‘‘(B) 
ASSURING
EQUIVALENT
UNSUB-
SIDIZED
VALUE
OF
COVERAGE.—The unsub-
sidized value of the coverage is at least equal to 
the unsubsidized value of standard coverage. 
For purposes of this subparagraph, the unsub-
sidized value of coverage is the amount by 
which the actuarial value of the coverage (as 
determined under subsection (e)) exceeds the 
actuarial value of the subsidy payments under 
section 1860D–8 with respect to such coverage. 
‘‘(C) ASSURING STANDARD PAYMENT FOR 
COSTS AT INITIAL COVERAGE LIMIT.—The cov-
erage is designed, based upon an actuarially 
representative pattern of utilization (as deter-
mined under subsection (e)), to provide for the 
payment, with respect to costs incurred that are 
equal to the initial coverage limit under sub-
section (b)(3), of an amount equal to at least 
the product of—
‘‘(i) the amount by which the initial 
coverage limit described in subsection 
(b)(3) exceeds the deductible described in 
subsection (b)(1); and
‘‘(ii) 100 percent minus the cost-shar-
ing percentage specified in subsection 
(b)(2)(A)(i). 
‘‘(2) CATASTROPHIC
PROTECTION.—The cov-
erage provides for beneficiaries the catastrophic pro-
tection described in subsection (b)(4). 
‘‘(d) ACCESS TO NEGOTIATED PRICES.—
‘‘(1) IN GENERAL.—Under qualified prescrip-
tion drug coverage offered by a PDP sponsor or an 
entity offering a MA-EFFS Rx plan, the sponsor or 
entity shall provide beneficiaries with access to nego-
tiated prices (including applicable discounts) used 
for payment for covered outpatient drugs, regardless 
of the fact that no benefits may be payable 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 to a beneficiary enrolled under such title and 
under a prescription drug plan or MA-EFFS Rx 
plan for a drug based on the prices negotiated by a 
prescription drug plan or MA-EFFS Rx plan under 
this part, the requirements of section 1927 shall not 
apply to such drugs. The prices negotiated by a pre-
scription drug plan under this part, by a MA-EFFS
Rx plan with respect to covered outpatient drugs, or 
by a qualified retiree prescription drug plan (as de-
fined in section 1860D–8(f)(1)) with respect to such 
drugs on behalf of individuals entitled to benefits 
under part A or enrolled under part B, shall (not-
withstanding any other provision of law) not be 
taken into account for the purposes of establishing 
the best price under section 1927(c)(1)(C). 
‘‘(2) DISCLOSURE.—The PDP sponsor or entity 
offering a MA-EFFS Rx plan shall disclose to the 
Administrator (in a manner specified by the Admin-
istrator) the extent to which discounts or rebates or 
other remuneration or price concessions made avail-
able to the sponsor or organization by a manufac-
turer are passed through to enrollees through phar-
macies and other dispensers or otherwise. The provi-
sions of section 1927(b)(3)(D) shall apply to infor-
mation disclosed to the Administrator under this 
paragraph in the same manner as such provisions 
apply to information disclosed under such section. 
‘‘(3) 
AUDITS
AND
REPORTS.—To 
protect 
against fraud and abuse and to ensure proper disclo-
sures and accounting under this part, in addition to 
any protections against fraud and abuse provided 
under section 1860D–4(b)(3)(C), the Administrator
may periodically audit the financial statements and 
records of PDP sponsor or entities offering a MA-
EFFS Rx plan.
‘‘(e) ACTUARIAL VALUATION; DETERMINATION OF 
ANNUAL PERCENTAGE INCREASES.—
‘‘(1) PROCESSES.—For purposes of this section, 
the Administrator shall establish processes and 
methods—
‘‘(A) for determining the actuarial valu-
ation of prescription drug coverage, including—
‘‘(i) an actuarial valuation of standard 
coverage and of the reinsurance subsidy 
payments under section 1860D–8; 
‘‘(ii) the use of generally accepted ac-
tuarial principles and methodologies; and 
‘‘(iii) applying the same methodology 
for determinations of alternative coverage 
under subsection (c) as is used with re-
spect to determinations of standard cov-
erage under subsection (b); and 
‘‘(B) for determining annual percentage in-
creases described in subsection (b)(5). 
Such methods for determining actuarial valuation 
shall take into account effects of alternative coverage 
on drug utilization.
‘‘(2) USE OF OUTSIDE ACTUARIES.—Under the 
processes under paragraph (1)(A), PDP sponsors 
and entities offering MA-EFFS Rx plans may use 
actuarial opinions certified by independent, qualified 
actuaries to establish actuarial values, but the Ad-
ministrator shall determine whether such actuarial 
values meet the requirements under subsection 
(c)(1). 
‘‘(f) COVERED OUTPATIENT DRUGS DEFINED.—
‘‘(1) IN GENERAL.—Except as provided in this 
subsection, for purposes of this part, the term ‘cov-
ered outpatient 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 insulin described in subpara-
graph (C) of such section and medical supplies 
associated with the injection of insulin (as de-
fined in regulations of the Secretary), 
and such term includes a vaccine licensed under sec-
tion 351 of the Public Health Service Act and any
use of a covered outpatient drug for a medically ac-
cepted 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 med-
ical uses, which may be excluded from coverage 
or 
otherwise 
restricted 
under 
section 
1927(d)(2), other than subparagraph (E) there-
of (relating to smoking cessation agents), or 
under section 1927(d)(3). 
‘‘(B) AVOIDANCE
OF
DUPLICATE
COV-
ERAGE.—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
RESTRIC-
TIONS.—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 1860D–3(f)(2).
cumstances recognized by the Adminis-
trator. 
‘‘(ii) PROVISION OF INFORMATION TO 
PRESCRIBING
HEALTH
CARE
PROFES-
SIONAL.—The program provides for the 
electronic transmittal to the prescribing 
health care professional of information 
that includes—
‘‘(I) information (to the extent 
available and feasible) on the drug or 
drugs being prescribed for that pa-
tient and other information relating to 
the medical history or condition of the 
patient that may be relevant to the 
appropriate prescription for that pa-
tient; 
‘‘(II) cost-effective alternatives (if 
any) for the use of the drug pre-
scribed; and 
‘‘(III) information on the drugs 
included in the applicable formulary. 
To the extent feasible, such program shall 
permit the prescribing health care profes-
sional to provide (and be provided) related
information on an interactive, real-time 
basis. 
‘‘(B) STANDARDS.—
‘‘(i) DEVELOPMENT.—The Adminis-
trator shall provide for the development of 
uniform standards relating to the elec-
tronic 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 de-
veloping such standards and the standards 
described in subsection (c)(2)(B)(i) the Ad-
ministrator shall establish a task force that 
includes representatives of physicians, hos-
pitals, pharmacies, beneficiaries, pharmacy 
benefit managers, individuals with exper-
tise in information technology, and phar-
macy benefit experts of the Departments 
of Veterans Affairs and Defense and other 
appropriate Federal agencies to provide 
recommendations to the Administrator on 
such standards, including recommenda-
tions relating to the following:
‘‘(I) The range of available com-
puterized prescribing software and 
hardware and their costs to develop 
and implement. 
‘‘(II) The extent to which such 
standards and systems reduce medica-
tion errors and can be readily imple-
mented by physicians, pharmacies, 
and hospitals. 
‘‘(III) Efforts to develop uniform 
standards and a common software 
platform for the secure electronic 
communication of medication history, 
eligibility, benefit, and prescription in-
formation. 
‘‘(IV) Efforts to develop and pro-
mote universal connectivity and inter-
operability for the secure electronic 
exchange of such information.
‘‘(V) The cost of implementing 
such systems in the range of hospital 
and physician office settings and 
pharmacies, including hardware, soft-
ware, and training costs.
‘‘(VI) 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 computerized 
prescribing. 
‘‘(iii) DEADLINES.—
‘‘(I) The Administrator shall con-
stitute the task force under clause (ii) 
by not later than April 1, 2004. 
‘‘(II) Such task force shall sub-
mit recommendations to Adminis-
trator by not later than January 1, 
2005. 
‘‘(III) The Administrator shall 
provide for the development and pro-
mulgation, by not later than January 
1, 2006, of national standards relat-
ing to the electronic prescription drug 
program described in clause (ii). Such 
standards shall be issued by a stand-
ards organization accredited by the 
American National Standards Insti-
tute (ANSI) and shall be compatible
with standards established under part 
C of title XI. 
‘‘(4) TREATMENT OF ACCREDITATION.—Section 
1852(e)(4) (relating to treatment of accreditation) 
shall apply to prescription drug plans under this 
part with respect to the following requirements, in 
the same manner as they apply to plans under part 
C with respect to the requirements described in a 
clause of section 1852(e)(4)(B): 
‘‘(A) Paragraph (1) (including quality as-
surance), including medication therapy manage-
ment program under paragraph (2). 
‘‘(B) Subsection (c)(1) (relating to access 
to covered benefits). 
‘‘(C) Subsection (g) (relating to confiden-
tiality and accuracy of enrollee records). 
‘‘(5) PUBLIC DISCLOSURE OF PHARMACEUTICAL 
PRICES FOR EQUIVALENT DRUGS.—Each PDP spon-
sor and each entity offering a MA-EFFS Rx plan 
shall provide that each pharmacy or other dispenser 
that arranges for the dispensing of a covered out-
patient 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 available generic drug