SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicare Prescription Drug Savings 
and Choice Act of 2004''.

SEC. 2. ESTABLISHMENT OF MEDICARE OPERATED PRESCRIPTION DRUG PLAN 
              OPTION.

    (a) In General.--Subpart 2 of part D of the Social Security Act, as 
added by section 101 of the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (Public Law 108-173), is amended by 
inserting after section 1860D-11 the following new section:

           ``medicare operated prescription drug plan option

    ``Sec. 1860D-11A. (a) In General.--Notwithstanding any other 
provision of this part, for each year (beginning with 2006), in 
addition to any plans offered under section 1860D-11, the Secretary 
shall offer one or more medicare operated prescription drug plans (as 
defined in subsection (c)) with a service area that consists of the 
entire United States and shall enter into negotiations with 
pharmaceutical manufacturers to reduce the purchase cost of covered 
part D drugs for eligible part D individuals in accordance with 
subsection (b).
    ``(b) Negotiations.--Notwithstanding section 1860D-11(i), for 
purposes of offering a medicare operated prescription drug plan under 
this section, the Secretary shall negotiate with pharmaceutical 
manufacturers with respect to the purchase price of covered part D 
drugs and shall encourage the use of more affordable therapeutic 
equivalents to the extent such practices do not override medical 
necessity as determined by the prescribing physician. To the extent 
practicable and consistent with the previous sentence, the Secretary 
shall implement strategies similar to those used by other Federal 
purchasers of prescription drugs, and other strategies, to reduce the 
purchase cost of covered part D drugs.
    ``(c) Medicare Operated Prescription Drug Plan Defined.--For 
purposes of this part, the term `medicare operated prescription drug 
plan' means a prescription drug plan that offers qualified prescription 
drug coverage and access to negotiated prices described in section 
1860D-2(a)(1)(A). Such a plan may offer supplemental prescription drug 
coverage in the same manner as other qualified prescription drug 
coverage offered by other prescription drug plans.
    ``(d) Monthly Beneficiary Premium.--
            ``(1) Qualified prescription drug coverage.--The monthly 
        beneficiary premium for qualified prescription drug coverage 
        and access to negotiated prices described in section 1860D-
        2(a)(1)(A) to be charged under a medicare operated prescription 
        drug plan shall be uniform nationally. Such premium for months 
        in 2006 shall be $35 and for months in succeeding years shall 
        be based on the average monthly per capita actuarial cost of 
        offering the medicare operated prescription drug plan for the 
        year involved, including administrative expenses.
            ``(2) Supplemental prescription drug coverage.--Insofar as 
        a medicare operated prescription drug plan offers supplemental 
        prescription drug coverage, the Secretary may adjust the amount 
        of the premium charged under paragraph (1).
            ``(3) Requirement for at least one plan with a $35 premium 
        in 2006.--The Secretary shall ensure that at least one medicare 
        operated prescription drug plan offered in 2006 has a monthly 
        premium of $35. ''.
    (b) Conforming Amendments.--
            (1) Section 1860D-3(a) of the Social Security Act, as added 
        by section 101 of the Medicare Prescription Drug, Improvement, 
        and Modernization Act of 2003, is amended by adding at the end 
        the following new paragraph:
            ``(4) Availability of the medicare operated prescription 
        drug plan.--
                    ``(A) In general.--A medicare operated prescription 
                drug plan (as defined in section 1860D-11A(c)) shall be 
                offered nationally in accordance with section 1860D-
                11A.
                    ``(B) Relationship to other plans.--
                            ``(i) In general.--Subject to clause (ii), 
                        a medicare operated prescription drug plan 
                        shall be offered in addition to any qualifying 
                        plan or fallback prescription drug plan offered 
                        in a PDP region and shall not be considered to 
                        be such a plan purposes of meeting the 
                        requirements of this subsection.
                            ``(ii) Designation as a fallback plan.--
                        Notwithstanding any other provision of this 
                        part, the Secretary may designate the medicare 
                        operated prescription drug plan as the fallback 
                        prescription drug plan for any fallback service 
                        area (as defined in section 1860D-11(g)(3)) 
                        determined to be appropriate by the 
                        Secretary.''.
            (2) Section 1860D-13(c)(3) of such Act, as added by such 
        section, is amended--
                    (A) in the heading, by inserting ``and medicare 
                operated prescription drug plans'' after ``Fallback 
                plans''; and
                    (B) by inserting ``or a medicare operated 
                prescription drug plan'' after ``a fallback 
                prescription drug plan''.
            (3) Section 1860D-16(b)(1) of such Act, as added by such 
        section, is amended--
                    (A) in subparagraph (C), by striking ``and'' after 
                the semicolon at the end;
                    (B) in subparagraph (D), by striking the period at 
                the end and inserting ``; and''; and
                    ``(E) payments for expenses incurred with respect 
                to the operation of medicare operated prescription drug 
                plans under section 1860D-11A.''.
            (4) Section 1860D-41(a) of such Act, as added by such 
        section, is amended by adding at the end the following new 
        paragraph:
            ``(19) Medicare operated prescription drug plan.--The term 
        `medicare operated prescription drug plan' has the meaning 
        given such term in section 1860D-11A(c).''.
    (c) Effective Date.--The amendments made by this section shall take 
effect as if included in the enactment of section 101 of the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003.
Output: Medicare Prescription Drug Savings and Choice Act of 2004 - Amends part D (Voluntary Prescription Drug Benefit Program) of title XVIII (Medicare) of the Social Security Act, as added by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, to direct the Secretary of Health and Human Services, for each year beginning with 2006, to: (1) offer one or more Medicare operated prescription drug plans nationally that offers qualified prescription drug coverage and access to negotiated prices, while allowing the plan to offer supplemental prescription drug coverage in the same manner as other qualified prescription drug coverage offered by other prescription drug plans; and (2) enter into negotiations with pharmaceutical manufacturers to reduce the purchase cost of covered Medicare part D drugs for eligible part D individuals, and encourage the use of more affordable therapeutic equivalents. Requires the monthly beneficiary premium charged under such a plan to be uniform nationally and for months in 2006 shall be $35 and for months in succeeding years shall be based on the average monthly per capita actuarial cost of offering the Medicare operated prescription drug plan for the year involved, including administrative expenses. Allows for adjustment of such premium amount in case of supplemental prescription drug coverage.