I
106TH CONGRESS
1ST SESSION
H. R. 3274
To amend the Public Health Service Act, the Employee Retirement Income
Security Act of 1974, the Internal Revenue Code of 1986, and title
XVIII of the Social Security Act to provide protection for beneficiaries
of group and individual health insurance coverage, group health plans,
and Medicare+Choice plans in the use of prescription drug formularies.
IN THE HOUSE OF REPRESENTATIVES
NOVEMBER 9, 1999
Mr. GUTIERREZ introduced the following bill; which was referred to the Com-
mittee on Commerce, and in addition to the Committees on Education
and the Workforce, and Ways and Means, for a period to be subsequently
determined by the Speaker, in each case for consideration of such provi-
sions as fall within the jurisdiction of the committee concerned
A BILL
To amend the Public Health Service Act, the Employee Re-
tirement Income Security Act of 1974, the Internal Rev-
enue Code of 1986, and title XVIII of the Social Security
Act to provide protection for beneficiaries of group and
individual health insurance coverage, group health plans,
and Medicare+Choice plans in the use of prescription
drug formularies.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Patients’ Formulary
Rights Act of 1999’’.
SEC. 
2. 
PATIENT 
PROTECTIONS 
AGAINST 
ABUSE 
OF
FORMULARIES FOR PRESCRIPTION DRUGS.
(a) GROUP HEALTH PLANS.—
(1) PUBLIC
HEALTH
SERVICE
ACT
AMEND-
MENTS.—(A) Subpart 2 of part A of title XXVII of
the Public Health Service Act is amended by adding
at the end the following new section:
‘‘SEC. 
2707. 
STANDARDS 
RELATING 
TO 
USE 
OF
FORMULARIES AND THERAPEUTIC SUBSTI-
TUTION.
‘‘(a) REQUIREMENTS ON USE OF FORMULARIES.—
‘‘(1) IN GENERAL.—A group health plan, and a
health insurance issuer offering group health insur-
ance coverage, shall not use a formulary unless the
plan or issuer—
‘‘(A) notifies participants, beneficiaries,
and enrollees, prior to initial enrollment or cov-
erage, and makes available at any time to
health care professionals who prescribe pre-
scription drugs under the plan or coverage of
the information described in paragraph (2);
‘‘(B) notifies participants, beneficiaries,
enrollees, and health care providers who pre-
scribe covered prescription drugs under the plan
or coverage on a routine and annual basis of
any changes in (including deletions from) the
formulary; and
‘‘(C) in the case of a participant, bene-
ficiary, or enrollee who is provided coverage for
a prescription drug at the time the drug is re-
moved from the formulary, to permit the partic-
ipant, beneficiary, or enrollee to continue to
have the drug prescribed for treatment of the
same condition for which it was previously pre-
scribed.
‘‘(2) INFORMATION TO BE DISCLOSED.—The in-
formation described in this paragraph is as follows
(with respect to prescription drug coverage under a
group health plan or health insurance coverage):
‘‘(A) EXTENT OF THERAPEUTIC SUBSTI-
TUTION.—What constitutes the practice or
therapeutic substitution that may be effected
under the plan or coverage.
‘‘(B) FORMULARY.—A complete list of all
the prescription drugs included in the formulary
and any changes in the formulary and how deci-
sions to include drugs in the formulary are
made.
‘‘(C) 
ACCESS
TO
NONFORMULARY
DRUGS.—The fact that a patient can have a
prescription filled as written (rather than sub-
ject to therapeutic substitution) if the pre-
scribing health care professional uses a ‘dis-
pense as written’ or similar endorsement.
‘‘(D) 
PAYMENT
FOR
NONFORMULARY
DRUGS.—Whether or not the plan or coverage
will cover or pay for prescription drugs not in-
cluded in the formulary and, if it will, the ex-
tent of such coverage or payment.
‘‘(E) 
COST-SHARING.—The 
copayments
and other cost-sharing that is applicable under
the plan or coverage for prescription drugs in-
cluded on the formulary and for those not in-
cluded on the formulary.
‘‘(F) LIMITS ON PAYMENTS.—Limitations
on the dollar amount the plan or coverage will
cover for outpatient prescription drugs, includ-
ing any such limits on a per year, per lifetime,
or per diagnosis basis.
‘‘(3) FORMULARY DEFINED.—For purposes of
this subsection, the term ‘formulary’ includes any
method under which a plan or issuer limits the par-
ticular drugs (among those that may be legally pre-
scribed for treatment) for which coverage is made
available under the plan or health insurance cov-
erage offered by the issuer.
‘‘(b) NOTICE OF REQUIREMENT.—A group health
plan under this part shall comply with the notice require-
ment under section 714(b) of the Employee Retirement
Income Security Act of 1974 with respect to the require-
ments of this section as if such section applied to such
plan.
‘‘(c) FORMULARY DEFINED.—For purposes of this
section, the term ‘formulary’ includes any method under
which a plan or issuer limits the particular drugs (among
those that may be legally prescribed for treatment) for
which coverage is made available under the plan or health
insurance coverage offered by the issuer.’’.
(B) Section 2723(c) of such Act (42 U.S.C.
300gg–23(c)) is amended by striking ‘‘section 2704’’
and inserting ‘‘sections 2704 and 2707’’.
(2) ERISA AMENDMENTS.—(A) Subpart B of
part 7 of subtitle B of title I of the Employee Re-
tirement Income Security Act of 1974 is amended by
adding at the end the following new section:
‘‘SEC. 
714. 
STANDARDS 
RELATING 
TO 
USE 
OF
FORMULARIES AND THERAPEUTIC SUBSTI-
TUTION.
‘‘(a) REQUIREMENTS ON USE OF FORMULARIES.—
‘‘(1) IN GENERAL.—A group health plan, and a
health insurance issuer offering group health insur-
ance coverage, shall not use a formulary unless the
plan or issuer—
‘‘(A) notifies participants, beneficiaries,
and enrollees, prior to initial enrollment or cov-
erage, and makes available at any time to
health care professionals who prescribe pre-
scription drugs under the plan or coverage of
the information described in paragraph (2);
‘‘(B) notifies participants, beneficiaries,
enrollees, and health care providers who pre-
scribe covered prescription drugs under the plan
or coverage on a routine and annual basis of
any changes in (including deletions from) the
formulary; and
‘‘(C) in the case of a participant, bene-
ficiary, or enrollee who is provided coverage for
a prescription drug at the time the drug is re-
moved from the formulary, to permit the partic-
ipant, beneficiary, or enrollee to continue to
have the drug prescribed for treatment of the
cluded in the formulary and, if it will, the ex-
tent of such coverage or payment.
‘‘(E) 
COST-SHARING.—The 
copayments
and other cost-sharing that is applicable under
the plan or coverage for prescription drugs in-
cluded on the formulary and for those not in-
cluded on the formulary.
‘‘(F) LIMITS ON PAYMENTS.—Limitations
on the dollar amount the plan or coverage will
cover for outpatient prescription drugs, includ-
ing such any such limits on a per year, per life-
time, or per diagnosis basis.
‘‘(b) NOTICE UNDER GROUP HEALTH PLAN.—The
imposition of the requirement of this section shall be treat-
ed as a material modification in the terms of the plan de-
scribed in section 102(a)(1), for purposes of assuring no-
tice of such requirements under the plan; except that the
summary description required to be provided under the
last sentence of section 104(b)(1) with respect to such
modification shall be provided by not later than 60 days
after the first day of the first plan year in which such
requirement apply.
‘‘(c) FORMULARY DEFINED.—For purposes of this
section, the term ‘formulary’ includes any method under
which a plan or issuer limits the particular drugs (among
those that may be legally prescribed for treatment) for
which coverage is made available under the plan or health
insurance coverage offered by the issuer.’’.
(B) Section 731(c) of such Act (29 U.S.C.
1191(c)) is amended by striking ‘‘section 711’’ and
inserting ‘‘sections 711 and 714’’.
(C) Section 732(a) of such Act (29 U.S.C.
1191a(a)) is amended by striking ‘‘section 711’’ and
inserting ‘‘sections 711 and 714’’.
(D) The table of contents in section 1 of such
Act is amended by inserting after the item relating
to section 713 the following new item:
‘‘Sec. 714. Standards relating to use of formularies and therapeutic substi-
tution.’’.
(3) 
INTERNAL
REVENUE
CODE
AMEND-
MENTS.—
(A) IN GENERAL.—Subchapter B of chap-
ter 100 of the Internal Revenue Code of 1986
is amended—
(i) in the table of sections, by insert-
ing after the item relating to section 9812
the following new item:
‘‘Sec. 9813. Standards relating to use of formularies and thera-
peutic substitution.’’; and
(ii) by inserting after section 9812 the
following:
‘‘SEC. 
9813. 
STANDARDS 
RELATING 
TO 
USE 
OF
FORMULARIES AND THERAPEUTIC SUBSTI-
TUTION.
‘‘(a) REQUIREMENTS ON USE OF FORMULARIES.—
‘‘(1) IN GENERAL.—A group health plan shall
not use a formulary unless the plan or issuer—
‘‘(A) notifies participants and beneficiaries,
prior to initial enrollment or coverage, and
makes available at any time to health care pro-
fessionals who prescribe prescription drugs
under the plan of the information described in
paragraph (2);
‘‘(B) notifies participants, beneficiaries,
and health care providers who prescribe covered
prescription drugs under the plan on a routine
and annual basis of any changes in (including
deletions from) the formulary; and
‘‘(C) in the case of a participant or bene-
ficiary who is provided coverage for a prescrip-
tion drug at the time the drug is removed from
the formulary, to permit the participant or ben-
eficiary to continue to have the drug prescribed
for treatment of the same condition for which
it was previously prescribed.
‘‘(2) 
INFORMATION.—The 
information 
de-
scribed in this paragraph is as follows (with respect
to prescription drug coverage under a group health
plan):
‘‘(A) EXTENT OF THERAPEUTIC SUBSTI-
TUTION.—What constitutes the practice or
therapeutic substitution that may be effected
under the plan.
‘‘(B) FORMULARY.—A complete list of all
the prescription drugs included in the formulary
and any changes in the formulary and how deci-
sions to include drugs in the formulary are
made.
‘‘(C) 
ACCESS
TO
NONFORMULARY
DRUGS.—The fact that a patient can have a
prescription filled as written (rather than sub-
ject to therapeutic substitution) if the pre-
scribing health care professional uses a ‘dis-
pense as written’ or similar endorsement.
‘‘(D) 
PAYMENT
FOR
NONFORMULARY
DRUGS.—Whether or not the plan will cover or
pay for prescription drugs not included in the
formulary and, if it will, the extent of such cov-
erage or payment.
‘‘(E) 
COST-SHARING.—The 
copayments
and other cost-sharing that is applicable under
the plan for prescription drugs included on the
formulary and for those not included on the for-
mulary.
‘‘(F) LIMITS ON PAYMENTS.—Limitations
on the dollar amount the plan will cover for
outpatient prescription drugs, including such
any such limits on a per year, per lifetime, or
per diagnosis basis.
‘‘(b) FORMULARY DEFINED.—For purposes of this
section, the term ‘formulary’ includes any method under
which a plan or issuer limits the particular drugs (among
those that may be legally prescribed for treatment) for
which coverage is made available under the plan.’’
(B) CONFORMING
AMENDMENT.—Section
4980D(d)(1) of such Code is amended by strik-
ing ‘‘section 9811’’ and inserting ‘‘sections
9811 and 9813’’.
(b) INDIVIDUAL HEALTH INSURANCE.—(1) Part B
of title XXVII of the Public Health Service Act is amend-
ed by inserting after section 2752 the following new sec-
tion:
‘‘SEC. 2753. STANDARD RELATING PATIENT FREEDOM OF
CHOICE.
‘‘(a) IN
GENERAL.—The provisions of section
2707(a) shall apply to health insurance coverage offered
by a health insurance issuer in the individual market in
the same manner as they apply to health insurance cov-
erage offered by a health insurance issuer in connection
with a group health plan in the small or large group mar-
ket.
‘‘(b) NOTICE.—A health insurance issuer under this
part shall comply with the notice requirement under sec-
tion 714(b) of the Employee Retirement Income Security
Act of 1974 with respect to the requirements referred to
in subsection (a) as if such section applied to such issuer
and such issuer were a group health plan.’’.
(2) Section 2762(b)(2) of such Act (42 U.S.C.
300gg–62(b)(2)) is amended by striking ‘‘section 2751’’
and inserting ‘‘sections 2751 and 2753’’.
(c) MEDICARE+CHOICE PLANS.—Section 1852 of
the Social Security Act (42 U.S.C. 1395w–22) is amended
by adding at the end the following new subsection:
‘‘(l) FORMULARY REQUIREMENTS.—
‘‘(1) IN GENERAL.—A Medicare+Choice orga-
nization shall comply with the requirements of sec-
tion 2707 of the Public Health Service Act with re-
spect to a Medicare+Choice plan it offers in the
same manner as such requirements apply to health
insurance coverage offered in connection with a
group health plan.
‘‘(2) CONSTRUCTION.—Nothing in paragraph
(1) shall be construed as superseding other require-
ments of this part, except to the extent the Sec-
retary specifically finds that such other requirements
are less stringent, and do not duplicate, the require-
ments referred to in such paragraph.’’.
(d) EFFECTIVE DATES.—
(1) 
GROUP
HEALTH
PLANS
AND
GROUP
HEALTH INSURANCE COVERAGE.—Subject to para-
graph (4), the amendments made by subsection (a)
apply with respect to group health plans for plan
years beginning on or after January 1, 2001.
(2) INDIVIDUAL
HEALTH
INSURANCE
COV-
ERAGE.—The amendments made by subsection (b)
apply with respect to health insurance coverage of-
fered, sold, issued, renewed, in effect, or operated in
the individual market on or after such date.
(3) MEDICARE+CHOICE
PLANS.—The amend-
ments made by subsection (b) apply with respect to
Medicare+Choice plans offered on or after such
date.
(4) COLLECTIVE BARGAINING EXCEPTION.—In
the case of a group health plan maintained pursuant
to 1 or more collective bargaining agreements be-
tween employee representatives and 1 or more em-
ployers ratified before the date of enactment of this
Act, the amendments made subsection (a) shall not
apply to plan years beginning before the later of—
(A) the date on which the last collective
bargaining agreements relating to the plan ter-
minates (determined without regard to any ex-
tension thereof agreed to after the date of en-
actment of this Act), or
(B) January 1, 2001.
For purposes of subparagraph (A), any plan amend-
ment made pursuant to a collective bargaining
agreement relating to the plan which amends the
plan solely to conform to any requirement added by
subsection (a) shall not be treated as a termination
of such collective bargaining agreement.
(e) COORDINATION OF ADMINISTRATION.—The Sec-
retary of Labor, the Secretary of the Treasury, and the
Secretary of Health and Human Services shall ensure,
through the execution of an interagency memorandum of
understanding among such Secretaries, that—
(1) regulations, rulings, and interpretations
issued by such Secretaries relating to the same mat-
ter over which two or more such Secretaries have re-
sponsibility under the provisions of this Act (and the
amendments made thereby) are administered so as
to have the same effect at all times; and
(2) coordination of policies relating to enforcing
the same requirements through such Secretaries in
order to have a coordinated enforcement strategy
that avoids duplication of enforcement efforts and
assigns priorities in enforcement.
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