‘‘(2) FEES
PAID
BY
PHARMACY
BENEFIT
FUND.—The Pharmacy Benefit Administrator, di-
rectly or through an agent or otherwise, shall not
impose transaction charges, processing, or adminis-
trative fees on pharmacy providers that submit
claims or receive payments under the program.
Transactions charges, processing or administrative
fees shall be paid by the Pharmacy Benefit Adminis-
trator from the Pharmacy Benefit Fund.
‘‘(h) PRICE COMPARISONS.—The Secretary shall en-
courage and create incentives for a pharmacy provider to
make available, on a voluntary basis, a price list that the
pharmacy provider would charge for other covered out-
patient drugs within the same therapeutic class.
‘‘(i) PRIVATE SERVICES CONTRACTS WITH PHAR-
MACIES.—
‘‘(1) IN GENERAL.—To the extent not prohib-
ited by or otherwise in conflict with any other provi-
sion in this title, pharmacies may privately contract
with manufacturers, beneficiaries or other persons to
provide pharmacy services to individuals upon such
terms and conditions as those contracting parties
may agree.
‘‘(2) DESCRIPTION OF SERVICES.—The services
referred to in paragraph (1) include medication re-
view services, medication therapy management serv-
ices, medication compliance and persistence pro-
grams, disease state management programs for tar-
geted beneficiaries, refill reminders, medication mon-
itoring, medication therapy problem resolution, bene-
ficiary education regarding medication preparation
and administration, and other professional services
consistent with the applicable State’s scope of phar-
macy practice.
‘‘CATASTROPHIC COVERAGE BENEFIT
‘‘SEC. 1860C. (a) BENEFITS.—The benefits provided
to an eligible beneficiary under this section shall consist
of the following:
‘‘(1) STOP-LOSS.—Payment for covered out-
patient drugs furnished in a year after the bene-
ficiary incurs in that year unreimbursed out-of-pock-
et costs in excess $5,000. In the case of any cal-
endar year after 2003, the dollar amount in this
paragraph shall be adjusted each year by an amount
equal to the percentage increase or decrease in the
Consumer Price Index for medical care for the pre-
ceding year, as determined by the Bureau of Labor
Statistics.
‘‘(2) 
MEDICATION
THERAPY
MANAGEMENT
SERVICES.—Payment for covered medication therapy
management services and other professional services
furnished by a pharmacy provider in accordance
with the provisions of this part.
‘‘(b) MEDICATION REVIEW AND MEDICATION THER-
APY MANAGEMENT.—
‘‘(1) PURPOSE.—To help reduce overall medical
costs, the Secretary shall implement a medication re-
view and medication therapy management services
program designed to ensure that covered outpatient
drugs are used appropriately to achieve therapeutic
goals and reduce the risk of adverse events, includ-
ing adverse drug interactions.
‘‘(2) SERVICES DESCRIBED.—Covered medica-
tion review and medication therapy management
services shall be treated as treatment activities for
purposes of applying part C of title XI, and shall
include—
‘‘(A) services or programs provided by par-
ticipating pharmacy providers which are de-
signed to—
‘‘(i) assure that medications are used
appropriately by beneficiaries;
‘‘(ii) enhance beneficiaries’ under-
standing of the appropriate use of medica-
tions through beneficiary education, coun-
seling, and other appropriate means;
‘‘(iii) increase beneficiaries’ adherence
with 
prescription 
medication 
regimens
through medication refill reminders, special
packaging, and other appropriate means;
‘‘(iv) reduce the risk of potential ad-
verse events associated with medications;
and
‘‘(v) reduce the need for other costly
medical services through better manage-
ment of medication therapy; and
‘‘(B) services offered by pharmacy pro-
viders involving counseling, case management,
disease management, patient training and edu-
cation, medication refill reminders, medication
therapy management and problem resolution,
annual medication review assessments of all
medications currently used by a beneficiary to
identify potential adverse interactions or to
identify the need for additional medication
therapies, and such other professional services
that enhance the use of prescription medica-
tions, consistent with the scope of the practice
of pharmacy as defined by applicable State law.
‘‘(2) PROGRAM
OPERATION.—Any medication
therapy management program established under this
section must—
‘‘(A) identify and provide medication ther-
apy management services to beneficiaries at
risk for potential medication problems, such as
beneficiaries taking multiple medications and
beneficiaries with complex or chronic medical
conditions;
‘‘(B) be developed and structured in co-
operation with organizations representing par-
ticipating pharmacy providers, including identi-
fying those medication therapy management
services that will be provided, as well as pay-
ment mechanisms for these services; and
‘‘(C) provide for ongoing evaluation and
documentation of these services in improving
quality of care and reducing health care costs.
‘‘(c) 
PAYMENTS
FOR
COVERED
OUTPATIENT
DRUGS.—For each covered outpatient drug dispensed to
an enrolled beneficiary by a participating pharmacy pro-
vider under this section, the Pharmacy Benefit Adminis-
trator shall pay the pharmacy provider an amount equal
to the lesser of—
‘‘(1) the pharmacy provider’s usual and cus-
tomary retail price, without regard to any discount
otherwise applicable, for the covered outpatient drug
that the pharmacy provider ordinarily charges cus-
tomers who do not have private or Federal or State
financed prescription drug coverage; or
‘‘(2) the sum of the applicable drug product re-
imbursement rate under subparagraph (A) and the
administrative allowance under subparagraph (B),
but in no case less than the minimum rate under
subparagraph (C), as follows:
‘‘(A) DRUG PRODUCT REIMBURSEMENT.—
‘‘(i) GENERICS.—For covered out-
patient drugs that are noninnovator mul-
tiple source drugs, the drug product reim-
bursement rate shall equal the maximum
payment amount calculated under section
1927.
‘‘(ii) OTHER
DRUGS.—For a drug
other than a drug described in clause (i),
the drug product reimbursement shall
equal 110 percent of the most current
wholesale acquisition cost of the drug prod-
uct as reported by the manufacturer.
‘‘(B) ADMINISTRATIVE ALLOWANCE.—For
calendar year 2003, an administrative allowance
of $7.00 per prescription shall be paid as reim-
bursement for costs associated with storing,
preparing, and dispensing covered outpatient
drugs, operating and staffing pharmacy loca-
tions, and other direct and indirect costs of pro-
viding covered outpatient drugs under this part,
as well as to provide an incentive to participate
in the program.
‘‘(C) ADJUSTMENT FOR INFLATION.—For
a year after 2003, the administrative allowance
shall be adjusted annually based on the percent-
age increase or decrease in the Consumer Price
Index for medical care for the preceding year,
as calculated by the Bureau of Labor Statistics.
‘‘(d) PAYMENTS
FOR MEDICATION REVIEW
AND
MEDICATION
THERAPY
MANAGEMENT.—For covered
medication review and medication therapy management
services provided to an enrolled beneficiary by a pharmacy
provider, the Pharmacy Benefit Administrator shall make
payments to the pharmacy provider in amounts estab-
lished by the Secretary that—
‘‘(1) are reasonable and adequate to cover all
direct and indirect overhead and other costs of fur-
nishing the services;
‘‘(2) do not vary by size, type, or corporate
structure of pharmacy provider;
‘‘(3) do not exceed the pharmacy provider’s
usual and customary retail charges that the phar-
macy provider ordinarily charges customers who do
not have private or Government financed coverage
with respect to such benefits; and
‘‘(4) recognize and provide appropriate payment
incentives for individual pharmacy providers located
in rural and underserved areas, as the Secretary
may define.
‘‘(e) MANUFACTURER PAYMENTS.—
‘‘(1) IN GENERAL.—The Pharmacy Benefit Ad-
ministrator shall only make payment under this part
for innovator multiple source drugs or single source
drugs (as defined in clauses (ii) and (iv), respec-
tively, of section 1927(k)(7)(A)) for which payment
may be made under this part of a manufacturer if
that manufacturer has entered into and has in effect
an agreement with the Pharmacy Benefit Adminis-
trator that requires the manufacturer to make peri-
odic payments in the amount described in this sub-
section. A payment agreement shall be effective for
an initial period of not less than 1 year and shall be
automatically renewed for a period of not less than
1 year.
‘‘(2) AMOUNT OF PAYMENT.—
‘‘(A) IN GENERAL.—The payment amount
for a covered outpatient drug furnished under
this part shall be equal to not less than the sum
of the basic rebate amount (determined under
subparagraph (B)) for each dosage form and
strength of such drug increased by the amount
of the inflation adjustment rebate (determined
under subparagraph (C)) for each dosage form
and strength of such drug.
‘‘(B) BASIC REBATE AMOUNT.—The basic
rebate amount shall be equal to the product of
the total number of units of each dosage form
and strength paid for by the Pharmacy Benefit
Administrator in the payment period (as de-
fined in section 1927(b)), and the average man-
ufacturer’s price (as defined in section 1860)
for the quarter for the dosage form and
strength of the covered outpatient drug minus
not less than 18 percent of the average manu-
facturer’s price for the quarter, or such amount
as determined by the Secretary through nego-
tiations with the manufacturer of such drug.
‘‘(C) INFLATION ADJUSTMENT AMOUNT.—
The amount of the basic rebate payment shall
be increased by an amount equal to the product
of the number of units of each dosage form and
strength paid for by the Pharmacy Benefit Ad-
ministrator in the payment period and the
amount by which the average manufacturer’s
price for such drug and dosage form and
strength for the calendar quarter increased in
excess of the percentage by which the consumer
price index for all urban consumers increased
during the calendar quarter.
‘‘(3) PHARMACY BENEFIT ADMINISTRATOR RE-
SPONSIBILITY.—The Pharmacy Benefit Adminis-
trator shall report to each manufacturer not later
than 60 days after the end of each payment period
and in a form consistent with a standard reporting
format established by the Secretary, information on
the total number of units of each dosage form and
strength and package size of each covered outpatient
drug dispensed in the quarter for which payment
was made under the program during the period, and
shall promptly transmit a copy of such report to the
Secretary.
‘‘(4) MANUFACTURER
RESPONSIBILITY.—The
manufacturer shall remit payments to the Pharmacy
Benefit Administrator not later than 30 days after
receiving information from the Pharmacy Benefit
Administrator on the total number of units of each
dosage form and strength of the manufacturer’s
drugs paid for by the Pharmacy Benefit Adminis-
trator in the quarter.
‘‘(5) COLLECTION OF PAYMENTS.—The Phar-
macy Benefit Administrator shall deposit the pay-
ments collected under this subsection from manufac-
turers in the Pharmacy Benefit Fund, and shall use
the payments for program purposes.
‘‘(f) COST AND UTILIZATION MANAGEMENT; QUAL-
ITY ASSURANCE.—In addition to other incentives provided
to pharmacy providers under this part, in connection with
catastrophic coverage benefits provided under this section,
the Secretary may establish and create incentives for phar-
macies to participate in—
‘‘(1) an effective cost and drug utilization man-
agement program, including appropriate incentives
to promote appropriate use of generic drugs in order
to maximize program savings;