SEC. 2. TREATMENT OF DRUGS AND BIOLOGICALS UNDER 
OUTPATIENT HOSPITAL PROSPECTIVE PAY-
MENT SYSTEM. 
(a) SEPARATE
APCS
FOR
MOST
DRUGS
AND 
BIOLOGICALS.—
(1) IN
GENERAL.—Section 1833(t)(2) of the 
Social Security Act (42 U.S.C. 1395l(t)(2) is amend-
ed—
(A) by striking ‘‘and’’ at the end of sub-
paragraph (F); 
(B) striking the period at the end of sub-
paragraph (G) and inserting ‘‘; and’’; and 
(C) by adding at the end the following: 
‘‘(H) the Secretary shall treat as a sepa-
rate group of covered OPD services—
‘‘(i) any drug or biological that was 
treated as such a group as of December 
31, 2002; and 
‘‘(ii) any drug or biological that has 
ceased to be eligible for transitional, pass-
through payments under paragraph (6) by 
reason of the limited period of payment 
specified in paragraph (6)(C)(i).’’. 
(2) EFFECTIVE DATE.—The amendments made 
by paragraph (1) shall apply to items and services 
furnished on or after January 1, 2004.
(b) PAYMENT
RATES
FOR
NON-PASS-THROUGH 
DRUGS AND BIOLOGICALS.—
(1) PROGRAM PAYMENTS.—Section 1833(t) of 
such Act (42 U.S.C. 1395l(t)) is amended—
(A) in paragraph (3), by amending sub-
paragraph (D) to read as follows: 
‘‘(D) CALCULATION
OF
MEDICARE
OPD 
FEE SCHEDULE AMOUNTS.—
‘‘(i) IN
GENERAL.—The Secretary 
shall compute a Medicare OPD fee sched-
ule amount for each covered OPD service 
(or group of such services) furnished in a 
year, in an amount that (except as pro-
vided in clause (ii)) is equal to the product 
of—
‘‘(I) the conversion factor com-
puted under subparagraph (C) for the 
year, and 
‘‘(II) the relative payment weight 
(determined under paragraph (2)(C) 
or paragraph (9)(A)) for the service 
or group. 
‘‘(ii) SPECIAL RULES FOR 2004.—
‘‘(I) 
IN
GENERAL.—Notwith-
standing clause (i), the Medicare OPD
fee schedule amount for 2004 for a 
drug or biological that is treated as a 
separate group of covered OPD serv-
ices and is a single-source drug (as 
defined in section 1927(k)(7)(A)(iv)) 
or an innovator multiple source drug 
(as 
defined 
in 
section 
1927(k)(7)(A)(ii)) may not be less 
than an amount equal to 83 percent 
of the average wholesale price for the 
drug or biological. 
‘‘(II) NO REVISION OF RELATIVE 
PAYMENT
WEIGHTS.—The 
relative 
payment weights established under 
paragraph (9)(A) for 2004 for groups 
of covered OPD services other than 
those to which subclause (I) applies 
shall not be revised to take into ac-
count the application of such sub-
clause (I). 
‘‘(III) DEFINITION.—For pur-
poses of subclause (I), the term ‘mul-
tiple source drug or biological’ has the 
meaning given to the term ‘multiple
source 
drug’ 
in 
section 
1927(k)(7)(A)(i).’’; 
(B) in paragraph (4)—
(i) in subparagraph (A), by striking 
‘‘Secretary, as computed under paragraphs 
(2)(D) and (2)(E)’’ and inserting ‘‘Sec-
retary (as computed under paragraphs 
(2)(D) and (2)(E)), except that the Medi-
care OPD fee schedule amount determined 
under paragraph (3)(D) for a drug or bio-
logical that is treated as a separate group 
of covered OPD services shall not be ad-
justed for relative differences in the cost of 
labor’’; and 
(ii) in subparagraph (B), by striking 
‘‘adjusted’’; and 
(C) in paragraph (9), by adding at the end 
the following: 
‘‘(D) USE OF EXTERNAL DATA.—In deter-
mining the relative payment weight for any 
drug or biological that is treated as a separate 
group of covered OPD services for any year 
after 2003, the Secretary shall adjust the 
weight otherwise determined under this para-
graph with respect to the drug or biological to
the extent that reliable and valid data collected 
and submitted by entities and organizations 
other than the Department of Health and 
Human Services (including data submitted in 
public comments on the proposed rule promul-
gated with respect to the system established 
under this subsection for 2004) demonstrate 
that such payment weight is inadequate or inac-
curate. In the case of any adjustments made 
pursuant to the preceding sentence for 2004, 
the Secretary shall not revise the relative pay-
ment weights for other groups of covered OPD 
services for such year to take into account such 
adjustments, and the medicare OPD fee sched-
ule amount determined under paragraph (3)(D) 
using a relative weight resulting from such an 
adjustment shall be subject to the minimum 
amount described in clause (ii)(I) of such para-
graph.’’. 
(2) COPAYMENTS.—Section 1833(t)(8)(E) of 
such Act (42 U.S.C. 1395l(t)(8)(E)) is amended—
(A) in the heading, by striking ‘‘OUTLIER 
AND PASS-THROUGH’’ and inserting ‘‘CERTAIN’’; 
and
(B) by striking ‘‘paragraphs (5) and (6)’’ 
and inserting ‘‘paragraphs (3)(D)(ii), (5), and 
(6)’’. 
(3) EXCEPTIONS TO BUDGET NEUTRALITY RE-
QUIREMENT.—Section 1833(t)(9)(B) of such Act 
(42 U.S.C. 1395l(t)(9)(B)) is amended by adding at 
the end the following: ‘‘In determining the budget 
neutrality adjustment required by the preceding sen-
tence, the Secretary shall not take into account—
‘‘(i) any expenditures that would not 
have been made but for the application of 
clause (ii) of paragraph (3)(D); or 
‘‘(ii) any expenditures made by reason 
of an adjustment required by subpara-
graph (D) for 2004.’’. 
(c) STUDY OF PHARMACY SERVICES USED TO PRO-
VIDE CANCER DRUG THERAPIES
IN HOSPITAL OUT-
PATIENT SETTING.—
(1) IN GENERAL.—The Comptroller General of 
the United States shall conduct a study of payments 
under part B of title XVIII of the Social Security 
Act for pharmacy service costs and related costs that 
are incurred in acquiring chemotherapy and sup-
portive care drugs and providing these therapies to
cancer patients in hospital outpatient departments. 
The study shall—
(A) identify pharmacy costs, including the 
costs of storage, handling, processing, quality 
control, disposal, compliance with safety proto-
cols and regulations, establishing dosage regi-
mens that avoid drug interactions and contra-
indications, and pharmacy overhead; 
(B) include a review of the adequacy of the 
current payment methodology for pharmacy 
service costs and related costs (including the 
adequacy of the cost-to-charge ratios used in 
such methodology); and 
(C) identify any changes to that method-
ology that are necessary to ensure recognition 
of, and appropriate payment for, all of the serv-
ices and functions inherent in the provision of 
cancer treatment in hospital outpatient settings. 
(2) REPORT TO CONGRESS.—Not later than 12 
months after the date of enactment of this Act, the 
Comptroller General shall submit to Congress a re-
port on the results of the study under paragraph 
(1), including any recommendations for legislation
necessary to implement the changes identified under 
paragraph (1)(C).
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