To amend title XVIII of the Social Security Act to improve payments made by prescription drug plans and MA-PD plans to pharmacies for covered part D drugs dispensed through such pharmacies.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Independent Pharmacy Protection Act 
of 2006''.

SEC. 2. IMPROVING MEDICARE PRESCRIPTION DRUG PLAN PAYMENTS TO 
              PHARMACIES.

    (a) In General.--Section 1860D-12(b) of the Social Security Act (42 
U.S.C. 1395w-112(b)) is amended by adding at the end the following new 
paragraph:
            ``(4) Payments to pharmacies.--
                    ``(A) In general.--Each contract entered into with 
                a PDP sponsor under this section with respect to a 
                prescription drug plan offered by such sponsor shall 
                provide for the following:
                            ``(i) Availability of direct deposit 
                        payments.--The option for any participating 
                        pharmacy to elect for the plan to make payments 
                        by direct deposits to the pharmacy for covered 
                        part D drugs dispensed through the pharmacy.
                            ``(ii) Increased dispensing fee for generic 
                        drugs.--The payment of dispensing fees by the 
                        plan to each participating pharmacy for covered 
                        part D drugs dispensed through the 
                        participating pharmacy, in accordance with 
                        subparagraph (B).
                            ``(iii) Payments within 10 days for certain 
                        pharmacies.--In the case of a participating 
                        pharmacy that is not part of a chain of 
                        pharmacies that consists of more than three 
                        pharmacies at different locations, payment with 
                        respect to any non-disputed claim (as defined 
                        in subparagraph (C)) for a covered part D drug 
                        dispensed through the pharmacy to be made by 
                        the plan to the pharmacy in full by a date that 
                        is not more than 10 days after the date on 
                        which the claim is received by the plan.
                    ``(B) Payment of dispensing fees to encourage use 
                of generic drugs.--
                            ``(i) In general.--For purposes of 
                        subparagraph (A)(ii) and subject to clauses 
                        (ii) and (iii), with respect to a generic 
                        covered part D drug that is therapeutically 
                        equivalent and bioequivalent to a brand name 
                        drug that is a covered part D drug dispensed 
                        through a participating pharmacy, the amount of 
                        the dispensing fee paid to the pharmacy for the 
                        generic covered part D drug shall be an amount 
                        that is at least 50 percent greater than the 
                        amount of the dispensing fee for the brand name 
                        drug.
                            ``(ii) Cap on amount of dispensing fees for 
                        generic drugs.--For purposes of subclause (i), 
                        the amount of the dispensing fee paid to a 
                        participating pharmacy for a generic covered 
                        part D drug shall not be more than $10.
                            ``(iii) Safe harbor for brand name drug 
                        dispensing fee amounts.--
                                    ``(I) In general.--For purposes of 
                                clause (i) and subject to subclause 
                                (II), a prescription drug plan under 
                                this section shall not decrease the 
                                amount of the dispensing fee paid by 
                                the plan to a participating pharmacy 
                                for a brand name drug described in such 
                                clause to an amount that is less than 
                                the amount of the dispensing fee paid 
                                by such plan to such pharmacy for such 
                                drug on the date of the enactment of 
                                the `Independent Pharmacy Protection 
                                Act of 2006'.
                                    ``(II) Exception.--The Secretary 
                                may waive the prohibition under 
                                subclause (I) with respect to a 
                                dispensing fee paid by a prescription 
                                drug plan for a brand name drug, as the 
                                Secretary determines appropriate.
                    ``(C) Non-disputed claim defined.--For purposes of 
                subparagraph (A)(iii), a `non-disputed claim' means a 
                claim that has no defect or impropriety or particular 
                circumstance requiring special treatment that prevents 
                timely payment from being made under this part.''.
    (b) Application to MA-PD Plans.--Section 1857(e) of such Act (42 
U.S.C. 1395w-27(e)) is amended by adding at the end the following new 
paragraph:
            ``(4) Incorporation of prescription drug plan contract 
        requirements for pharmacy payments.--The provisions of section 
        1860D-12(b)(4) shall apply to contracts with a Medicare 
        Advantage organization in the same manner as they apply to 
        contracts with a PDP sponsor offering a prescription drug plan 
        under part D.''.
    (c) Effective Date.--The amendments made by this Act shall apply to 
plan years beginning on or after the date of the enactment of this Act.

Summary: Independent Pharmacy Protection Act of 2006 - Amends part D (Voluntary Prescription Drug Benefit Program) of title XVIII (Medicare) of the Social Security Act to require each prescription drug plan contract entered into with a plan sponsor to provide for: (1) the availability of direct deposit payments; (2) an increased dispensing fee for generic drugs; and (3) payments within 10 days for certain pharmacies.

Requires the dispensing fee paid to a participating pharmacy for a generic covered part D drug therapeutically equivalent and bioequivalent to a brand name covered part D drug dispensed through the pharmacy to be at least 50% greater than the dispensing fee for the brand name drug.

Limits to $10 the dispensing fee paid to a participating pharmacy for a generic covered part D drug.

Prohibits a prescription drug plan, subject to exception by the Secretary of Health and Human Services, from decreasing the dispensing fee paid to a participating pharmacy for a brand name drug to an amount less than the dispensing fee paid for it on the date of enactment of this Act.

Applies this Act to contracts with a Medicare Advantage organization in the same manner as they apply to those with a prescription drug plan sponsor.