I
105TH CONGRESS
2D SESSION
H. R. 4753
To amend title XVIII of the Social Security Act to provide for coverage
of outpatient prescription drugs and home infusion drug therapy under
the Medicare Program.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 8, 1998
Mr. STARK introduced the following bill; which was referred to the Committee
on Ways and Means, and in addition to the Committee on Commerce,
for a period to be subsequently determined by the Speaker, in each case
for consideration of such provisions as fall within the jurisdiction of the
committee concerned
A BILL
To amend title XVIII of the Social Security Act to provide
for coverage of outpatient prescription drugs and home
infusion drug therapy under the Medicare Program.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Medicare Prescription Drug Coverage Act of 1998’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Coverage of outpatient prescription drugs.
Sec. 3. Payment rules and related requirements for covered outpatient drugs.
Sec. 4. Medicare rebates for covered outpatient drugs.
Sec. 5. Expansion of Medicare payment advisory commission.
Sec. 6. Coverage of home infusion drug therapy services.
Sec. 7. No mark-up for drugs, biologicals, or parenteral nutrients.
Sec. 8. Treatment of part B premium increases resulting from enactment.
Sec. 9. Effective date.
SEC. 2. COVERAGE OF OUTPATIENT PRESCRIPTION DRUGS.
(a) COVERED OUTPATIENT DRUGS AS MEDICAL AND
OTHER HEALTH SERVICES.—Section 1861(s)(2)(J) of the
Social Security Act (42 U.S.C. 1395x(s)(2)(J)) is amend-
ed to read as follows:
‘‘(J) covered outpatient drugs;’’.
(b) DEFINITION OF COVERED OUTPATIENT DRUG.—
Section 1861(t) of such Act (42 U.S.C. 1395x(t)) is
amended—
(1) in the heading, by adding at the end the fol-
lowing: ‘‘; Covered Outpatient Drugs’’;
(2) in paragraph (1)—
(A) by striking ‘‘paragraph (2)’’ and in-
serting ‘‘the succeeding paragraphs of this sub-
section’’, and
(B) by striking the period at the end and
inserting ‘‘, but only if used for a medically ac-
cepted indication (as described in paragraph
(4)).’’; and
(3) by striking paragraph (2) and inserting the
following:
‘‘(2) Except as otherwise provided in paragraph (3),
the term ‘covered outpatient drug’ means any of the fol-
lowing products used for a medically accepted indication
(as described in paragraph (4)):
‘‘(A) A drug which may be dispensed only upon
prescription and—
‘‘(i) which is approved for safety and effec-
tiveness as a prescription drug under section
505 or 507 of the Federal Food, Drug, and
Cosmetic Act or which is approved under sec-
tion 505(j) of such Act;
‘‘(ii)(I) which was commercially used or
sold in the United States before the date of the
enactment of the Drug Amendments of 1962 or
which is identical, similar, or related (within the
meaning of section 310.6(b)(1) of title 21 of the
Code of Federal Regulations) to such a drug,
and (II) which has not been the subject of a
final determination by the Secretary that it is
a ‘new drug’ (within the meaning of section
201(p) of the Federal Food, Drug, and Cos-
metic Act) or an action brought by the Sec-
retary under section 301, 302(a), or 304(a) of
such Act to enforce section 502(f) or 505(a) of
such Act; or
‘‘(iii)(I) which is described in section
107(c)(3) of the Drug Amendments of 1962
and for which the Secretary has determined
there is a compelling justification for its medi-
cal need, or is identical, similar, or related
(within the meaning of section 310.6(b)(1) of
title 21 of the Code of Federal Regulations) to
such a drug, and (II) for which the Secretary
has not issued a notice of an opportunity for a
hearing under section 505(e) of the Federal
Food, Drug, and Cosmetic Act on a proposed
order of the Secretary to withdraw approval of
an application for such drug under such section
because the Secretary has determined that the
drug is less than effective for all conditions of
use prescribed, recommended, or suggested in
its labeling.
‘‘(B) A biological product which—
‘‘(i) may only be dispensed upon prescrip-
tion,
‘‘(ii) is licensed under section 351 of the
Public Health Service Act, and
‘‘(iii) is produced at an establishment li-
censed under such section to produce such
product.
‘‘(C) Insulin certified under section 506 of the
Federal Food, Drug, and Cosmetic Act.
‘‘(D) Enteral nutrients (but only if provided as
a covered home infusion drug).
‘‘(E) Medically-necessary foods for persons with
Phenylketonuria (PKU) and other inborn errors of
metabolism, in accordance with guidelines developed
by the Secretary.
‘‘(3) The term ‘covered outpatient drug’ does not in-
clude any product—
‘‘(A) which is administered through infusion in
a setting described in paragraph (5)(A)(ii) unless
the product is a covered home infusion drug (as de-
fined in paragraph (5));
‘‘(B) when furnished as part of, or as incident
to, a diagnostic service or any other item or service
for which payment may be made under this title
(other than physicians’ services or services which
would be physicians’ services if furnished by a physi-
cian); or
‘‘(C) which is listed under paragraph (2) of sec-
tion 1927(d) (other than subparagraph (B), (I), or
(J) of such subparagraph) as a drug which may be
excluded from coverage under a State plan under
title XIX and which the Secretary elects to exclude
from coverage under part B.
‘‘(4) For purposes of paragraph (2), the term ‘medi-
cally accepted indication’, with respect to the use of an
outpatient drug, includes any use which has been approved
by the Food and Drug Administration for the drug, and
includes another use of the drug if—
‘‘(A) the drug has been approved by the Food
and Drug Administration; and
‘‘(B)(i) such use is supported by one or more
citations which are included (or approved for inclu-
sion) in one or more of the following compendia: the
American Hospital Formulary Service-Drug Infor-
mation, the American Medical Association Drug
Evaluations, the United States Pharmacopoeia-Drug
Information, and other authoritative compendia as
identified by the Secretary, unless the Secretary has
determined that the use is not medically appropriate
or the use is identified as not indicated in one or
more such compendia, or
‘‘(ii) the carrier involved determines, based
upon guidance provided by the Secretary to carriers
for determining accepted uses of drugs, that such
use is medically accepted based on supportive clinical
evidence in peer reviewed medical literature appear-
ing in publications which have been identified for
purposes of this clause by the Secretary.
The Secretary may revise the list of compendia in sub-
paragraph (B)(i) designated as appropriate for identifying
medically accepted indications for drugs.
‘‘(5)(A) For purposes of paragraph (3), the term
‘covered home infusion drug’ means a covered outpatient
drug dispensed to an individual that—
‘‘(i) 
is 
administered 
intravenously,
subcutaneously, or epidurally, using an access device
that is inserted into the body and an infusion device
to control the rate of flow of the drug (or through
other means of administration determined by the
Secretary);
‘‘(ii) is administered—
‘‘(I) in the individual’s home,
‘‘(II) an institution used as the individual’s
home, but only if the drug is administered dur-
ing an inpatient day for which payment is not
made to the institution under part A for inpa-
tient or extended care services furnished to the
individual, or
‘‘(III) in a facility other than the individ-
ual’s home if the administration of the drug at
the facility is determined by the Secretary to be
cost-effective (in accordance with such criteria
as the Secretary may establish); and
‘‘(iii) with respect to a drug furnished in a
home setting—
‘‘(I) is an antibiotic drug and the Sec-
retary has not determined, for the specific drug
or the indication to which the drug is applied,
that the drug cannot generally be administered
safely, effectively, and cost effectively in such a
setting, or
‘‘(II) is not an antibiotic drug and the Sec-
retary has determined, for the specific drug or
the indication to which the drug is applied, that
the drug can generally be administered safely,
effectively, and cost effectively in such a setting.
‘‘(B) Not later than January 1, 2002 (and periodi-
cally thereafter), the Secretary shall publish a list of the
drugs, and indications for such drugs, that are covered
home infusion drugs, with respect to which home infusion
drug therapy may be provided under this title.
‘‘(C) In this paragraph, the term ‘cost effectively’
means, with respect to a home infusion drug, a determina-
tion by the Secretary that the coverage of the drug in a
non-hospital setting will, considering all expenses, result
in lower expenditures under this title than if the drug were
not so covered.’’.
(c) CONFORMING AMENDMENTS REPEALING SEPA-
RATE COVERAGE OF CERTAIN DRUGS AND PRODUCTS.—
(1) Effective January 1, 2002, section 1861(s)(2) of such
Act (42 U.S.C. 1395x(s)(2)) is amended—
(A) in subparagraph (A), by striking ‘‘(includ-
ing drugs’’ and all that follows through ‘‘self-admin-
istered)’’;
(B) by striking subparagraphs (G), (I), (O),
(Q), and (T);
(C) by adding ‘‘and’’ at the end of subpara-
graph (R); and
(D) by striking ‘‘; and’’ at the end of subpara-
graph (S) and inserting a period.
(2) Effective January 1, 2002, section 1861 of such
Act (42 U.S.C. 1395x) is amended by striking the sub-
section (kk).
(3) Effective January 1, 2002, section 1881(b) of
such Act (42 U.S.C. 1395rr(b)) is amended—
(A) in the first sentence of paragraph (1)—
(i) by striking ‘‘, (B)’’ and inserting ‘‘, and
(B)’’, and
(ii) by striking ‘‘, and (C)’’ and all that
follows and inserting a period;
(B) in paragraph (11)—
(i) by striking ‘‘(11)(A)’’ and inserting
‘‘(11)’’, and
(ii) by striking subparagraphs (B) and (C).
SEC. 3. PAYMENT RULES AND RELATED REQUIREMENTS
FOR COVERED OUTPATIENT DRUGS.
(a) IN GENERAL.—Section 1834 of the Social Secu-
rity Act (42 U.S.C. 1395m) is amended by inserting after
subsection (d) the following new subsection:
‘‘(e) PAYMENT FOR AND CERTAIN REQUIREMENTS
CONCERNING COVERED OUTPATIENT DRUGS.—
‘‘(1) DEDUCTIBLE.—
‘‘(A) IN
GENERAL.—Payment shall be
made under paragraph (2) only for expenses in-
curred by an individual for a covered outpatient
drug during a calendar year after the individual
has incurred expenses in the year for such
drugs (during a period in which the individual
is entitled to benefits under this part) equal to
the deductible amount for that year.
‘‘(B) DEDUCTIBLE AMOUNT.—
‘‘(i) For purposes of subparagraph
(A), subject to clause (iii), the deductible
amount is—
‘‘(I) for 2002, an amount equal
to $ll; and
‘‘(II) for any succeeding year, the
amount applicable under this subpara-
graph for the previous year, increased
by the percentage increase in the con-
sumer price index for all urban con-
sumers (all items; U.S. city average)
for the 12-month period ending with
June of the previous year (or, if
lower, the percentage increase in the
pharmaceutical component of such
index for such period).
‘‘(ii) The Secretary shall promulgate
the deductible amount for 2003 and each
succeeding year not later than October 1
of the previous year.
‘‘(iii) If the deductible amount com-
puted under clause (i)(II) for a year is not
a multiple of $10, the Secretary shall (for
that year only) round it to the nearest
multiple of $10.
‘‘(2) PAYMENT AMOUNT.—
‘‘(A) IN GENERAL.—Subject to the deduct-
ible established under paragraph (1), the
amount payable under this part for a covered
outpatient drug furnished to an individual dur-
ing a calendar year shall be equal to—
‘‘(i) 80 percent of the payment basis
described in paragraph (3), in the case of
an individual who has not incurred ex-
penses for covered outpatient drugs during
the year (including the deductible imposed
under paragraph (1)) in excess of the out-
of-pocket limit for the year under subpara-
graph (B); and
‘‘(ii) 100 percent of the payment basis
described in paragraph (3), in the case of
any other individual.
‘‘(B) 
OUT-OF-POCKET
LIMIT
DE-
SCRIBED.—
‘‘(i) For purposes of subparagraph
(A), the out-of-pocket limit for a year is
equal to—
‘‘(I) for 2002, $ll; and
‘‘(II) for any succeeding year, the
amount applicable under this subpara-
graph for the previous year, increased
by the percentage increase described
in paragraph (1)(B)(i)(II).
‘‘(ii) The Secretary shall promulgate
the out-of-pocket limit for 2003 and each
succeeding year not later than October 1
of the previous year.
‘‘(iii) If the out-of-pocket limit com-
puted under clause (i)(II) for a year is not
a multiple of $10, the Secretary shall (for
that year only) round it to the nearest
multiple of $10.
‘‘(3) PAYMENT BASIS.—For purposes of para-
graph (2), the payment basis is the lesser of—
‘‘(A) the actual net payment for a covered
outpatient drug, or
‘‘(B) the applicable payment limit estab-
lished under paragraph (4).
‘‘(4) PAYMENT LIMITS.—
‘‘(A) PAYMENT LIMIT FOR SINGLE SOURCE
DRUGS
AND
MULTIPLE
SOURCE
DRUGS
WITH
RESTRICTIVE PRESCRIPTIONS.—In the case of a
covered outpatient drug that is a multiple
source drug which has a restrictive prescription,
or that is single source drug, the payment limit
for a payment calculation period is equal to the
amount of the administrative allowance (estab-
lished under paragraph (5)) plus the product of
the number of dosage units dispensed and the
per unit actual acquisition cost for the drug
product (determined under subparagraph (C))
for the period.
‘‘(B) PAYMENT
LIMIT
FOR
MULTIPLE
SOURCE
DRUGS
WITHOUT
RESTRICTIVE
PRE-
SCRIPTIONS.—In the case of a drug that is a
multiple source drug which does not have a re-
strictive prescription, the payment limit for a
payment calculation period is equal to the
amount of the administrative allowance (estab-
lished under paragraph (5)) plus the product of
the number of dosage units dispensed and the
lowest actual acquisition cost (determined under
subparagraph (C)) of any of the multiple source
drugs in the category as determined by the Sec-
retary for the period.
‘‘(C) DETERMINATION OF UNIT PRICE.—
‘‘(i) INITIAL PAYMENT CALCULATION
PERIOD.—The Secretary shall determine,
for the dispensing of a covered outpatient
drug product in the payment calculation
period beginning January 1, 2002, the ac-
tual acquisition cost for the drug product,
based upon—
‘‘(I) in the case of a single source
drug or multiple source drug with a
restrictive prescription, based upon in-
formation from the period beginning
in 1998 updated (in a compound man-
ner) by the percentage change in the
consumer price index for all urban
consumers (U.S. city average) for the
4 12-month periods ending with June
2001; or
‘‘(II) in the case of a multiple
source drug without a restrictive pre-
scription, based upon information
from the most recent year for which
data is available.
‘‘(ii) SUBSEQUENT PERIODS.—The ac-
tual acquisition cost for a covered out-
patient drug product applicable under this
subparagraph for the dispensing of a drug
product in a payment calculation period
beginning in January of each year (begin-
ning with 2003) shall be equal to the ac-
tual acquisition cost for the product deter-
mined under this subparagraph for the pe-
riod ending in January of the previous
year, increased by the percentage increase
described in paragraph (1)(B)(i)(II).
‘‘(iii) SIMPLIFICATION IN DETERMINA-
TION OF ACTUAL ACQUISITION COST.—The
Secretary shall consult with the provider
community to simplify the accounting and
reporting requirements used in calculating
actual acquisition cost and may accept var-
ious averaging procedures, tax documents,
and tax accounting procedures (such as
last-in-first-out (LIFO) and first-in-first-
out (FIFO)) instead of new reporting re-
quirements.
‘‘(iv) COMPLIANCE
WITH
REQUEST
FOR INFORMATION.—If a wholesaler or di-
rect seller of a covered outpatient drug re-
fuses, after being requested by the Sec-
retary, to provide price information re-
quested to carry out clauses (i) or (ii), or
deliberately provides information that is
false, the Secretary may impose a civil
money penalty of not to exceed $10,000
for each such refusal or provision of false
information. The provisions of section
1128A (other than subsections (a) and (b))
shall apply to civil money penalties under
the previous sentence in the same manner
as they apply to a penalty or proceeding
under section 1128A(a). Information gath-
ered pursuant to clause (i) or (ii) shall not
be disclosed except as the Secretary deter-
mines to be necessary to carry out the pur-
poses of this part and to permit the Comp-
troller General and the Director of the
Congressional Budget Office to review the
information provided.
‘‘(D) DEMONSTRATION
OF
ALTERNATIVE
PURCHASING
ARRANGEMENTS.—The Secretary
may conduct demonstrations with different
forms of purchasing, such as competitive bid-
ding, preferred provider organizations, bundling
of medical and pharmaceutical costs, and other
devices to obtain the lowest possible price for
quality pharmaceutical products under this
part. If the Secretary determines that a dem-
onstration results in lower costs to the program
and beneficiaries under this title while main-
taining the quality and access to needed prod-
ucts, the Secretary may implement the dem-
onstration regionally or nationally. The Sec-
retary shall from time to time report to Con-
gress on demonstrations conducted under this
subparagraph.
‘‘(5) ADMINISTRATIVE
ALLOWANCE
FOR
PUR-
POSES OF PAYMENT LIMIT.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraphs (B) through (D), the adminis-
trative allowance established under this para-
graph is—
‘‘(i) for 2002, an amount equal to
$ll; and
‘‘(ii) for each succeeding year, the
amount for the previous year, adjusted by
the percentage increase described in para-
graph (1)(B)(i)(II).
‘‘(B) SPECIAL RULE.—The Secretary shall
establish a higher administrative allowance
under subparagraph (A) in the case of
compounding, consultation, and to ensure ac-
cess to covered drugs and antigens that entail
extra or unusual expense.
‘‘(C) REDUCTION FOR MAIL ORDER PHAR-
MACIES.—The Secretary may, after consulting
with representatives of pharmacists, individuals
enrolled under this part, and of private insur-
ers, reduce the administrative allowances estab-
lished under subparagraph (A) for any covered
outpatient drug dispensed by a mail order phar-
macy, based on differences between such phar-
macies and other pharmacies with respect to
operating costs and other economies.
‘‘(D) NO DISPENSING FEE FOR CERTAIN
DRUGS AND PRODUCTS.—No administrative al-
lowance may be provided under this paragraph
with respect to any of the following covered out-
patient drugs, unless the Secretary determines
that an administrative allowance is necessary to
assure access:
‘‘(i) Erythropoietin provided to dialy-
sis patients.
‘‘(ii) Drugs and biologicals provided
as an incident to a physician’s service or to
a service which would be a physician’s
service if furnished by a physician.
‘‘(iii) Covered home infusion drugs.
‘‘(6) ASSURING
APPROPRIATE
PRESCRIBING
AND DISPENSING PRACTICES.—
‘‘(A) IN
GENERAL.—The Secretary shall
develop a program to—
‘‘(i) provide on-line prospective review
of prescriptions on a 24-hour basis (in ac-
cordance with subparagraph (B)) and ret-
rospective review of claims;
‘‘(ii) establish standards for counsel-
ing individuals to whom covered outpatient
drugs are prescribed; and
‘‘(iii) identify (and to educate physi-
cians, patients, and pharmacists concern-
ing)—
‘‘(I) instances or patterns of un-
necessary or inappropriate prescribing
or dispensing practices for covered
outpatient drugs,
‘‘(II) instances or patterns of
substandard care with respect to such
drugs,
‘‘(III) potential adverse reactions,
and
‘‘(IV) appropriate use of generic
products.
‘‘(B) PROSPECTIVE REVIEW.—
‘‘(i) 
IN
GENERAL.—The 
program
under this paragraph shall provide for on-
line prospective review of each covered out-
patient drug prescribed for a patient be-
fore the prescription is filled or the drug is
furnished, including screening for potential
drug therapy problems due to therapeutic
duplication, drug-to-drug interactions, and
incorrect drug dosage or duration of drug
treatment, including inadequate pain man-
agement therapy.
‘‘(ii) DISCUSSION
OF
APPROPRIATE
USE.—In conducting prospective review
under this subparagraph, any individual or
entity that dispenses a covered outpatient
drug shall offer to discuss with the patient
to whom the drug is furnished or the pa-
tient’s caregiver (in person if practicable,
or through access to a toll-free telephone
service) information regarding the appro-
priate use of the drug, potential inter-
actions between the drug and other drugs
dispensed to the individual, the need for
adequate pain management, and such
other matters as the Secretary may re-
quire.
‘‘(iii) ADDITIONAL DUTIES.—In carry-
ing out this subparagraph, the Secretary
shall—
‘‘(I) develop public domain soft-
ware which could be used by carriers
and pharmacies to provide the on-line
prospective review; and
‘‘(II) study the feasibility and de-
sirability of requiring confidential, en-
coded patient diagnosis codes on pre-
scriptions and the feasibility of ex-
panding the prospective review pro-
gram to include the identification of
drug-disease contraindications, inter-
actions with over-the-counter drugs,
and drug-allergy interactions.
‘‘(C) PRIOR AUTHORIZATION.—
‘‘(i) DEVELOPMENT OF LIST OF MIS-
USED DRUGS.—The Secretary shall develop
(and periodically) update a list of covered
outpatient drugs which the Secretary has
determined, based on data collected, may
be subject to misuse or inappropriate use.
The Secretary shall provide a means for
manufacturers to appeal an initial decision
to include a drug on the list.
‘‘(ii) 
PRIOR
AUTHORIZATION
FOR
DRUGS ON LIST.—The Secretary shall es-
tablish a process under which (subject to
clause (iii)) the Secretary may require ad-
vance approval for any covered outpatient
drug included on the list developed under
clause (i), and the Secretary shall develop
exceptions for oncologists, medical direc-
tors of hospice programs, and others who
are or should be regularly involved in ag-
gressive pain management.
‘‘(iii) RESTRICTIONS
ON
DENIAL
OF
APPROVAL.—The Secretary may not deny
the approval of a drug under the process
established under clause (ii) before its dis-
pensing unless the process—
‘‘(I) provides responses by tele-
phone or other telecommunication de-
vice within 24 hours of a request for
prior authorization; and
‘‘(II) provides for the dispensing
of at least a 72-hour supply of a cov-
ered outpatient prescription drug in
emergency situations.
‘‘(D) DRUG USE REVIEW.—As part of the
program established under subparagraph (A),
the Secretary shall provide for a drug use re-
view program to provide for the ongoing peri-
odic examination of claims data and other
records on covered outpatient drugs furnished
to patients under this title in order to identify
patterns of fraud, abuse, gross overuse or
underuse, or inappropriate or medically unnec-
essary care among physicians, pharmacists, and
patients.
‘‘(E) EXCEPTION
FOR
MANAGED
CARE
PROGRAMS.—The Secretary may waive the ap-
plication of any provision of this paragraph to
the dispensing of covered outpatient drugs by
an 
organization 
described 
in 
section
1833(a)(1)(A) or a Medicare+Choice organiza-
tion under part C to the extent the Secretary
finds that the organization has in effect a pro-
gram that meets the objectives of such provi-
sion.
‘‘(F) 
ADOPTION
OF
MEDICAID
PRO-
GRAMS.—To the extent considered appropriate
by the Secretary, the program developed under
this paragraph with respect to drugs furnished
in a State may include elements applicable to
the furnishing of covered outpatient drugs
under the State Medicaid program under sec-
tion 1927.
‘‘(7) ADMINISTRATIVE AND REPORTING REQUIRE-
MENTS.—
‘‘(A) REQUIREMENTS RELATING TO CON-
TROLLED SUBSTANCES AND ILLEGAL USES.—
The Secretary shall require an entity furnishing
covered outpatient drugs under this part to re-
port electronically to the appropriate State
agency on any covered outpatient drugs dis-
pensed to individuals enrolled under this part
that are controlled substances under schedules
II through V of the Controlled Substance Act,
and on the illegal use or diversion of any such
drugs furnished by the entity.
‘‘(B) PRIVACY
PROTECTION.—The Sec-
retary shall establish standards to protect from
public disclosure the identity of any individual
(whether a patient or an individual involved in
the prescribing, dispensing, or administration of
the drug) who is the subject of information
under this section. Under such standards—
‘‘(i) no information on the use of a
pharmaceutical by an identifiable individ-
ual shall be shared with anyone other than
the individual, the individual’s legal guard-
ian or custodian, or the individual’s physi-
cian;
‘‘(ii) no information shall be shared
with the individual’s employer, or with a
pharmaceutical manufacturer or whole-
saler, or with any other individual for pur-
poses of contacting the individual to per-
suade, sell, or influence the individual’s
choice of pharmaceuticals; and
‘‘(iii) no physician, pharmacist, or
other health care provider who receives any
form of compensation or thing of value
from a drug manufacturer or wholesaler
may contact a patient for purposes of in-
fluencing the patient to use the product of
that drug manufacturer or wholesaler.
‘‘(C) STANDARD CLAIMS FORM.—The Sec-
retary shall develop, in consultation with rep-
resentatives of pharmacies and of other inter-
ested persons, a standard claims form for cov-
ered outpatient drugs in accordance with part C
of title IX.
‘‘(8) BILLING REQUIREMENTS.—
‘‘(A) MANDATORY ASSIGNMENT.—(i) Pay-
ment under this part for a covered outpatient
drug may only be made on an assignment-relat-
ed basis.
‘‘(ii) Except for deductible, coinsurance, or
copayment amounts applicable under this part,
no person may bill or collect any amount from
an individual enrolled under this part or other
person for a covered outpatient drug for which
payment may be made under this part, and no
such individual or person is liable for payment
of any amounts billed in violation of this clause.
If a person knowingly and willfully bills or col-
lects an amount in violation of the previous sen-
tence, the Secretary may apply sanctions
against such person in accordance with section
1842(j)(2). Paragraph (4) of section 1842(j)
shall apply in this clause in the same manner
as such paragraph applies to such section.
‘‘(B) USE OF ELECTRONIC SYSTEM.—The
Secretary shall establish, by not later than July
1, 2001, a point-of-sale electronic system for
use by carriers and pharmacies in the submis-
sion of information respecting covered out-
patient drugs dispensed to Medicare bene-
ficiaries under this part. Such system shall be
consistent with the standards established by the
National Council of Prescription Drug Pro-
grams, and to the maximum extent possible
shall be based on current industry best prac-
tices.
‘‘(9) DEFINITIONS.—In this subsection:
‘‘(A) MULTIPLE
AND
SINGLE
SOURCE
DRUGS.—The terms ‘multiple source drug’ and
‘single source drug’ have the meanings of those
terms under section 1927(k)(7), except that the
reference in such section to a ‘covered out-
patient drug’ shall be considered a reference to
a covered outpatient drug under this title.
‘‘(B) 
RESTRICTIVE
PRESCRIPTION.—A
drug has a ‘restrictive prescription’ only if—
‘‘(i) in the case of a written prescrip-
tion, the prescription for the drug indi-
cates, in the handwriting of the physician
or other person prescribing the drug and
with an appropriate phrase (such as ‘brand
medically necessary’) recognized by the
Secretary, that a particular drug product
must be dispensed, or
‘‘(ii) in the case of a prescription
issued by telephone—
‘‘(I) the physician or other per-
son prescribing the drug (through use
of such an appropriate phrase) states
that a particular drug product must
be dispensed, and
‘‘(II) the physician or other per-
son submits to the pharmacy involved,
within 30 days after the date of the
telephone prescription, a written con-
firmation which is in the handwriting
of the physician or other person pre-
scribing the drug and which indicates
with such appropriate phrase that the
particular drug product was required
to have been dispensed.
The requirement of subclause (II) may be
satisfied in such alternative manner, in-
cluded electronic transmission of appro-
priate information, as the Secretary, after
consultation with physicians and providers,
finds will reduce paperwork and adminis-
trative costs while maintaining program in-
tegrity.
‘‘(C) PAYMENT
CALCULATION
PERIOD.—
The term ‘payment calculation period’ means a
calendar year.’’.
(b) REQUIRING PHARMACIES TO SUBMIT CLAIMS.—
Section 1848(g)(4) of such Act (42 U.S.C. 1395w–
4(g)(4)) is amended—
(1) in the heading—
(A) by striking ‘‘PHYSICIAN SUBMISSION’’
and inserting ‘‘SUBMISSION’’, and
(B) by inserting ‘‘BY
PHYSICIANS
AND
SUPPLIERS’’ after ‘‘CLAIMS’’;
(2) in the matter in subparagraph (A) preced-
ing clause (i)—
(A) by striking ‘‘For services furnished on
or after September 1, 1990, within 1 year’’ and
inserting ‘‘Within 1 year (or 90 days in the
case of covered outpatient drugs)’’,
(B) by striking ‘‘a service’’ and inserting
‘‘an item or service’’, and
(C) by inserting ‘‘or of providing a covered
outpatient drug,’’ after ‘‘basis,’’; and
(3) in subparagraph (A)(i), by inserting ‘‘item
or’’ before ‘‘service’’.
(c) SPECIAL RULES FOR CARRIERS.—
(1) USE OF CARRIERS.—Section 1842(b)(2) of
such Act (42 U.S.C. 1395u(b)(2)) is amended by
adding at the end the following:
‘‘(F) With respect to activities related to covered out-
patient drugs, the Secretary may enter into contracts with
carriers under this section to perform the activities on a
regional or national basis.’’.
(2) 
ADDITIONAL
FUNCTIONS.—Section
1842(b)(3) of such Act (42 U.S.C. 1395u(b)(3)) is
amended—
(A) by striking ‘‘and’’ at the end of sub-
paragraph (H); and
(B) by inserting after subparagraph (H)
the following new subparagraphs:
‘‘(I) if it makes determinations or payments
with respect to covered outpatient drugs, will—
‘‘(i) receive information transmitted under
the electronic system established under section
1834(e)(8)(B), and
‘‘(ii) respond to requests by pharmacies
(and individuals entitled to benefits under this
part) as to whether or not such an individual
has met the prescription drug deductible estab-
lished under section 1834(e)(1)(B) for a year;
‘‘(J) will enter into such contracts with organi-
zations described in subsection (f)(3) as the Sec-
retary determines may be necessary to implement
and operate (and for related functions with respect
to) the electronic system established under section
1834(e)(8)(B) for covered outpatient drugs under
this part; and’’.
(3) PAYMENT
ON
OTHER
THAN
A
COST
BASIS.—Section 1842(c)(1) of such Act (42 U.S.C.
1395u(c)(1)) is amended—
(A) by inserting ‘‘(A)’’ after ‘‘(c)(1)’’,
(B) in the first sentence, by inserting ‘‘,
except as otherwise provided in subparagraph
(B),’’ after ‘‘under this part, and’’, and
(C) by adding at the end the following:
‘‘(B) To the extent that a contract under this section
provides for activities related to covered outpatient drugs,
the Secretary may provide for payment for those activities
based on any method of payment determined by the Sec-
retary to be appropriate.’’.
(4) BATCH PROMPT PROCESSING OF CLAIMS.—
Section 1842(c) of such Act (42 U.S.C. 1395u(c)) is
amended—
(A) in paragraphs (2)(A) and (3)(A), by
striking ‘‘Each’’ and inserting ‘‘Except as pro-
vided in paragraph (7), each’’; and
(B) by adding at the end the following new
paragraph:
‘‘(7)(A) Each contract under this section which pro-
vides for the disbursement of funds, as described in sub-
section (a)(1)(B), with respect to claims for payment for
covered outpatient drugs shall provide for a payment cycle
under which each carrier will, on a monthly basis, make
a payment with respect to all claims which were received
and approved for payment in the period since the most
recent date on which such a payment was made with re-
spect to the participating pharmacy or individual submit-
ting the claim.
‘‘(B) If payment is not issued, mailed, or otherwise
transmitted within 5 days of when such a payment is re-
quired to be made under subparagraph (A), interest shall
be paid at the rate used for purposes of section 3902(a)
of title 31, United States Code (relating to interest pen-
alties for failure to make prompt payments) for the period
beginning on the day after such 5-day period and ending
on the date on which payment is made.’’.
(5) USE
OF
OTHER
ENTITIES
FOR
COVERED
OUTPATIENT DRUGS.—Section 1842(f) of such Act
(42 U.S.C. 1395u(f)) is amended—
(A) by striking ‘‘and’’ at the end of para-
graph (1),
(B) by striking the period at the end of
paragraph (2) and inserting ‘‘; and’’, and
(C) by adding at the end the following:
‘‘(3) with respect to activities related to covered
outpatient drugs, any other private entity which the
Secretary determines is qualified to conduct such ac-
tivities.’’.
(6) 
DESIGNATED
CARRIERS
TO
PROCESS
CLAIMS OF RAILROAD RETIREES.—Section 1842(g)
of such Act (42 U.S.C. 1395u(g)) is amended by in-
serting ‘‘(other than functions related to covered
outpatient drugs)’’ after ‘‘functions’’.
(d) CONFORMING AMENDMENTS.—
(1)(A) Section 1833(a)(1) of such Act (42
U.S.C. 1395l(a)(1)) is amended—
(i) by striking ‘‘and’’ at the end of clause
(R), and
(ii) by inserting before the semicolon at the
end the following: ‘‘, and (T) with respect to
covered outpatient drugs, the amounts paid
shall be as prescribed by section 1834(e)’’.
(B) Section 1833(a)(2) of such Act (42 U.S.C.
1395l(a)(2)) is amended in the matter preceding
subparagraph (A) by inserting ‘‘, except for covered
outpatient drugs,’’ after ‘‘and (I) of such section’’.
(2) Section 1833(b)(2) of such Act (42 U.S.C.
1395l(b)(2)) is amended by inserting ‘‘or with re-
spect to covered outpatient drugs’’ before the
comma.
(3) The first sentence of section 1842(h)(2) of
such Act (42 U.S.C. 1395u(h)(2)) is amended by in-
serting ‘‘(other than a carrier described in sub-
section (f)(3))’’ after ‘‘Each carrier’’.
(4) The first sentence of section 1866(a)(2)(A)
of such Act (42 U.S.C. 1395cc(a)(2)(A)) is amend-
ed—
(A) in clause (i), by inserting ‘‘section
1834(e),’’ after ‘‘section 1833(b),’’, and
(B) in clause (ii), by inserting ‘‘, other
than for covered outpatient drugs,’’ after ‘‘pro-
vider)’’.
SEC. 4. MEDICARE REBATES FOR COVERED OUTPATIENT
DRUGS.
(a) IN GENERAL.—Part B of title XVIII of the Social
Security Act is amended by adding at the end the follow-
ing new section:
‘‘REBATES FOR COVERED OUTPATIENT DRUGS
‘‘Sec. 1849. (a) REQUIREMENT FOR REBATE AGREE-
MENT.—
‘‘(1) IN GENERAL.—In order for payment to be
available under this part for covered outpatient
drugs of a manufacturer dispensed or provided on or
after January 1, 2002, subject to paragraph (2), the
manufacturer must have entered into and have in ef-
fect a rebate agreement with the Secretary meeting
the requirements of subsection (b) and an agreement
to give equal access to discounts in accordance with
subsection (e).
‘‘(2) DEMONSTRATIONS.—The Secretary may
conduct demonstrations with different forms of pur-
chasing, such a competitive bidding, exclusive long-
term contracts resulting in lower prices, and other
devices to obtain the lowest possible price for quality
pharmaceutical products. If the Secretary deter-
mines that a demonstration results in lower costs to
the program and beneficiaries under this title than
the rebate program under paragraph (1) while main-
taining quality and access to needed products, the
Secretary may implement use of the demonstration
regionally or nationally as an alternative to the re-
bate program. The Secretary shall from time to time
report to Congress on such demonstrations.
‘‘(b) TERMS, IMPLEMENTATION, AND ENFORCEMENT
OF REBATE AGREEMENT.—
‘‘(1) PERIODIC REBATES.—
‘‘(A) IN
GENERAL.—A rebate agreement
under this section shall require the manufac-
turer to pay to the Secretary for each calendar
quarter, not later than 30 days after the date
of receipt of the information described in para-
graph (2) for such quarter, a rebate in an
amount determined under subsection (c) for all
covered outpatient drugs of the manufacturer
described in subparagraph (B).
‘‘(B) DRUGS
INCLUDED
IN
QUARTERLY
REBATE CALCULATION.—Drugs subject to a re-
bate with respect to a calendar quarter are cov-
ered outpatient drugs which are single source
and innovator multiple source drugs which are
dispensed or provided during such quarter to
individuals (other than individuals enrolled with
a Medicare+Choice organization under part C)
agreement under this section shall report to the
Secretary, by not later than 30 days after the
effective date of such agreement (or, if later, 30
days after the end of the base quarter), the av-
erage manufacturer retail price, for such base
quarter, for each dosage form and strength of
each such covered drug.
‘‘(C) VERIFICATION
OF
AVERAGE
MANU-
FACTURER PRICE.—The Secretary may inspect
the records of manufacturers, and survey whole-
salers, pharmacies, and institutional purchasers
of drugs, as necessary to verify prices reported
under subparagraph (A).
‘‘(D) PENALTIES.—
‘‘(i) CIVIL
MONEY
PENALTIES.—The
Secretary may impose a civil money pen-
alty on a manufacturer with an agreement
under this section—
‘‘(I) for failure to provide infor-
mation required under subparagraph
(A) on a timely basis, in an amount
up to $10,000 per day of delay;
‘‘(II) for refusal to provide infor-
mation about charges or prices re-
quested by the Secretary for purposes
of verification pursuant to subpara-
graph (C), in an amount up to
$100,000; and
‘‘(III) for provision, pursuant to
subparagraph (A) or (B), of informa-
tion that the manufacturer knows or
should know is false, in an amount up
to $100,000 per item of information.
Such civil money penalties are in addition
to any other penalties prescribed by law.
The provisions of section 1128A (other
than subsections (a) (with respect to
amounts of penalties or additional assess-
ments) and (b)) shall apply to a civil
money penalty under this subparagraph in
the same manner as such provisions apply
to a penalty or proceeding under section
1128A(a).
‘‘(ii) 
TERMINATION
OF
AGREE-
MENT.—If a manufacturer with an agree-
ment under this section has not provided
information required under subparagraph
(A) or (B) within 90 days of the deadline
imposed, the Secretary may suspend the
agreement with respect to covered out-
patient drugs dispensed after the end of
such 90-day period and until the date such
information is reported (but in no case
shall a suspension be for less than 30
days).
‘‘(4) LENGTH OF AGREEMENT.—
‘‘(A) IN
GENERAL.—A rebate agreement
shall be effective for an initial period of not less
than one year and shall be automatically re-
newed for a period of not less than one year un-
less terminated under subparagraph (B).
‘‘(B) TERMINATION.—
‘‘(i) BY THE SECRETARY.—The Sec-
retary may provide for termination of a re-
bate agreement for violation of the require-
ments of the agreement or other good
cause shown. Such termination shall not be
effective earlier than 60 days after the
date of notice of such termination. The
Secretary shall afford a manufacturer an
opportunity for a hearing concerning such
termination, but such hearing shall not
delay the effective date of the termination.
‘‘(ii) BY A MANUFACTURER.—A man-
ufacturer may terminate a rebate agree-
ment under this section for any reason.
Any such termination shall not be effective
until the calendar quarter beginning at
least 60 days after the date the manufac-
turer provides notice to the Secretary.
‘‘(iii) EFFECTIVE
DATE
OF
TERMI-
NATION.—Any termination under this sub-
paragraph shall not affect rebates due
under the agreement before the effective
date of its termination.
‘‘(iv) NOTICE
TO
PHARMACIES.—In
the case of a termination under this sub-
paragraph, the Secretary shall notify phar-
macies and physician organizations not less
than 30 days before the effective date of
such termination.
‘‘(c) AMOUNT OF REBATE.—
‘‘(1) BASE REBATE.—Each manufacturer shall
remit a basic rebate to the Secretary for each cal-
endar quarter in an amount, with respect to each
dosage form and strength of a covered outpatient
drug equal to the product of—
‘‘(A) the total number of units subject to
rebate for such quarter, as described in sub-
section (b)(1)(B); and
‘‘(B)(i) in the case of a single-source drug
or an innovator-multiple source drug (other
than insulin furnished over-the-counter), 15
percent of the average manufacturer retail
price, or
‘‘(ii) in the case of insulin furnished over-
the-counter, 10 percent of the average manufac-
turer retail price.
‘‘(2) ADDITIONAL
REBATE.—Each manufac-
turer shall remit to the Secretary, for each calendar
quarter, an additional rebate for each dosage form
and strength of a single-source drug or an innova-
tor-multiple source drug, in an amount equal to—
‘‘(A) the total number of units subject to
rebate for such quarter, as described in sub-
section (b)(1)(B), multiplied by
‘‘(B) the amount, if any, by which the av-
erage manufacturer retail price for such drugs
of the manufacturer exceeds the average manu-
facturer retail price for the base quarter, in-
creased by the percentage increase in the Con-
sumer Price Index for all urban consumers
(U.S. average) from the end of such base quar-
ter to the month before the beginning of such
calendar quarter.
‘‘(3) DEPOSIT
OF
REBATES.—The Secretary
shall deposit rebates under this section in the Fed-
eral Supplementary Medical Insurance Trust Fund
established under section 1841.
‘‘(d) CONFIDENTIALITY OF INFORMATION.—Notwith-
standing any other provision of law, information disclosed
by a manufacturer under this section is confidential and
shall not be disclosed by the Secretary (or a carrier), ex-
cept—
‘‘(1) as the Secretary determines to be nec-
essary to carry out this section,
‘‘(2) to permit the Comptroller General to re-
view the information provided, and
‘‘(3) to permit the Director of the Congres-
sional Budget Office to review the information pro-
vided.
‘‘(e) AGREEMENT TO GIVE EQUAL ACCESS TO DIS-
COUNTS.—An agreement under this subsection by a man-
ufacturer of covered outpatient drugs shall guarantee that
the manufacturer will offer, to each wholesaler or retailer
(or other purchaser representing a group of such whole-
salers or retailers) that purchases such drugs on substan-
tially the same terms (including such terms as prompt
payment, cash payment, volume purchase, single-site de-
livery, the use of formularies by purchasers, and any other
terms effectively reducing the manufacturer’s costs) as
any other purchaser (including any institutional pur-
chaser) the same price for such drugs as is offered to such
other purchaser. In determining a manufacturer’s compli-
ance with the previous sentence, there shall not be taken
into account prices that are merely nominal in amount or
prices excluded under section 1927(c)(1)(C)(i).
‘‘(f) DEFINITIONS.—For purposes of this section—
‘‘(1) 
AVERAGE
MANUFACTURER
RETAIL
PRICE.—The term ‘average manufacturer retail
price’ means, with respect to a covered outpatient
drug of a manufacturer for a calendar quarter, the
average price (inclusive of discounts for cash pay-
ment, prompt payment, volume purchases, and re-
bates (other than rebates under this section), but ex-
clusive of nominal prices) paid to the manufacturer
for the drug in the United States for drugs distrib-
uted to the retail pharmacy class of trade.
‘‘(2) AVERAGE
MANUFACTURER
NON-RETAIL
PRICE.—The term ‘average manufacturer non-retail
price’ means, with respect to a covered outpatient
drug of a manufacturer for a calendar quarter, the
weighted average price (inclusive of discounts for
cash payment, prompt payment, volume purchases,
and rebates (other than rebates under this section),
but exclusive of nominal prices) paid to the manu-
facturer for the drug in the United States by hos-
pitals and other institutional purchasers that pur-
chase drugs for institutional use and not for resale.
‘‘(3) BASE QUARTER.—The term ‘base quarter’
means, with respect to a covered outpatient drug of
a manufacturer, the calendar quarter beginning
April 1, 2002, or (if later) the first full calendar
quarter during which the drug was marketed in the
United States.
‘‘(4) DRUG.—The terms ‘innovator multiple
source drug’, ‘noninnovator multiple source drug’,
and ‘single source drug’ have the meanings of those
terms under section 1927(k)(7), except that the ref-
erence in such section to a ‘covered outpatient drug’
shall be considered a reference to a covered out-
patient drug under this part.
‘‘(5) MANUFACTURER.—The term ‘manufac-
turer’ means, with respect to a covered outpatient
drug—
‘‘(A) the entity whose National Drug Code
number (as issued pursuant to section 510(e) of
the Federal Food, Drug, and Cosmetic Act) ap-
pears on the labeling of the drug; or
‘‘(B) if the number described in subpara-
graph (A) does not appear on the labeling of
the drug, the person named as the applicant in
a human drug application (in the case of a new
drug) or the product license application (in the
case of a biological product) for such drug ap-
proved by the Food and Drug Administration.’’.
(b) 
EXCLUSIONS
FROM
COVERAGE.—Section
1862(a) of such Act (42 U.S.C. 1395y(a)) is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(20),
(2) by striking the period at the end of para-
graph (21) and inserting ‘‘; or’’, and
(3) by inserting after paragraph (21) the fol-
lowing new paragraph:
‘‘(22) consisting of a covered outpatient drug
(as described in section 1861(t)) furnished during a
year for which the drug’s manufacturer does not
have in effect a rebate agreement with the Secretary
that meets the requirements of section 1849 for the
year.’’.
SEC. 5. EXPANSION OF MEDICARE PAYMENT ADVISORY
COMMISSION.
(a) IN GENERAL.—Effective January 1, 2000, the
membership of the Medicare Payment Advisory Commis-
sion (established under section 1805 of the Social Security
Act, (42 U.S.C. 1395b–6)) shall be expanded to include
2 additional members, appointed by the Comptroller Gen-
eral of the United States, with expertise in the area of
pharmacology and prescription drug benefit programs.
(b) APPLICATION OF PROVISIONS.—The provisions of
paragraphs (2)(D), (3), and (4) of subsection (c) of such
section (relating to ethical disclosure, terms, and com-
pensation) shall apply to the additional members ap-
pointed under subsection (a) in the same manner as they
apply to other members of the Commission.
SEC. 6. COVERAGE OF HOME INFUSION DRUG THERAPY
SERVICES.
(a) IN GENERAL.—Section 1832(a)(2)(A) of the So-
cial Security Act (42 U.S.C. 1395k(a)(2)(A)) is amended
by inserting ‘‘and home infusion drug therapy services’’
before the semicolon.
(b) HOME INFUSION DRUG THERAPY SERVICES DE-
FINED.—Section 1861 of such Act (42 U.S.C. 1395x) is
amended by adding at the end the following new sub-
section:
‘‘Home Infusion Drug Therapy Services
‘‘(uu)(1) The term ‘home infusion drug therapy serv-
ices’ means the items and services described in paragraph
(2) furnished to an individual who is under the care of
a physician—
‘‘(A) 
in 
a 
setting 
described 
in 
section
1861(t)(5)(A)(ii),
‘‘(B) by a qualified home infusion drug therapy
provider (as defined in paragraph (3)) or by others
under arrangements with them made by that pro-
vider, and
‘‘(C) under a plan established and periodically
reviewed by a physician.
‘‘(2) The items and services described in this para-
graph are such nursing, pharmacy, and related services
(including medical supplies, intravenous fluids, delivery,
and equipment) as are necessary to conduct safely and ef-
fectively a drug regimen through use of a covered home
infusion drug (as defined in subsection (t)(5)), but do not
include such covered home infusion drugs.
‘‘(3) The term ‘qualified home infusion drug therapy
provider’ means any entity that the Secretary determines
meets the following requirements (or, in the case of a
home health agency or an entity with respect to which the
only items and services described in paragraph (2) fur-
nished by the entity are enteral nutrition therapy services,
meets any of the following requirements which the Sec-
retary considers appropriate):
‘‘(A) The entity is capable of providing or ar-
ranging for the items and services described in para-
graph (2) and covered home infusion drugs.
‘‘(B) The entity maintains clinical records on
all patients.
‘‘(C) The entity adheres to written protocols
and policies with respect to the provision of items
and services.
‘‘(D) The entity makes services available (as
needed) seven days a week on a 24-hour basis.
‘‘(E) The entity coordinates all service with the
patient’s physician.
‘‘(F) The entity conducts a quality assessment
and assurance program, including drug regimen re-
view and coordination of patient care.
‘‘(G) The entity assures that only trained per-
sonnel provide covered home infusion drugs (and any
other service for which training is required to pro-
vide the service safely).
‘‘(H) The entity assumes responsibility for the
quality of services provided by others under arrange-
ments with the entity.
‘‘(I) In the case of an entity in any State in
which State or applicable local law provides for the
licensing of entities of this nature, the entity (i) is
licensed pursuant to such law, or (ii) is approved, by
the agency of such State or locality responsible for
licensing entities of this nature, as meeting the
standards established for such licensing.
‘‘(J) The entity meets such other requirements
as the Secretary may determine are necessary to as-
sure the safe and effective provision of home infu-
sion drug therapy services and the efficient adminis-
tration of the home infusion drug therapy benefit.’’.
(c) PAYMENT.—
(1) IN GENERAL.—Section 1833 of such Act
(42 U.S.C. 1395l) is amended—
(A) in subsection (a)(2)(B), by striking ‘‘or
(E)’’ and inserting ‘‘(E), or (H)’’,
(B) in subsection (a)(2)(F), by striking
‘‘and’’ at the end,
(C) in subsection (a)(2)(G), by striking the
semicolon and inserting ‘‘; and’’,
(D) by inserting after subsection (a)(2)(G)
the following new subparagraph:
‘‘(H) with respect to home infusion drug
therapy services, the amounts described in sec-
tion 1834(m);’’, and
(E) in the first sentence of subsection (b),
by inserting ‘‘and home infusion drug therapy
services’’ after ‘‘1861(kk)))’’.
(2) AMOUNT
DESCRIBED.—Section 1834 of
such Act is amended by adding at the end the fol-
lowing new subsection:
‘‘(m) HOME INFUSION DRUG THERAPY SERVICES.—
‘‘(1) IN GENERAL.—With respect to home infu-
sion drug therapy services, payment under this part
shall be made in an amount equal to the lesser of
the actual charges for such services or the fee sched-
ule established under paragraph (2).
‘‘(2) ESTABLISHMENT OF FEE SCHEDULE.—
‘‘(A) IN
GENERAL.—The Secretary shall
establish by regulation before the beginning of
2002 and each succeeding year a fee schedule
for home infusion drug therapy services for
which payment is made under this part. A fee
schedule established under this subsection shall
be on a per diem basis.
‘‘(B) ADJUSTMENT
FOR
SERVICES
FUR-
NISHED
BY
INSTITUTIONS.—The fee schedule
established by the Secretary under subpara-
graph (A) shall provide for adjustments in the
case of home infusion drug therapy services for
which payment is made under this part that are
furnished by a provider of services to avoid du-
plicative payments under this title for the serv-
ice costs associated with such services.’’.
(d) CERTIFICATION.—Section 1835(a)(2) of such Act
(42 U.S.C. 1395n(a)(2)) is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (E),
(2) by striking the period at the end of sub-
paragraph (F) and inserting ‘‘; and’’, and
(3) by inserting after subparagraph (F) the fol-
lowing:
‘‘(G) in the case of home infusion drug
therapy services, (i) such services are or were
required because the individual needed such
services for the administration of a covered
home infusion drug, (ii) a plan for furnishing
such services has been established and is re-
viewed periodically by a physician, and (iii)
such services are or were furnished while the in-
dividual is or was under the care of a physi-
cian.’’.
(e) CERTIFICATION
OF
HOME
INFUSION
DRUG
THERAPY PROVIDERS; INTERMEDIATE SANCTIONS FOR
NONCOMPLIANCE.—
(1) TREATMENT AS PROVIDER OF SERVICES.—
Section 1861(u) of such Act (42 U.S.C. 1395x(u))
is amended by inserting ‘‘home infusion drug ther-
apy provider,’’ after ‘‘hospice program,’’.
(2) CONSULTATION WITH STATE AGENCIES AND
OTHER ORGANIZATIONS.—Section 1863 of such Act
(42 U.S.C. 1395z) is amended by striking ‘‘and
(dd)(2)’’ and inserting ‘‘(dd)(2), and (uu)(3)’’.
(3) USE OF STATE AGENCIES IN DETERMINING
COMPLIANCE.—Section 1864(a) of such Act (42
U.S.C. 1395aa(a)) is amended—
(A) in the first sentence, by striking ‘‘an
agency is a hospice program’’ and inserting ‘‘an
agency or entity is a hospice program or a
home infusion drug therapy provider,’’; and
(B) in the second sentence—
(i) by striking ‘‘institution or agency’’
and inserting ‘‘institution, agency, or en-
tity’’, and
(ii) by striking ‘‘or hospice program’’
and inserting ‘‘hospice program, or home
infusion drug therapy provider’’.
(4) APPLICATION
OF
INTERMEDIATE
SANC-
TIONS.—Section 1846 of such Act (42 U.S.C.
1395w–2) is amended—
(A) in the heading, by adding ‘‘AND FOR
QUALIFIED
HOME
INFUSION
DRUG
THERAPY
PROVIDERS’’ at the end,
(B) in subsection (a), by inserting ‘‘or that
a qualified home infusion drug therapy provider
that is certified for participation under this title
no longer substantially meets the requirements
of section 1861(uu)(3)’’ after ‘‘under this
part’’, and
(C) in subsection (b)(2)(A)(iv), by insert-
ing ‘‘or home infusion drug therapy services’’
after ‘‘clinical diagnostic laboratory tests’’.
(f) USE OF INTERMEDIARIES IN ADMINISTRATION OF
BENEFIT.—Section 1816 of such Act (42 U.S.C. 1395h)
is amended by adding at the end the following new sub-
section:
‘‘(l) With respect to carrying out functions relating
to payment for home infusion drug therapy services and
covered home infusion drugs, the Secretary may enter into
contracts with agencies or organizations under this section
to perform such functions on a regional or national
basis.’’.
(g) 
CONFORMING
AMENDMENTS.—(1) 
Section
1834(h)(4)(B) of such Act (42 U.S.C. 1395m(h)(4)(B))
is amended by striking ‘‘, except that’’ and all that follows
through ‘‘equipment’’.
(2) Section 1861(n) of such Act (42 U.S.C.
1395x(n)) is amended by adding at the end the following:
‘‘Such term does not include any home infusion drug ther-
apy services described in section 1861(uu) or any covered
outpatient drug used as a supply related to the furnishing
of an item of durable medical equipment.’’.
(3) Section 1861(s)(8) of such Act (42 U.S.C.
1395x(s)(8)) is amended by inserting after ‘‘dental’’ the
following: ‘‘devices or enteral and parenteral nutrients,
supplies, and equipment’’.
SEC. 7. NO MARK-UP FOR DRUGS, BIOLOGICALS, OR PAREN-
TERAL NUTRIENTS.
(a) IN GENERAL.—Section 1842(o) of the Social Se-
curity Act (42 U.S.C. 1395u(o)) is amended to read as
follows:
‘‘(o)(1) If a physician’s, supplier’s, or any other per-
son’s bill or request for payment for services includes a
charge for a drug, biological, or parenteral nutrient for
which payment may be made under this part and the drug,
biological, or parenteral nutrient is not paid on a cost or
prospective payment basis as otherwise provided in this
part, the payment amount established in this subsection