I 
108TH CONGRESS 
1ST SESSION 
H. R. 194
To amend title XVIII of the Social Security Act with respect to reform 
of payment for drugs and biologicals under the Medicare Program. 
IN THE HOUSE OF REPRESENTATIVES 
JANUARY 7, 2003
Mr. STARK introduced the following bill; which was referred to the Committee 
on Energy and Commerce, and in addition to the Committee on Ways 
and Means, for a period to be subsequently determined by the Speaker, 
in each case for consideration of such provisions as fall within the juris-
diction of the committee concerned 
A BILL 
To amend title XVIII of the Social Security Act with respect 
to reform of payment for drugs and biologicals 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. 
This Act may be cited as the ‘‘Medicare Market Ac-
quisition Drug Price Act of 2003’’.
SEC. 
2. 
REFORM 
OF 
PAYMENT 
FOR 
DRUGS 
AND 
BIOLOGICALS UNDER THE MEDICARE PRO-
GRAM. 
(a) PAYMENT REFORM.—
(1) IN GENERAL.—Section 1842(o) of the So-
cial Security Act (42 U.S.C. 1395u(o)) is amended 
to read as follows: 
‘‘(o) PAYMENT FOR DRUGS AND BIOLOGICALS.—
‘‘(1) GENERAL RULE.—If a physician’s, sup-
plier’s, or any other person’s bill or request for pay-
ment for services includes a charge for a drug or bi-
ological for which payment may be made under this 
part and the drug or biological is not paid on a cost 
or prospective payment basis as otherwise provided 
in this part, the amount payable for the drug or bio-
logical shall be based on the following: 
‘‘(A) MULTI-SOURCE (GENERIC) DRUGS.—
In the case of a drug or biological that meets 
the requirements for a multi-source drug under 
subclauses 
(I) 
and 
(II) 
of 
section 
1927(k)(7)(A)(i), 105 percent of the volume-
weighted median average acquisition price for 
any drug or biological covered under the same 
medicare HCPCS code. 
‘‘(B) SINGLE SOURCE (BRAND) DRUGS AND 
BIOLOGICALS.—In the case of a drug or biologi-
cal that meets the requirements for a single 
source drug under section 1927(k)(7)(A)(iv), 
105 percent of the average acquisition price for 
the drug or biological. 
‘‘(C) ACCESS EXCEPTION.—The Secretary 
may modify the rate otherwise applicable in 
order to assure access to necessary drugs and 
biologicals in the case of sole community pro-
viders in rural and other areas where the pro-
viders are not reasonably able to obtain the 
drugs and biologicals at the payment rates oth-
erwise applicable. Such modification shall not 
result in a change of more than 15 percent of 
the rate otherwise applicable. 
‘‘(D) DATA-RELATED EXCEPTION.—If the 
Secretary determines that there is insufficient 
data available with respect to compute an aver-
age acquisition price for a drug or biological for 
a quarter or that, because of a significant 
change in price from quarter-to-quarter, the 
available data on the average acquisition price 
does not accurately reflect the actual, current 
acquisition cost for the drug or biological, the 
Secretary may substitute for the quarters in-
volved an appropriate payment for the drug or 
biological for such average acquisition price. 
‘‘(E) APPLICATION OF NDC CODES.—If the 
Secretary determines that it is appropriate to 
provide for payment under this subsection using 
national drug code (NDC) instead of HCPCS 
codes, in applying subparagraph (A) the ref-
erence to the same HCPCS code shall be 
deemed a reference to the appropriate national 
drug codes for those drugs or biologicals that 
are therapeutically and pharmaceutically equiv-
alent and bioequivalent (as defined for purposes 
of section 1927(k)(7)(A)). 
‘‘(2) DEFINITION
OF
AVERAGE
ACQUISITION 
PRICE.—
‘‘(A) IN GENERAL.—For purposes of this 
subsection, the term ‘average acquisition price’ 
means, with respect to a drug or biological and 
with respect to each dosage form and strength 
of the drug or biological product (without re-
gard to any special packaging, labeling, or iden-
tifiers on the dosage form or product or pack-
age), the average of all final sales prices 
charged by the manufacturer of the drug or bio-
logical product in the United States, excluding
sales exempt from inclusion in the calculation of 
best price under section 1927(c)(1)(C) (other 
than under clause (ii)(III) of such section) and 
excluding sales subject to a rebate under section 
1927, as reported under paragraph (3). 
‘‘(B) NET PRICE.—Such average acquisi-
tion price shall be calculated net of all of the 
following (as estimated by the Secretary): 
‘‘(i) Volume discounts. 
‘‘(ii) Prompt pay discounts and cash 
discounts. 
‘‘(iii) Charge-backs. 
‘‘(iv) Short-dated product discounts 
(for spoilage and other factors). 
‘‘(v) Free goods and services. 
‘‘(vi) Rebates. 
‘‘(vii) All other price concessions pro-
vided by the drug manufacturer. 
The Secretary may make subsequent adjust-
ments in such average acquisition price to take 
into account updated information and dif-
ferences between the price previously estimated 
and the actual average acquisition price.
the manufacturer’s average acquisition 
price and the information required under 
subparagraph (C) for all drugs and 
biologicals of the manufacturer by national 
drug code (NDC); 
‘‘(ii) maintain such records (in written 
or electronic form) regarding such sales 
and prices for all such drugs and 
biologicals as may be necessary to audit 
the information so reported or required to 
be reported; and 
‘‘(iii) provide the Secretary with ac-
cess to such records in order to permit the 
Secretary to audit information so reported 
or required to be reported. 
‘‘(B) PENALTIES.—The provisions of sec-
tion 1927(b)(3)(C) shall apply with respect to 
the reporting of information under subpara-
graph (A) in the same manner as it applies to 
the reporting of information under section 
1927(b)(3)(A), except that the reference in 
clause (i) of such section to $10,000 is deemed 
a reference to $100,000 and any reference to a 
suspension of an agreement is deemed a ref-
erence to a suspension of payment for the drug
or biological involved under this part. The Sec-
retary shall promptly refer to the Inspector 
General of the Department of Health and 
Human Services and, if appropriate, to appro-
priate officials in the Department of Justice 
cases in which the Secretary becomes aware of 
a false price representation made in the infor-
mation submitted under this paragraph. 
‘‘(C) FORM OF REPORTING.—Information 
required to be reported under subparagraph 
(A)(i) shall be reported in a form and manner 
specified by the Secretary. The information re-
quired to be reported shall include the identi-
fication of the generic name of the drug or bio-
logical and its brand name (if any), the national 
drug code (NDC) and the HCPCS code as-
signed to the drug or biological, the dosage 
form, strength, volume, and package size in-
volved. The information for a quarter shall be 
submitted not later than 30 days after the end 
of the quarter. The information shall be accom-
panied by a written and signed certification by 
an officer of the manufacturer attesting to the 
accuracy of the information reported. Such in-
formation shall include updated information on
the net price realized (taking into account re-
bates and other amounts affecting net price), 
regardless of the period for which such a rebate 
or other adjustment in net price might have 
been earned. 
‘‘(D) 
AUDITING.—The 
Secretary 
shall 
audit on a periodic basis information reported 
or required to be reported under this para-
graph. The Secretary may conduct such inde-
pendent price gathering activities, such as sur-
veys and review of published catalog informa-
tion or other transactional information, as may 
be appropriate to verify the accuracy of the in-
formation reported. 
‘‘(4) DISPENSING FEE.—If payment for a drug 
or biological is made to a licensed pharmacy ap-
proved to dispense drugs or biologicals under this 
part, the Secretary shall pay a dispensing fee (less 
the applicable deductible and coinsurance amounts) 
to the pharmacy. Such a dispensing fee shall be sub-
ject to adjustment from year to year based upon 
changes in the consumer price index over time and 
may be adjusted as the Secretary determines to be 
appropriate to reflect differences in the costs of dis-
pensing different drugs and biologicals.
‘‘(5) PAYMENT REQUIRED ON AN ASSIGNMENT-
RELATED BASIS.—
‘‘(A) IN GENERAL.—Payment for a charge 
for any drug or biological for which payment 
may be made under this part may be made only 
on an assignment-related basis. 
‘‘(B) 
APPLICATION
OF
ENFORCEMENT 
PROVISIONS.—The 
provisions 
of 
subsection 
(b)(18)(B) shall apply to charges for such 
drugs or biologicals in the same manner as they 
apply to services furnished by a practitioner de-
scribed in subsection (b)(18)(C).’’. 
(2) EFFECTIVE DATE.—Subject to subsection 
(c)(2), the amendment made by paragraph (1) shall 
apply to drugs and biologicals furnished on or after 
January 1, 2004. 
(b) REVISION IN PRACTICE EXPENSE PAYMENTS.—
(1) ADJUSTMENT
IN
ONCOLOGIST
MEDICAL 
SUPPLY EXPENSES.—In computing the practice ex-
pense component of the physician fee schedule under 
section 1848 of the Social Security Act (42 U.S.C. 
1395w–4) with respect to payment for services of 
oncologists, the Secretary of Health and Human 
Services shall make adjustments to oncologists’ re-
ported medical supply expenses in order to ensure
that such expenses better reflect the actual supply 
costs of providing such services. 
(2) ALLOCATION OF INDIRECT EXPENSES.—In 
establishing such fee schedule, the Secretary shall 
change the allocation of indirect expenses in a man-
ner so that all services, including services without di-
rect physician involvement, are allocated the appro-
priate share of indirect expenses. 
(3) SERVICES WITHOUT DIRECT PHYSICIAN IN-
VOLVEMENT.—In establishing such fee schedule, the 
Secretary shall calculate payments, for those services 
without direct physician involvement under the basic 
method, using information on the resources required 
for each services and, if deemed necessary, shall vali-
date the underlying resource-based estimates of di-
rect practice expenses required to provide each serv-
ice. 
(4) BUDGET
NEUTRAL
ADJUSTMENT.—The 
changes in payment made by this subsection shall 
not be treated as a change in law or regulation de-
scribed in section 1848(f)(2)(D) of the Social Secu-
rity Act (42 U.S.C. 1395w–4(f)(2)(D)). 
(5) EFFECTIVE DATE.—The provisions of this 
subsection apply to payments for services furnished 
on or after January 1, 2004.
(c) STUDY OF PAYMENTS FOR BLOOD CLOTTING 
FACTORS AND OTHER BIOLOGICALS.—
(1) IN GENERAL.—The Secretary of Health and 
Human Services shall provide for a study of the ap-
propriateness of the medicare payment methodology 
for blood clotting factors and other biologicals under 
part B of title XVIII of the Social Security Act. Not 
later than 9 months after the date of the enactment 
of this Act, the Secretary shall submit to Congress 
a report on such study and shall include in such re-
port recommendations regarding whether to apply 
the payment methodology provided under the 
amendment made by subsection (a)(1) and alter-
native recommendations for appropriate dispensing 
fees. 
(2) DELAY IN EFFECTIVE DATE.—The amend-
ment made by subsection (a)(1) shall not apply to 
blood clotting factors furnished before the first day 
of the first calendar year that begins at least 6 
months after the date the report under paragraph 
(1) has been submitted to the Congress.
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