II 113th CONGRESS 1st Session S. 740 IN THE SENATE OF THE UNITED STATES April 16, 2013 Mr. Rockefeller (for himself, Mr. Nelson , Ms. Baldwin , Mr. Blumenthal , Mrs. Boxer , Mr. Brown , Mr. Durbin , Mr. Franken , Mr. King , Ms. Klobuchar , Mr. Leahy , Mr. Merkley , Mr. Reed , Mr. Sanders , Mr. Schatz , Mrs. Shaheen , Ms. Stabenow , Mr. Udall of New Mexico , and Mr. Whitehouse ) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend title XVIII of the Social Security Act to require drug manufacturers to provide drug rebates for drugs dispensed to low-income individuals under the Medicare prescription drug benefit program.

1. Short title This Act may be cited as the Medicare Drug Savings Act of 2013 . 2. Requiring drug manufacturers to provide drug rebates for drugs dispensed to low-income individuals (a) In general Section 1860D–2 of the Social Security Act ( 42 U.S.C. 1395w–102 ) is amended— (1) in subsection (e)(1), in the matter preceding subparagraph (A), by inserting and subsection (f) after this subsection ; and (2) by adding at the end the following new subsection: (f) Prescription drug rebate agreement for rebate eligible individuals (1) Requirement (A) In general For plan years beginning on or after January 1, 2015, in this part, the term covered part D drug does not include any drug or biological product that is manufactured by a manufacturer that has not entered into and have in effect a rebate agreement described in paragraph (2). (B) 2014 plan year requirement Any drug or biological product manufactured by a manufacturer that declines to enter into a rebate agreement described in paragraph (2) for the period beginning on January 1, 2014, and ending on December 31, 2014, shall not be included as a covered part D drug for the subsequent plan year. (2) Rebate agreement A rebate agreement under this subsection shall require the manufacturer to provide to the Secretary a rebate for each rebate period (as defined in paragraph (6)(B)) ending after December 31, 2013, in the amount specified in paragraph (3) for any covered part D drug of the manufacturer dispensed after December 31, 2013, to any rebate eligible individual (as defined in paragraph (6)(A)) for which payment was made by a PDP sponsor or MA organization under this part for such period, including payments passed through the low-income and reinsurance subsidies under sections 1860D–14 and 1860D–15(b), respectively. Such rebate shall be paid by the manufacturer to the Secretary not later than 30 days after the date of receipt of the information described in section 1860D–12(b)(7), including as such section is applied under section 1857(f)(3), or 30 days after the receipt of information under subparagraph (D) of paragraph (3), as determined by the Secretary. Insofar as not inconsistent with this subsection, the Secretary shall establish terms and conditions of such agreement relating to compliance, penalties, and program evaluations, investigations, and audits that are similar to the terms and conditions for rebate agreements under paragraphs (3) and (4) of section 1927(b). (3) Rebate for rebate eligible Medicare drug plan enrollees (A) In general The amount of the rebate specified under this paragraph for a manufacturer for a rebate period, with respect to each dosage form and strength of any covered part D drug provided by such manufacturer and dispensed to a rebate eligible individual, shall be equal to the product of— (i) the total number of units of such dosage form and strength of the drug so provided and dispensed for which payment was made by a PDP sponsor or an MA organization under this part for the rebate period, including payments passed through the low-income and reinsurance subsidies under sections 1860D–14 and 1860D–15(b), respectively; and (ii) the amount (if any) by which— (I) the Medicaid rebate amount (as defined in subparagraph (B)) for such form, strength, and period, exceeds (II) the average Medicare drug program rebate eligible rebate amount (as defined in subparagraph (C)) for such form, strength, and period. (B) Medicaid rebate amount For purposes of this paragraph, the term Medicaid rebate amount means, with respect to each dosage form and strength of a covered part D drug provided by the manufacturer for a rebate period— (i) in the case of a single source drug or an innovator multiple source drug, the amount specified in paragraph (1)(A)(ii)(II) or (2)(C) of section 1927(c) plus the amount, if any, specified in subparagraph (A)(ii) of paragraph (2) of such section, for such form, strength, and period; or (ii) in the case of any other covered outpatient drug, the amount specified in paragraph (3)(A)(i) of such section for such form, strength, and period. (C) Average Medicare drug program rebate eligible rebate amount For purposes of this subsection, the term average Medicare drug program rebate eligible rebate amount means, with respect to each dosage form and strength of a covered part D drug provided by a manufacturer for a rebate period, the sum, for all PDP sponsors under part D and MA organizations administering an MA–PD plan under part C, of— (i) the product, for each such sponsor or organization, of— (I) the sum of all rebates, discounts, or other price concessions (not taking into account any rebate provided under paragraph (2) or any discounts under the program under section 1860D–14A) for such dosage form and strength of the drug dispensed, calculated on a per-unit basis, but only to the extent that any such rebate, discount, or other price concession applies equally to drugs dispensed to rebate eligible Medicare drug plan enrollees and drugs dispensed to PDP and MA–PD enrollees who are not rebate eligible individuals; and (II) the number of the units of such dosage and strength of the drug dispensed during the rebate period to rebate eligible individuals enrolled in the prescription drug plans administered by the PDP sponsor or the MA–PD plans administered by the MA organization; divided by (ii) the total number of units of such dosage and strength of the drug dispensed during the rebate period to rebate eligible individuals enrolled in all prescription drug plans administered by PDP sponsors and all MA–PD plans administered by MA organizations. (D) Use of estimates The Secretary may establish a methodology for estimating the average Medicare drug program rebate eligible rebate amounts for each rebate period based on bid and utilization information under this part and may use these estimates as the basis for determining the rebates under this section. If the Secretary elects to estimate the average Medicare drug program rebate eligible rebate amounts, the Secretary shall establish a reconciliation process for adjusting manufacturer rebate payments not later than 3 months after the date that manufacturers receive the information collected under section 1860D–12(b)(7)(B). (4) Length of agreement The provisions of paragraph (4) of section 1927(b) (other than clauses (iv) and (v) of subparagraph (B)) shall apply to rebate agreements under this subsection in the same manner as such paragraph applies to a rebate agreement under such section. (5) Other terms and conditions The Secretary shall establish other terms and conditions of the rebate agreement under this subsection, including terms and conditions related to compliance, that are consistent with this subsection. (6) Definitions In this subsection and section 1860D–12(b)(7): (A) Rebate eligible individual The term rebate eligible individual means— (i) a subsidy eligible individual (as defined in section 1860D–14(a)(3)(A)); (ii) a Medicaid beneficiary treated as a subsidy eligible individual under clause (v) of section 1860D–14(a)(3)(B); and (iii) any part D eligible individual not described in clause (i) or (ii) who is determined for purposes of the State plan under title XIX to be eligible for medical assistance under clause (i), (iii), or (iv) of section 1902(a)(10)(E). (B) Rebate period The term rebate period has the meaning given such term in section 1927(k)(8). . (b) Reporting requirement for the determination and payment of rebates by manufacturers related to rebate for rebate eligible Medicare drug plan enrollees (1) Requirements for PDP sponsors 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: (7) Reporting requirement for the determination and payment of rebates by manufacturers related to rebate for rebate eligible Medicare drug plan enrollees (A) In general For purposes of the rebate under section 1860D–2(f) for contract years beginning on or after January 1, 2015, each contract entered into with a PDP sponsor under this part with respect to a prescription drug plan shall require that the sponsor comply with subparagraphs (B) and (C). (B) Report form and contents Not later than a date specified by the Secretary, a PDP sponsor of a prescription drug plan under this part shall report to each manufacturer— (i) information (by National Drug Code number) on the total number of units of each dosage, form, and strength of each drug of such manufacturer dispensed to rebate eligible Medicare drug plan enrollees under any prescription drug plan operated by the PDP sponsor during the rebate period; (ii) information on the price discounts, price concessions, and rebates for such drugs for such form, strength, and period; (iii) information on the extent to which such price discounts, price concessions, and rebates apply equally to rebate eligible Medicare drug plan enrollees and PDP enrollees who are not rebate eligible Medicare drug plan enrollees; and (iv) any additional information that the Secretary determines is necessary to enable the Secretary to calculate the average Medicare drug program rebate eligible rebate amount (as defined in paragraph (3)(C) of such section), and to determine the amount of the rebate required under this section, for such form, strength, and period. Such report shall be in a form consistent with a standard reporting format established by the Secretary. (C) Submission to Secretary Each PDP sponsor shall promptly transmit a copy of the information reported under subparagraph (B) to the Secretary for the purpose of audit oversight and evaluation. (D) Confidentiality of information The provisions of subparagraph (D) of section 1927(b)(3), relating to confidentiality of information, shall apply to information reported by PDP sponsors under this paragraph in the same manner that such provisions apply to information disclosed by manufacturers or wholesalers under such section, except— (i) that any reference to this section in clause (i) of such subparagraph shall be treated as being a reference to this section; (ii) the reference to the Director of the Congressional Budget Office in clause (iii) of such subparagraph shall be treated as including a reference to the Medicare Payment Advisory Commission; and (iii) clause (iv) of such subparagraph shall not apply. (E) Oversight Information reported under this paragraph may be used by the Inspector General of the Department of Health and Human Services for the statutorily authorized purposes of audit, investigation, and evaluations. (F) Penalties for failure to provide timely information and provision of false information In the case of a PDP sponsor— (i) that fails to provide information required under subparagraph (B) on a timely basis, the sponsor is subject to a civil money penalty in the amount of $10,000 for each day in which such information has not been provided; or (ii) that knowingly (as defined in section 1128A(i)) provides false information under such subparagraph, the sponsor is subject to a civil money penalty in an amount not to exceed $100,000 for each item of false information. Such civil money penalties are in addition to other penalties as may be prescribed by law. The provisions of section 1128A (other than subsections (a) 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). . (2) Application to MA organizations Section 1857(f)(3) of the Social Security Act ( 42 U.S.C. 1395w–27(f)(3) ) is amended by adding at the end the following: (D) Reporting requirement related to rebate for rebate eligible Medicare drug plan enrollees Section 1860D–12(b)(7). . (c) Deposit of rebates into Medicare Prescription Drug Account Section 1860D–16(c) of the Social Security Act ( 42 U.S.C. 1395w–116(c) ) is amended by adding at the end the following new paragraph: (6) Rebate for rebate eligible Medicare drug plan enrollees Amounts paid under a rebate agreement under section 1860D–2(f) shall be deposited into the Account. . (d) Exclusion from determination of best price and average manufacturer price under Medicaid (1) Exclusion from best price determination Section 1927(c)(1)(C)(ii)(I) of the Social Security Act ( 42 U.S.C. 1396r–8(c)(1)(C)(ii)(I) ) is amended by inserting and amounts paid under a rebate agreement under section 1860D–2(f) after this section . (2) Exclusion from average manufacturer price determination Section 1927(k)(1)(B)(i) of the Social Security Act ( 42 U.S.C. 1396r–8(k)(1)(B)(i) ) is amended— (A) in subclause (IV), by striking and after the semicolon; (B) in subclause (V), by striking the period at the end and inserting ; and ; and (C) by adding at the end the following: (VI) amounts paid under a rebate agreement under section 1860D–2(f). .