
shall be redistributed in accordance with
subsection (e).
‘‘(B) APPLICABILITY.—Subparagraph (A)
shall not apply if, not later than the date de-
scribed in paragraph (2) for such fiscal year, a
State submits a plan or is part of a group of
States that submits a plan to the Secretary that
the Secretary finds meets the requirements of
section 2201(b).
‘‘(2) DATE DESCRIBED.—The date described in
this paragraph is—
‘‘(A) in the case of fiscal year 2001, De-
cember 31, 2000; and
‘‘(B) in the case of fiscal year 2002, 2003,
or 2004, September 1 of the fiscal year pre-
ceding such fiscal year.
‘‘(e) REDISTRIBUTION
OF
PORTION
OF
ALLOT-
MENTS.—With respect to a fiscal year, not later than 30
days after the date described in subsection (d)(2) for such
fiscal year, the Secretary shall redistribute the total
amount made available for redistribution for such fiscal
year under subsection (d)(1)(A)(ii) to each State that sub-
mits a plan or is part of a group of States that submits
a plan to the Secretary that the Secretary finds meets the
requirements of this title. Such amount shall be redistrib-
uted in the same manner as allotments are determined
under subsections (b) and (c) and shall be available only
to the extent consistent with subsection (a)(2).
‘‘SEC. 2205. PAYMENTS TO STATES.
‘‘(a) IN GENERAL.—Subject to the succeeding provi-
sions of this section, the Secretary shall pay to each State
with a plan approved under section 2206(a)(2) (individ-
ually or as part of a group of States) from the State’s
allotment under section 2204, an amount for each quarter
equal to the applicable percentage of expenditures in the
quarter—
‘‘(1) for outpatient prescription drug assistance
under the plan for low-income medicare beneficiaries
and, if applicable, medicare beneficiaries with high
drug costs in the form of providing coverage for out-
patient prescription drugs that meets the require-
ments of section 2203; and
‘‘(2) only to the extent permitted consistent
with subsection (c), for reasonable costs incurred to
administer the plan.
‘‘(b) APPLICABLE PERCENTAGE.—For purposes of
subsection (a), the applicable percentage is—
‘‘(1) for low-income medicare beneficiaries with
family incomes that do not exceed 135 percent of
the poverty line, 100 percent; and
‘‘(2) for all other low-income medicare bene-
ficiaries and for medicare beneficiaries with high
drug costs, the enhanced FMAP (as defined in sec-
tion 2105(b)).
‘‘(c) LIMITATION ON PAYMENTS FOR CERTAIN EX-
PENDITURES.—
‘‘(1) GENERAL LIMITATIONS.—Funds provided
to a State or group of States under this title shall
only be used to carry out the purposes of this title.
‘‘(2) ADMINISTRATIVE EXPENDITURES.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), payment shall not be made under
subsection (a) for expenditures described in
subsection (a)(2) for a fiscal year to the extent
the total of such expenditures (for which pay-
ment is made under such subsection) exceeds
10 percent of the total expenditures described
in subsection (a)(1) made by—
‘‘(i) in the case of a State that is not
part of a group of States, the State for
such fiscal year; and
‘‘(ii) in the case of a group of States,
the group for such fiscal year.
‘‘(B) SPECIAL RULE.—With respect to the
first fiscal year that a State or group of States
provides outpatient prescription drug assistance
under a plan approved under this title, the 10
percent limitation described in subparagraph
(A) shall be applied—
‘‘(i) in the case of a State that is not
part of a group of States, to the allotment
available for such State for such fiscal
year; and
‘‘(ii) in the case of a group of States,
to the aggregate of the State allotments
available for all the States in such group
for such fiscal year.
‘‘(3) USE OF NON-FEDERAL FUNDS FOR STATE
MATCHING
REQUIREMENT.—Amounts provided by
the Federal Government, or services assisted or sub-
sidized to any significant extent by the Federal Gov-
ernment, may not be included in determining the
amount of the non-Federal share of plan expendi-
tures required under the plan.
‘‘(4) OFFSET OF RECEIPTS ATTRIBUTABLE TO
PREMIUMS OR COST-SHARING.—For purposes of sub-
section (a), the amount of the expenditures under
the plan shall be reduced by the amount of any pre-
miums or cost-sharing received by a State.
‘‘(5) 
PREVENTION
OF
DUPLICATIVE
PAY-
MENTS.—
‘‘(A) OTHER
HEALTH
PLANS.—No pay-
ment shall be made under this section for ex-
penditures for outpatient prescription drug as-
sistance provided under an outpatient prescrip-
tion drug assistance plan to the extent that a
private insurer (as defined by the Secretary by
regulation and including a group health plan, a
service benefit plan, and a health maintenance
organization) would have been obligated to pro-
vide such assistance but for a provision of its
insurance contract which has the effect of lim-
iting or excluding such obligation because the
beneficiary is eligible for or is provided out-
patient prescription drug assistance under the
plan.
‘‘(B) OTHER
FEDERAL
GOVERNMENTAL
PROGRAMS.—Except as otherwise provided by
law 
(including 
section 
2202(b)(2)(B) 
and
2202(d)(1)), no payment shall be made under
this section for expenditures for outpatient pre-
scription drug assistance provided under an
outpatient prescription drug assistance plan to
the extent that payment has been made or can
reasonably be expected to be made promptly (as
determined in accordance with regulations)
under any other federally operated or financed
health care insurance program identified by the
Secretary. For purposes of this paragraph,
rules similar to the rules for overpayments
under section 1903(d)(2) shall apply.
‘‘(6) MEDICATION THERAPY MANAGEMENT.—A
State shall allocate a reasonable percentage of total
program expenditures allocated under subsection
(a)(1) for the purpose of establishing and compen-
sating pharmacy providers for medication therapy
management 
services 
described 
in 
section
2203(a)(3).
‘‘(d) ADVANCE PAYMENT; RETROSPECTIVE ADJUST-
MENT.—The Secretary may make payments under this
section for each quarter on the basis of advance estimates
of expenditures submitted by a State or group of States
and such other investigation as the Secretary may find
necessary, and may reduce or increase the payments as
necessary to adjust for any overpayment or underpayment
for prior quarters.
‘‘(e) FLEXIBILITY
IN SUBMITTAL
OF CLAIMS.—
Nothing in this section shall be construed as preventing
a State or group of States from claiming as expenditures
in any quarter of a fiscal year expenditures that were in-
curred in a previous quarter of such fiscal year.
‘‘(f) NO MAINTENANCE OF EFFORT REQUIRED.—
Nothing in this title shall be construed as requiring a
State that has a medicare pharmaceutical assistance pro-
gram in effect before the effective date of this title to
maintain such a program or to maintain the level of effort
or expenditure made under such program before this title
was enacted.
‘‘SEC. 2206. PROCESS FOR SUBMISSION, APPROVAL, AND
AMENDMENT 
OF 
OUTPATIENT 
PRESCRIP-
TION DRUG ASSISTANCE PLANS.
‘‘(a) INITIAL PLAN.—
‘‘(1) SUBMISSION.—A State may receive pay-
ments under section 2205 with respect to a fiscal
year if the State, individually or as part of a group
of States, has submitted to the Secretary, not later
than the date described in section 2204(d)(2), an
outpatient prescription drug assistance plan that the
Secretary has found meets the applicable require-
ments of this title.
‘‘(2) APPROVAL.—Except as the Secretary may
provide under subsection (c), a plan submitted under
paragraph (1)—
‘‘(A) shall be approved for purposes of this
title; and
‘‘(B) shall be effective beginning with a
calendar quarter that is specified in the plan,
but in no case earlier than October 1, 2000.
‘‘(3) STREAMLINED TREATMENT OF CURRENT
STATE-BASED
PROGRAMS.—In the case of such a
plan that is based on an existing state-based com-
prehensive prescription drug program, the Secretary
shall provide for the expediting review of the plan
under this section.
‘‘(b) PLAN AMENDMENTS.—Within 30 days after a
State or group of States amends an outpatient prescrip-
tion drug assistance plan submitted pursuant to sub-
section (a), the State or group shall notify the Secretary
of the amendment.
‘‘(c) DISAPPROVAL OF PLANS AND PLAN AMEND-
MENTS.—
‘‘(1) PROMPT REVIEW OF PLAN SUBMITTALS.—
The Secretary shall promptly review plans and plan
amendments submitted under this section to deter-
mine if they substantially comply with the require-
ments of this title.
‘‘(2) 45-DAY APPROVAL DEADLINES.—A plan or
plan amendment is considered approved unless the
Secretary notifies the State or group of States in
writing, within 45 days after receipt of the plan or
amendment, that the plan or amendment is dis-
approved (and the reasons for the disapproval) or
that specified additional information is needed.
‘‘(3) CORRECTION.—In the case of a dis-
approval of a plan or plan amendment, the Secretary
shall provide a State or group of States with a rea-
sonable opportunity for correction before taking fi-
nancial sanctions against the State or group on the
basis of such disapproval.
‘‘(d) PROGRAM OPERATION.—
‘‘(1) IN GENERAL.—A State or group of States
shall conduct the program in accordance with the
plan (and any amendments) approved under this
section and with the requirements of this title.
‘‘(2) VIOLATIONS.—The Secretary shall estab-
lish a process for enforcing requirements under this
title. Such process shall provide for the withholding
of funds in the case of substantial noncompliance
with such requirements. In the case of an enforce-
ment action against a State or group of States
under this paragraph, the Secretary shall provide a
State or group of States with a reasonable oppor-
tunity for correction and for administrative and judi-
cial appeal of the Secretary’s action before taking fi-
nancial sanctions against the State or group of
States on the basis of such an action.
‘‘(e) CONTINUED APPROVAL.—Subject to section
2201(d), an approved outpatient prescription drug assist-
ance plan shall continue in effect unless and until the
State or group of States amends the plan under subsection
(b) or the Secretary finds, under subsection (d), substan-
tial noncompliance of the plan with the requirements of
this title.
‘‘SEC. 2207. PLAN ADMINISTRATION; APPLICATION OF CER-
TAIN GENERAL PROVISIONS.
‘‘(a) PLAN ADMINISTRATION.—An outpatient pre-
scription drug assistance plan shall include an assurance
that the State or group of States administering the plan
will collect the data, maintain the records, afford the Sec-
retary access to any records or information relating to the
plan for the purposes of review or audit, and furnish re-
ports to the Secretary, at the times and in the standard-
ized format the Secretary may require in order to enable
the Secretary to monitor program administration and
compliance and to evaluate and compare the effectiveness
of plans under this title.
‘‘(b) APPLICATION OF CERTAIN GENERAL PROVI-
SIONS.—The following sections of this Act shall apply to
the program established under this title in the same man-
ner as they apply to a State under title XIX:
‘‘(1) TITLE XIX PROVISIONS.—
‘‘(A) Section 1902(a)(4)(C) (relating to
conflict of interest standards).
‘‘(B) Paragraphs (2), (16), and (17) of
section 1903(i) (relating to limitations on pay-
ment).
‘‘(C) Section 1903(w) (relating to limita-
tions on provider taxes and donations).
‘‘(2) TITLE XI PROVISIONS.—
‘‘(A) Section 1115 (relating to waiver au-
thority).
‘‘(B) Section 1116 (relating to administra-
tive and judicial review), but only insofar as
consistent with this title.
‘‘(C) Section 1124 (relating to disclosure
of ownership and related information).
‘‘(D) Section 1126 (relating to disclosure
of information about certain convicted individ-
uals).
‘‘(E) Section 1128A (relating to civil mon-
etary penalties).
‘‘(F) Section 1128B(d) (relating to crimi-
nal penalties for certain additional charges).
‘‘SEC. 2208. REPORTS.
‘‘(a) IN GENERAL.—Each State or group of States
administering a plan under this title shall annually—
‘‘(1) assess the operation of the outpatient pre-
scription drug assistance plan under this title in
each fiscal year; and
‘‘(2) report to the Secretary on the result of the
assessment.
‘‘(b) REQUIRED INFORMATION.—The annual report
required under subsection (a) shall include the following:
‘‘(1) An assessment of the effectiveness of the
plan in providing outpatient prescription drug assist-
ance to low-income medicare beneficiaries and, if ap-
plicable, medicare beneficiaries with high drug costs.
‘‘(2) A description and analysis of the effective-
ness of elements of the plan, including—
‘‘(A) the characteristics of the low-income
medicare beneficiaries and, if applicable, medi-
care beneficiaries with high drug costs assisted
under the plan, including family income and ac-
cess to, or coverage by, other health insurance
prior to the plan and after eligibility for the
plan ends;
‘‘(B) the amount and level of assistance
provided under the plan; and
‘‘(C) the sources of the non-Federal share
of plan expenditures.
‘‘(c) ANNUAL REPORT OF THE SECRETARY.—The
Secretary shall submit to Congress and make available to
the public an annual report based on the reports required
under subsection (a) and section 2209(b)(5), containing
any conclusions and recommendations the Secretary con-
siders appropriate.
‘‘SEC. 2209. ESTABLISHMENT OF DEFAULT PROGRAM.
‘‘(a) PROGRAM AUTHORITY.—
‘‘(1) IN
GENERAL.—With respect to a fiscal
year, in the case of a State that fails to submit (in-
dividually or as part of a group of States) an ap-
proved outpatient prescription drug assistance plan
to the Secretary by the date described in section
2204(d)(2) for such fiscal year, outpatient prescrip-
tion drug assistance to low-income medicare bene-
ficiaries and, subject to the availability of funds,
medicare beneficiaries with high drug costs, who re-
side in such State shall be provided during such fis-
cal year by the Secretary, through the Administrator
of the Health Care Financing Administration, in ac-
cordance with this section.
‘‘(2) DEFINITIONS.—In this section:
‘‘(A) CONTRACTOR.—The term ‘contractor’
means a pharmaceutical benefit manager or
other entity that meets standards established by
the Administrator of the Health Care Financing
Administration for the provision of outpatient
prescription drug assistance under a contract
entered into under this section.
‘‘(B) 
LOW-INCOME
MEDICARE
BENE-
FICIARY.—The term ‘low-income medicare bene-
ficiary’ means an individual who—
‘‘(i) satisfies the requirements of sub-
paragraphs 
(A) 
and 
(B) 
of 
section
2202(b)(1);
‘‘(ii) is determined to have family in-
come that does not exceed a percentage of
the poverty line for a family of the size in-
volved specified by the Administrator of
the Health Care Financing Administration
that may not exceed 135 percent; and
‘‘(iii) at the option of the Adminis-
trator of the Health Care Financing Ad-
ministration, is determined to have re-
sources that do not exceed a level specified
by such Administrator.
‘‘(C) MEDICARE BENEFICIARY WITH HIGH
DRUG COSTS.—The term ‘medicare beneficiary
with high drug costs’ means an individual—
‘‘(i) who satisfies the requirements of
subparagraphs (A) and (B) of section
2202(b)(1);
‘‘(ii) whose family income exceeds the
percentage of the poverty line specified by
the Administrator of the Health Care Fi-
nancing Administration under subpara-
graph (B)(ii) for a low-income medicare
beneficiary residing in the same State;
‘‘(iii) whose resources exceed a level
(if any) specified by the Administrator of
the Health Care Financing Administration
under subparagraph (B)(iii) for a low-in-
come medicare beneficiary residing in the
same State; and
‘‘(iv) with respect to any 3-month pe-
riod, who has out-of-pocket expenses for
outpatient 
prescription 
drugs 
and
biologicals (including insulin and insulin
supplies) for which outpatient prescription
drug assistance is available under this title
that exceed a level specified by such Ad-
ministrator (consistent with the availability
of funds for the operation of the program
established under this section in the State
where the beneficiary resides).
‘‘(b) ADMINISTRATION.—In administering the default
program established under this section, the Administrator
of the Health Care Financing Administration shall—
‘‘(1) establish procedures to determine the eligi-
bility of the low-income medicare beneficiaries and
medicare beneficiaries with high drug costs described
in subsection (a) for outpatient prescription drug as-
sistance;
‘‘(2) establish a process for accepting bids to
provide outpatient prescription drug assistance to
such beneficiaries, awarding contracts under such
bids, and making payments under such contracts;
‘‘(3) establish policies and procedures for over-
seeing the provision of outpatient prescription drug
assistance under such contracts;
‘‘(4) develop and implement quality and service
assessment measures that include beneficiary quality
surveys and annual quality and service rankings for
contractors awarded a contract under this section;
‘‘(5) annually assess the program established
under this section and submit a report to the Sec-
retary containing the information required under
section 2208(b); and
‘‘(6) carry out such other responsibilities as are
necessary for the administration of the provision of
outpatient prescription drug assistance under this
section.
‘‘(c) CONTRACT REQUIREMENTS.—
‘‘(1) AUTHORITY; TERM.—
‘‘(A) 
USE
OF
COMPETITIVE
PROCE-
DURES.—