II 117th CONGRESS 2d Session S. 4011 IN THE SENATE OF THE UNITED STATES April 6, 2022 Mr. Warnock 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 provide for a cap on beneficiary liability under part D of the Medicare program, and for other purposes.

1. Short title This Act may be cited as the Capping Drug Costs for Seniors Act of 2022 . 2. Medicare part D benefit redesign (a) Benefit structure redesign Section 1860D–2(b) of the Social Security Act ( 42 U.S.C. 1395w–102(b) ) is amended— (1) in paragraph (2)— (A) in subparagraph (A), in the matter preceding clause (i), by inserting for a year preceding 2025 and for costs above the annual deductible specified in paragraph (1) and up to the annual out-of-pocket threshold specified in paragraph (4)(B) for 2025 and each subsequent year after paragraph (3) ; (B) in subparagraph (C)— (i) in clause (i), in the matter preceding subclause (I), by inserting for a year preceding 2025, after paragraph (4), ; and (ii) in clause (ii)(III), by striking 2020 and each subsequent year and inserting each of years 2020 through 2024, ; and (C) in subparagraph (D)— (i) in clause (i)— (I) in the matter preceding subclause (I), by inserting for a year preceding 2025, after paragraph (4), ; and (II) in subclause (I)(bb), by striking a year after 2018 and inserting each of years 2018 through 2024 ; and (ii) in clause (ii)(V), by striking 2019 and each subsequent year and inserting each of years 2019 through 2024 ; (2) in paragraph (3)(A)— (A) in the matter preceding clause (i), by inserting for a year preceding 2025, after and (4), ; and (B) in clause (ii), by striking for a subsequent year and inserting for each of years 2007 through 2024 ; and (3) in paragraph (4)— (A) in subparagraph (A)— (i) in clause (i)— (I) by redesignating subclauses (I) and (II) as items (aa) and (bb), respectively, and moving the margin of each such redesignated item 2 ems to the right; (II) in the matter preceding item (aa), as redesignated by subclause (I), by striking is equal to the greater of— and inserting “is equal to— (I) for a year preceding 2025, the greater of— ; (III) by striking the period at the end of item (bb), as redesignated by subclause (I), and inserting ; and ; and (IV) by adding at the end the following: (II) for 2025 and each succeeding year, $0. ; and (ii) in clause (ii)— (I) by striking clause (i)(I) and inserting clause (i)(I)(aa) ; and (II) by adding at the end the following new sentence: The Secretary shall continue to calculate the dollar amounts specified in clause (i)(I)(aa), including with the adjustment under this clause, after 2024 for purposes of section 1860D–14(a)(1)(D)(iii). ; (B) in subparagraph (B)— (i) in clause (i)— (I) in subclause (V), by striking or at the end; (II) in subclause (VI)— (aa) by striking for a subsequent year and inserting for each of years 2021 through 2024 ; and (bb) by striking the period at the end and inserting a semicolon; and (III) by adding at the end the following new subclauses: (VII) for 2025, is equal to $2,000; or (VIII) for a subsequent year, is equal to the amount specified in this subparagraph for the previous year, increased by the annual percentage increase described in paragraph (6) for the year involved. ; and (ii) in clause (ii), by striking clause (i)(II) and inserting clause (i) ; (C) in subparagraph (C)(i), by striking and for amounts and inserting and, for a year preceding 2025, for amounts ; and (D) in subparagraph (E), by striking In applying and inserting For each of years 2011 through 2024, in applying . (b) Reinsurance payment amount Section 1860D–15(b)(1) of the Social Security Act ( 42 U.S.C. 1395w–115(b)(1) ) is amended— (1) by striking equal to 80 percent and inserting “equal to— (A) for a year preceding 2025, 80 percent ; (2) in subparagraph (A), as added by subparagraph (A), by striking the period at the end and inserting ; and ; and (3) by adding at the end the following new subparagraph: (B) for 2025 and each subsequent year, the sum of— (i) with respect to applicable drugs (as defined in section 1860D–14B(g)(2)), an amount equal to 20 percent of such allowable reinsurance costs attributable to that portion of gross covered prescription drug costs as specified in paragraph (3) incurred in the coverage year after such individual has incurred costs that exceed the annual out-of-pocket threshold specified in section 1860D–2(b)(4)(B); and (ii) with respect to covered part D drugs that are not applicable drugs (as so defined), an amount equal to 40 percent of such allowable reinsurance costs attributable to that portion of gross covered prescription drug costs as specified in paragraph (3) incurred in the coverage year after such individual has incurred costs that exceed the annual out-of-pocket threshold specified in section 1860D–2(b)(4)(B). . (c) Manufacturer discount program (1) In general Part D of title XVIII of the Social Security Act ( 42 U.S.C. 1395w–101 et seq. ) is amended by inserting after section 1860D–14A the following new section: 1860D–14B. Manufacturer discount program (a) Establishment The Secretary shall establish a manufacturer discount program (in this section referred to as the program ). Under the program, the Secretary shall enter into agreements described in subsection (b) with manufacturers and provide for the performance of the duties described in subsection (c). (b) Terms of agreement (1) In general (A) Agreement An agreement under this section shall require the manufacturer to provide, in accordance with this section, access to discounted prices for applicable drugs of the manufacturer that are dispensed to applicable beneficiaries on or after January 1, 2025. (B) Clarification Nothing in this section shall be construed as affecting— (i) the application of a coinsurance of 25 percent of the negotiated price, as applied under paragraph (2)(A) of section 1860D–2(b), for costs described in such paragraph; or (ii) the application of the copayment amount described in paragraph (4)(A) of such section, with respect to costs described in such paragraph. (C) Timing of agreement (i) Special rule for 2025 In order for an agreement with a manufacturer to be in effect under this section with respect to the period beginning on January 1, 2025, and ending on December 31, 2025, the manufacturer shall enter into such agreement not later than March 1, 2024. (ii) 2026 and subsequent years In order for an agreement with a manufacturer to be in effect under this section with respect to plan year 2026 or a subsequent plan year, the manufacturer shall enter into such agreement (or such agreement shall be renewed under paragraph (4)(A)) not later than a calendar quarter or semi-annual deadline established by the Secretary. (2) Provision of appropriate data Each manufacturer with an agreement in effect under this section shall collect and have available appropriate data, as determined by the Secretary, to ensure that it can demonstrate to the Secretary compliance with the requirements under the program. (3) Compliance with requirements for administration of program Each manufacturer with an agreement in effect under this section shall comply with requirements imposed by the Secretary for purposes of administering the program, including any determination under subparagraph (A) of subsection (c)(1) or procedures established under such subsection (c)(1). (4) Length of agreement (A) In general An agreement under this section shall be effective for an initial period of not less than 12 months and shall be automatically renewed for a period of not less than 1 year unless terminated under subparagraph (B). (B) Termination (i) By the Secretary The Secretary may provide for termination of an agreement under this section for a knowing and willful violation of the requirements of the agreement or other good cause shown. Such termination shall not be effective earlier than 30 days after the date of notice to the manufacturer of such termination. The Secretary shall provide, upon request, a manufacturer with a hearing concerning such a termination, and such hearing shall take place prior to the effective date of the termination with sufficient time for such effective date to be repealed if the Secretary determines appropriate. (ii) By a manufacturer A manufacturer may terminate an agreement under this section for any reason. Any such termination shall be effective, with respect to a plan year— (I) if the termination occurs before January 31 of a plan year, as of the day after the end of the plan year; and (II) if the termination occurs on or after January 31 of a plan year, as of the day after the end of the succeeding plan year. (iii) Effectiveness of termination Any termination under this subparagraph shall not affect discounts for applicable drugs of the manufacturer that are due under the agreement before the effective date of its termination. (c) Duties described The duties described in this subsection are the following: (1) Administration of program Administering the program, including— (A) the determination of the amount of the discounted price of an applicable drug of a manufacturer; (B) the establishment of procedures to ensure that, not later than the applicable number of calendar days after the dispensing of an applicable drug by a pharmacy or mail order service, the pharmacy or mail order service is reimbursed for an amount equal to the difference between— (i) the negotiated price of the applicable drug; and (ii) the discounted price of the applicable drug; (C) the establishment of procedures to ensure that the discounted price for an applicable drug under this section is applied before any coverage or financial assistance under other health benefit plans or programs that provide coverage or financial assistance for the purchase or provision of prescription drug coverage on behalf of applicable beneficiaries as the Secretary may specify; and (D) providing a reasonable dispute resolution mechanism to resolve disagreements between manufacturers and applicable beneficiaries. (2) Monitoring compliance The Secretary shall monitor compliance by a manufacturer with the terms of an agreement under this section. (3) Collection of data from prescription drug plans and MA–PD plans The Secretary may collect appropriate data from prescription drug plans and MA–PD plans in a timeframe that allows for discounted prices to be provided for applicable drugs under this section. (d) Administration (1) In general Subject to paragraph (2), the Secretary shall provide for the implementation of this section, including the performance of the duties described in subsection (c). (2) Limitation In providing for the implementation of this section, the Secretary shall not receive or distribute any funds of a manufacturer under the program. (3) Implementation The Secretary may implement the program under this section by program instruction or otherwise. (4) Administration Chapter 35 of title 44, United States Code, shall not apply to the program under this section. (e) Enforcement (1) Audits Each manufacturer with an agreement in effect under this section shall be subject to periodic audit by the Secretary. (2) Civil money penalty (A) In general The Secretary may impose a civil money penalty on a manufacturer that fails to provide discounts for applicable drugs of the manufacturer dispensed to applicable beneficiaries in accordance with such agreement for each such failure in an amount the Secretary determines is equal to the sum of— (i) the amount that the manufacturer would have paid with respect to such discounts under the agreement, which will then be used to pay the discounts which the manufacturer had failed to provide; and (ii) 25 percent of such amount. (B) Application The provisions of section 1128A (other than subsections (a) and (b)) shall apply to a civil money penalty under this paragraph in the same manner as such provisions apply to a penalty or proceeding under section 1128A(a). (f) Clarification regarding availability of other covered part D drugs Nothing in this section shall prevent an applicable beneficiary from purchasing a covered part D drug that is not an applicable drug (including a generic drug or a drug that is not on the formulary of the prescription drug plan or MA–PD plan that the applicable beneficiary is enrolled in). (g) Definitions In this section: (1) Applicable beneficiary The term applicable beneficiary means an individual who, on the date of dispensing a covered part D drug— (A) is enrolled in a prescription drug plan or an MA–PD plan; (B) is not enrolled in a qualified retiree prescription drug plan; and (C) has incurred costs, as determined in accordance with section 1860D–2(b)(4)(C), for covered part D drugs in the year that exceed the annual deductible for such year, as specified in section 1860D–2(b)(1). (2) Applicable drug The term applicable drug , with respect to an applicable beneficiary, means a covered part D drug— (A) approved under a new drug application under section 505(c) of the Federal Food, Drug, and Cosmetic Act or, in the case of a biologic product, licensed under section 351 of the Public Health Service Act; and (B) (i) if the PDP sponsor of the prescription drug plan or the MA organization offering the MA–PD plan uses a formulary, which is on the formulary of the prescription drug plan or MA–PD plan that the applicable beneficiary is enrolled in; (ii) if the PDP sponsor of the prescription drug plan or the MA organization offering the MA–PD plan does not use a formulary, for which benefits are available under the prescription drug plan or MA–PD plan that the applicable beneficiary is enrolled in; or (iii) is provided through an exception or appeal. (3) Applicable number of calendar days The term applicable number of calendar days means— (A) with respect to claims for reimbursement submitted electronically, 14 days; and (B) with respect to claims for reimbursement submitted otherwise, 30 days. (4) Discounted price (A) In general The term discounted price means, with respect to an applicable drug of a manufacturer dispensed during a year to an applicable beneficiary— (i) who has not incurred costs, as determined in accordance with section 1860D–2(b)(4)(C), for covered part D drugs in the year that are equal to or exceed the annual out-of-pocket threshold specified in section 1860D–2(b)(4)(B)(i) for the year, 90 percent of the negotiated price of such drug; and (ii) who has incurred such costs, as so determined, in the year that are equal to or exceed such threshold for the year, 80 percent of the negotiated price of such drug. (B) Clarification Nothing in this section shall be construed as affecting the responsibility of an applicable beneficiary for payment of a dispensing fee for an applicable drug. (C) Special case for certain claims (i) Claims spanning deductible In the case where the entire amount of the negotiated price of an individual claim for an applicable drug with respect to an applicable beneficiary does not fall above the annual deductible specified in section 1860D–2(b)(1) for the year, the manufacturer of the applicable drug shall provide the discounted price under this section on only the portion of the negotiated price of the applicable drug that falls above such annual deductible. (ii) Claims spanning out-of-pocket threshold In the case where the entire amount of the negotiated price of an individual claim for an applicable drug with respect to an applicable beneficiary does not fall entirely below or entirely above the annual out-of-pocket threshold specified in section 1860D–2(b)(4)(B)(i) for the year, the manufacturer of the applicable drug shall provide the discounted price— (I) in accordance with subparagraph (A)(i) on the portion of the negotiated price of the applicable drug that falls below such threshold; and (II) in accordance with subparagraph (A)(ii) on the portion of such price of such drug that falls at or above such threshold. (5) Manufacturer The term manufacturer means any entity which is engaged in the production, preparation, propagation, compounding, conversion, or processing of prescription drug products, either directly or indirectly by extraction from substances of natural origin, or independently by means of chemical synthesis, or by a combination of extraction and chemical synthesis. Such term does not include a wholesale distributor of drugs or a retail pharmacy licensed under State law. (6) Negotiated price The term negotiated price has the meaning given such term for purposes of section 1860D–2(d)(1)(B), except that such negotiated price shall not include any dispensing fee for the applicable drug. (7) Qualified retiree prescription drug plan The term qualified retiree prescription drug plan has the meaning given such term in section 1860D–22(a)(2). . (2) Sunset of Medicare coverage gap discount program Section 1860D–14A of the Social Security Act ( 42 U.S.C. 1395–114a ) is amended— (A) in subsection (a), in the first sentence, by striking The Secretary and inserting Subject to subsection (h), the Secretary ; and (B) by adding at the end the following new subsection: (h) Sunset of program (1) In general The program shall not apply with respect to applicable drugs dispensed on or after January 1, 2025, and, subject to paragraph (2), agreements under this section shall be terminated as of such date. (2) Continued application for applicable drugs dispensed prior to sunset The provisions of this section (including all responsibilities and duties) shall continue to apply after January 1, 2025, with respect to applicable drugs dispensed prior to such date. . (3) Inclusion of actuarial value of manufacturer discounts in bids Section 1860D–11 of the Social Security Act ( 42 U.S.C. 1395w–111 ) is amended— (A) in subsection (b)(2)(C)(iii)— (i) by striking assumptions regarding the reinsurance an inserting “assumptions regarding— (I) the reinsurance ; and (ii) by adding at the end the following: (II) for 2025 and each subsequent year, the manufacturer discounts provided under section 1860D–14B subtracted from the actuarial value to produce such bid; and ; and (B) in subsection (c)(1)(C)— (i) by striking an actuarial valuation of the reinsurance and inserting “an actuarial valuation of— (i) the reinsurance ; (ii) in clause (i), as inserted by clause (i) of this subparagraph, by adding and at the end; and (iii) by adding at the end the following: (ii) for 2025 and each subsequent year, the manufacturer discounts provided under section 1860D–14B; . (d) Conforming amendments (1) Section 1860D–2 of the Social Security Act ( 42 U.S.C. 1395w–102 ) is amended— (A) in subsection (a)(2)(A)(i)(I), by striking , or an increase in the initial and inserting or, for a year preceding 2025, an increase in the initial ; (B) in subsection (c)(1)(C)— (i) in the subparagraph heading, by striking at initial coverage limit ; and (ii) by inserting for a year preceding 2025 or the annual out-of-pocket threshold specified in subsection (b)(4)(B) for the year for 2025 and each subsequent year after subsection (b)(3) for the year each place it appears; and (C) in subsection (d)(1)(A), by striking or an initial and inserting or, for a year preceding 2025, an initial . (2) Section 1860D–4(a)(4)(B)(i) of the Social Security Act ( 42 U.S.C. 1395w–104(a)(4)(B)(i) ) is amended by striking the initial and inserting for a year preceding 2025, the initial . (3) Section 1860D–14(a) of the Social Security Act ( 42 U.S.C. 1395w–114(a) ) is amended— (A) in paragraph (1)— (i) in subparagraph (C), by striking The continuation and inserting For a year preceding 2025, the continuation ; (ii) in subparagraph (D)(iii), by striking 1860D–2(b)(4)(A)(i)(I) and inserting 1860D–2(b)(4)(A)(i)(I)(aa) ; and (iii) in subparagraph (E), by striking The elimination and inserting For a year preceding 2025, the elimination ; and (B) in paragraph (2)— (i) in subparagraph (C), by striking The continuation and inserting For a year preceding 2025, the continuation ; and (ii) in subparagraph (E), by striking 1860D–2(b)(4)(A)(i)(I) and inserting 1860D–2(b)(4)(A)(i)(I)(aa) (for a year preceding 2025) . (4) Section 1860D–21(d)(7) of the Social Security Act ( 42 U.S.C. 1395w–131(d)(7) ) is amended by striking section 1860D–2(b)(4)(B)(i) and inserting section 1860D–2(b)(4)(C)(i) . (5) Section 1860D–22(a)(2)(A) of the Social Security Act ( 42 U.S.C. 1395w–132(a)(2)(A) ) is amended— (A) by striking the value of any discount and inserting the following: the value of— (i) for years prior to 2025, any discount ; (B) in clause (i), as inserted by subparagraph (A) of this paragraph, by striking the period at the end and inserting ; and ; and (C) by adding at the end the following new clause: (ii) for 2025 and each subsequent year, any discount provided pursuant to section 1860D–14B. . (6) Section 1860D–41(a)(6) of the Social Security Act ( 42 U.S.C. 1395w–151(a)(6) ) is amended— (A) by inserting for a year before 2025 after 1860D–2(b)(3) ; and (B) by inserting for such year before the period. (7) Section 1860D–43 of the Social Security Act ( 42 U.S.C. 1395w–153 ) is amended— (A) in subsection (a)— (i) by striking paragraph (1) and inserting the following: (1) participate in— (A) for 2011 through 2024, the Medicare coverage gap discount program under section 1860D–14A; and (B) for 2025 and each subsequent year, the manufacturer discount program under section 1860D–14B; ; (ii) by striking paragraph (2) and inserting the following: (2) have entered into and have in effect— (A) for 2011 through 2024, an agreement described in subsection (b) of section 1860D–14A with the Secretary; and (B) for 2025 and each subsequent year, an agreement described in subsection (b) of section 1860D–14B with the Secretary; and ; and (iii) in paragraph (3), by striking such section and inserting section 1860D–14A ; and (B) by striking subsection (b) and inserting the following: (b) Effective date Paragraphs (1)(A), (2)(A), and (3) of subsection (a) shall apply to covered part D drugs dispensed under this part on or after January 1, 2011, and before January 1, 2025, and paragraphs (1)(B) and (2)(B) of such subsection shall apply to covered part D drugs dispensed under this part on or after January 1, 2025. . (8) Section 1927 of the Social Security Act ( 42 U.S.C. 1396r–8 ) is amended— (A) in subsection (c)(1)(C)(i)(VI), by inserting before the period at the end the following: or under the manufacturer discount program under section 1860D–14B ; and (B) in subsection (k)(1)(B)(i)(V), by inserting before the period at the end the following: or under section 1860D–14B . (e) Effective date The amendments made by this section shall apply with respect to plan year 2025 and subsequent plan years.