Prescription Drug Benefit and Cost Containment Act of 2003

        [Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 7 Introduced in Senate (IS)]

108th CONGRESS
1st Session
S. 7

To amend title XVIII of the Social Security Act to provide coverage of
outpatient prescription drugs under the medicare program and to amend
the Federal Food, Drug, and Cosmetic Act to provide greater access to
affordable pharmaceuticals, and for other purposes.

_______________________________________________________________________

IN THE SENATE OF THE UNITED STATES

January 7, 2003

Mr. Daschle (for himself, Mr. Rockefeller, Ms. Stabenow, Mr. Schumer,
Mr. Kennedy, Mrs. Clinton, Mr. Akaka, Mr. Corzine, Mr. Durbin, Ms.
Mikulski, Mr. Leahy, Mr. Levin, Mr. Johnson, Mr. Reed, Mr. Sarbanes,
Mr. Dayton, Mr. Lautenberg, and Mr. Reid) 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 coverage of
outpatient prescription drugs under the medicare program and to amend
the Federal Food, Drug, and Cosmetic Act to provide greater access to
affordable pharmaceuticals, and for other purposes.

Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) Short Title.--This title may be cited as the ``Prescription
Drug Benefit and Cost Containment Act of 2003''.
(b) Table of Contents.--The table of contents of this title is as
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings.
TITLE I--MEDICARE OUTPATIENT PRESCRIPTION DRUG BENEFIT PROGRAM

Sec. 101. Medicare outpatient prescription drug benefit program.
``Part D--Outpatient Prescription Drug Benefit Program

``Sec. 1860. Definitions.
``Sec. 1860A. Establishment of outpatient prescription drug benefit
program.
``Sec. 1860B. Enrollment under program.
``Sec. 1860C. Enrollment in a plan.
``Sec. 1860D. Providing information to beneficiaries.
``Sec. 1860E. Premiums.
``Sec. 1860F. Outpatient prescription drug benefits.
``Sec. 1860G. Entities eligible to provide outpatient drug benefit.
``Sec. 1860H. Minimum standards for eligible entities.
``Sec. 1860I. Payments.
``Sec. 1860J. Employer incentive program for employment-based retiree
drug coverage.
``Sec. 1860K. Prescription Drug Account in the Federal Supplementary
Medical Insurance Trust Fund.
``Sec. 1860L. Medicare Prescription Drug Advisory Committee.''.
Sec. 102. Part D benefits under Medicare+Choice plans.
Sec. 103. Additional assistance for low-income beneficiaries.
Sec. 104. Medigap revisions.
Sec. 105. Coverage of immunosuppressive drugs for all medicare
beneficiaries under part B.
Sec. 106. HHS study and report on uniform pharmacy benefit cards.
Sec. 107. Expansion of membership and duties of Medicare Payment
Advisory Commission (MedPAC).
TITLE II--PRESCRIPTION DRUG COST CONTAINMENT AND QUALITY ASSURANCE

Sec. 201. Filing of patent information with the Food and Drug
Administration.
Sec. 202. Limitation of 30-month stay to certain patents.
Sec. 203. Exclusivity for accelerated generic drug applicants.
Sec. 204. Fair treatment for innovators.
Sec. 205. Bioequivalence.
Sec. 206. Clarification of State authority relating to medicaid drug
rebate agreements.
Sec. 207. Importation of prescription drugs.
Sec. 208. Pediatric labeling of drugs and biological products.
Sec. 209. Report.
Sec. 210. Conforming and technical amendments.

SEC. 2. FINDINGS.

Congress makes the following findings:
(1) Prescription drug coverage was not a standard part of
health insurance when the medicare program under title XVIII of
the Social Security Act was enacted in 1965. Since 1965,
however, drug coverage has become a key component of most
private and public health insurance coverage, except for the
medicare program.
(2) At least \2/3\ of medicare beneficiaries have
unreliable, inadequate, or no drug coverage at all.
(3) Seniors who do not have drug coverage typically pay 15
percent more for prescription drugs than individuals who have
such coverage.
(4) The number of private firms offering retiree health
coverage is declining.
(5) The premiums for medicare supplemental policies
(medigap policies) that provide prescription drug coverage are
too expensive for most medicare beneficiaries and are highest
for older senior citizens who need prescription drug coverage
the most and typically have the lowest incomes.
(6) All medicare beneficiaries should have access to a
voluntary, reliable, affordable outpatient drug benefit as part
of the medicare program that assists with the high cost of
prescription drugs and protects them against excessive out-of-
pocket costs.
(7) Generic pharmaceuticals are approved by the Food and
Drug Administration on the basis of scientific testing and
other information establishing that pharmaceuticals are
therapeutically equivalent to brand-name pharmaceuticals,
ensuring consumers a safe, efficacious, and cost-effective
alternative to brand-name innovator pharmaceuticals.
(8) The Congressional Budget Office estimates that--
(A) the use of generic pharmaceuticals for brand-
name pharmaceuticals could save purchasers of
pharmaceuticals between $8,000,000,000 and
$10,000,000,000 each year; and
(B) generic pharmaceuticals cost between 25 percent
and 60 percent less than brand-name pharmaceuticals,
resulting in an estimated average savings of $15 to $30
on each prescription.
(9) Expanding access to generic pharmaceuticals can help
consumers, especially senior citizens and the uninsured, have
access to more affordable prescription drugs.

TITLE I--MEDICARE OUTPATIENT PRESCRIPTION DRUG BENEFIT PROGRAM

SEC. 101. MEDICARE OUTPATIENT PRESCRIPTION DRUG BENEFIT PROGRAM.

(a) Establishment.--Title XVIII of the Social Security Act (42
U.S.C. 1395 et seq.) is amended by redesignating part D as part E and
by inserting after part C the following new part:

``Part D--Outpatient Prescription Drug Benefit Program

``definitions

``Sec. 1860. In this part:
``(1) Covered outpatient drug.--
``(A) In general.--Except as provided in
subparagraph (B), the term `covered outpatient drug'
means any of the following products:
``(i) A drug which may be dispensed only
upon prescription, and--
``(I) which is approved for safety
and effectiveness as a prescription
drug under section 505 of the Federal
Food, Drug, and Cosmetic Act;
``(II)(aa) which was commercially
used or sold in the United States
before the date of enactment of the
Drug Amendments of 1962 or which is
identical, similar, or related (within
the meaning of section 310.6(b)(1) of
title 21 of the Code of Federal
Regulations) to such a drug, and (bb)
which has not been the subject of a
final determination by the Secretary
that it is a `new drug' (within the
meaning of section 201(p) of the
Federal Food, Drug, and Cosmetic Act)
or an action brought by the Secretary
under section 301, 302(a), or 304(a) of
such Act to enforce section 502(f) or
505(a) of such Act; or
``(III)(aa) which is described in
section 107(c)(3) of the Drug
Amendments of 1962 and for which the
Secretary has determined there is a
compelling justification for its
medical need, or is identical, similar,
or related (within the meaning of
section 310.6(b)(1) of title 21 of the
Code of Federal Regulations) to such a
drug, and (bb) for which the Secretary
has not issued a notice of an
opportunity for a hearing under section
505(e) of the Federal Food, Drug, and
Cosmetic Act on a proposed order of the
Secretary to withdraw approval of an
application for such drug under such
section because the Secretary has
determined that the drug is less than
effective for all conditions of use
prescribed, recommended, or suggested
in its labeling.
``(ii) A biological product which--
``(I) may only be dispensed upon
prescription;
``(II) is licensed under section
351 of the Public Health Service Act;
and
``(III) is produced at an
establishment licensed under such
section to produce such product.
``(iii) Insulin approved under appropriate
Federal law, including needles and syringes for
the administration of such insulin.
``(iv) A prescribed drug or biological
product that would meet the requirements of
clause (i) or (ii) except that it is available
over-the-counter in addition to being available
upon prescription.
``(B) Exclusion.--The term `covered outpatient
drug' does not include any product--
``(i) except as provided in subparagraph
(A)(iv), which may be distributed to
individuals without a prescription;
``(ii) for which payment is available under
part A or B or would be available under part B
but for the application of a deductible under
such part (unless payment for such product is
not available because benefits under part A or
B have been exhausted), determined, except as
provided in subparagraph (C), without regard to
whether the beneficiary involved is entitled to
benefits under part A or enrolled under part B;
or
``(iii) except for agents used to promote
smoking cessation and agents used for the
treatment of obesity, for which coverage may be
excluded or restricted under section
1927(d)(2).
``(2) Eligible beneficiary.--The term `eligible
beneficiary' means an individual that is entitled to benefits
under part A or enrolled under part B.
``(3) Eligible entity.--The term `eligible entity' means
any entity that the Secretary determines to be appropriate to
provide eligible beneficiaries with covered outpatient drugs
under a plan under this part, including--
``(A) a pharmacy benefit management company;
``(B) a retail pharmacy delivery system;
``(C) a health plan or insurer;
``(D) a State (through mechanisms established under
a State plan under title XIX or under a State
pharmaceutical assistance program);
``(E) any other entity approved by the Secretary;
or
``(F) any combination of the entities described in
subparagraphs (A) through (E) if the Secretary
determines that such combination--
``(i) increases the scope or efficiency of
the provision of benefits under this part; and
``(ii) is not anticompetitive.
``(4) Medicare+choice organization; medicare+choice plan.--
The terms `Medicare+Choice organization' and `Medicare+Choice
plan' have the meanings given such terms in subsections (a)(1)
and (b)(1), respectively, of section 1859 (relating to
definitions relating to Medicare+Choice organizations).
``(5) Prescription drug account.--The term `Prescription
Drug Account' means the Prescription Drug Account (as
established under section 1860K) in the Federal Supplementary
Medical Insurance Trust Fund under section 1841.

``establishment of outpatient prescription drug benefit program

``Sec. 1860A. (a) Provision of Benefit.--
``(1) In general.--As soon as the Prescription Drug Benefit
and Cost Containment Act of 2003 can be implemented after the
date of enactment of that Act, the Secretary shall provide for
and administer an outpatient prescription drug benefit program
under which each eligible beneficiary enrolled under this part
shall be provided with coverage of covered outpatient drugs as
follows:
``(A) Medicare+choice plan.--If the eligible
beneficiary is eligible to enroll in a Medicare+Choice
plan, the beneficiary--
``(i) may enroll in such a plan; and
``(ii) if so enrolled, shall obtain
coverage of covered outpatient drugs through
such plan.
``(B) Medicare prescription drug plan.--If the
eligible beneficiary is not enrolled in a
Medicare+Choice plan, the beneficiary shall obtain
coverage of covered outpatient drugs through enrollment
in a plan offered by an eligible entity with a contract
under this part.
``(2) Voluntary nature of program.--Nothing in this part
shall be construed as requiring an eligible beneficiary to
enroll in the program established under this part.
``(3) Scope of benefits.--The program established under
this part shall provide for coverage of all therapeutic classes
of covered outpatient drugs.
``(b) Access to Alternative Prescription Drug Coverage.--In the
case of an eligible beneficiary who has creditable prescription drug
coverage (as defined in section 1860B(b)(1)(F)), such beneficiary--
``(1) may continue to receive such coverage and not enroll
under this part; and
``(2) pursuant to section 1860B(b)(1)(C), is permitted to
subsequently enroll under this part without any penalty and
obtain coverage of covered outpatient drugs in the manner
described in subsection (a) if the beneficiary involuntarily
loses such coverage.
``(c) Financing.--The costs of providing benefits under this part
shall be payable from the Prescription Drug Account.

``enrollment under program

``Sec. 1860B. (a) Establishment of Process.--
``(1) Process similar to enrollment under part b.--The
Secretary shall establish a process through which an eligible
beneficiary (including an eligible beneficiary enrolled in a
Medicare+Choice plan offered by a Medicare+Choice organization)
may make an election to enroll under this part. Such process
shall be similar to the process for enrollment in part B under
section 1837, including the deeming provisions of such section.
``(2) Requirement of enrollment.--An eligible beneficiary
must enroll under this part in order to be eligible to receive
covered outpatient drugs under this title.
``(b) Special Enrollment Procedures.--
``(1) Late enrollment penalty.--
``(A) Increase in premium.--Subject to the
succeeding provisions of this paragraph, in the case of
an eligible beneficiary whose coverage period under
this part began pursuant to an enrollment after the
beneficiary's initial enrollment period under part B
(determined pursuant to section 1837(d)) and not
pursuant to the open enrollment period described in
paragraph (2), the Secretary shall establish procedures
for increasing the amount of the monthly part D premium
under section 1860E(a) applicable to such beneficiary
by an amount that the Secretary determines is
actuarially sound for each full 12-month period (in the
same continuous period of eligibility) in which the
eligible beneficiary could have been enrolled under
this part but was not so enrolled.
``(B) Periods taken into account.--For purposes of
calculating any 12-month period under subparagraph (A),
there shall be taken into account--
``(i) the months which elapsed between the
close of the eligible beneficiary's initial
enrollment period and the close of the
enrollment period in which the beneficiary
enrolled; and
``(ii) in the case of an eligible
beneficiary who reenrolls under this part, the
months which elapsed between the date of
termination of a previous coverage period and
the close of the enrollment period in which the
beneficiary reenrolled.
``(C) Periods not taken into account.--
``(i) In general.--For purposes of
calculating any 12-month period under
subparagraph (A), subject to clause (ii), there
shall not be taken into account months for
which the eligible beneficiary can demonstrate
that the beneficiary had creditable
prescription drug coverage (as defined in
subparagraph (F)).
``(ii) Application.--This subparagraph
shall only apply with respect to a coverage
period the enrollment for which occurs before
the end of the 60-day period that begins on the
first day of the month which includes--
``(I) in the case of a beneficiary
with coverage described in clause (ii)
of subparagraph (F), the date on which
the plan terminates, ceases to provide,
or reduces the value of the
prescription drug coverage under such
plan to below the actuarial value of
the coverage provided under the program
under this part; or
``(II) in the case of a beneficiary
with coverage described in clause (i),
(iii), or (iv) of subparagraph (F), the
date on which the beneficiary loses
eligibility for such coverage.
``(D) Periods treated separately.--Any increase in
an eligible beneficiary's monthly part D premium under
subparagraph (A) with respect to a particular
continuous period of eligibility shall not be
applicable with respect to any other continuous period
of eligibility which the beneficiary may have.
``(E) Continuous period of eligibility.--
``(i) In general.--Subject to clause (ii),
for purposes of this paragraph, an eligible
beneficiary's `continuous period of
eligibility' is the period that begins with the
first day on which the beneficiary is eligible
to enroll under section 1836 and ends with the
beneficiary's death.
``(ii) Separate period.--Any period during
all of which an eligible beneficiary satisfied
paragraph (1) of section 1836 and which
terminated in or before the month preceding the
month in which the beneficiary attained age 65
shall be a separate `continuous period of
eligibility' with respect to the beneficiary
(and each such period which terminates shall be
deemed not to have existed for purposes of
subsequently applying this paragraph).
``(F) Creditable prescription drug coverage
defined.--For purposes of this part, the term
`creditable prescription drug coverage' means any of
the following:
``(i) Medicaid prescription drug
coverage.--Prescription drug coverage under a
medicaid plan under title XIX, including
through the Program of All-inclusive Care for
the Elderly (PACE) under section 1934 and
through a social health maintenance
organization (referred to in section 4104(c) of
the Balanced Budget Act of 1997), but only if
the coverage provides coverage of the cost of
prescription drugs the actuarial value of which
(as defined by the Secretary) to the
beneficiary equals or exceeds the actuarial
value of the benefits provided to an individual
enrolled in the outpatient prescription drug
benefit program under this part.
``(ii) Prescription drug coverage under a
group health plan.--Prescription drug coverage
under a group health plan, including a health
benefits plan under the Federal Employees
Health Benefit Program under chapter 89 of
title 5, United States Code, and a qualified
retiree prescription drug plan (as defined in
section 1860J(e)(3)), but only if the coverage
provides coverage of the cost of prescription
drugs the actuarial value of which (as defined
by the Secretary) to the beneficiary equals or
exceeds the actuarial value of the benefits
provided to an individual enrolled in the
outpatient prescription drug benefit program
under this part.
``(iii) State pharmaceutical assistance
program.--Coverage of prescription drugs under
a State pharmaceutical assistance program, but
only if the coverage provides coverage of the
cost of prescription drugs the actuarial value
of which (as defined by the Secretary) to the
beneficiary equals or exceeds the actuarial
value of the benefits provided to an individual
enrolled in the outpatient prescription drug
benefit program under this part.
``(iv) Veterans' coverage of prescription
drugs.--Coverage of prescription drugs for
veterans, and survivors and dependents of
veterans, under chapter 17 of title 38, United
States Code, but only if the coverage provides
coverage of the cost of prescription drugs the
actuarial value of which (as defined by the
Secretary) to the beneficiary equals or exceeds
the actuarial value of the benefits provided to
an individual enrolled in the outpatient
prescription drug benefit program under this
part.
``(2) Open enrollment period for current beneficiaries in
which late enrollment procedures do not apply.--
``(A) In general.--The Secretary shall establish an
applicable period, which shall begin on the date on
which the Secretary first begins to accept elections
for enrollment under this part, during which any
eligible beneficiary may enroll under this part without
the application of the late enrollment procedures
established under paragraph (1)(A).
``(B) Open enrollment.--An eligible beneficiary who
enrolls under the program under this part pursuant to
subparagraph (A) shall be entitled to the benefits
under this part beginning on the first day of the month
following the month in which such enrollment occurs.
``(3) Special enrollment period for beneficiaries who
involuntarily lose creditable prescription drug coverage.--The
Secretary shall establish a special open enrollment period for
an eligible beneficiary that loses creditable prescription drug
coverage.
``(c) Period of Coverage.--
``(1) In general.--Except as provided in paragraph (2) and
subject to paragraph (3), an eligible beneficiary's coverage
under the program under this part shall be effective for the
period provided in section 1838, as if that section applied to
the program under this part.
``(2) Open and special enrollment.--Subject to paragraph
(3), an eligible beneficiary who enrolls under the program
under this part pursuant to paragraph (2) or (3) of subsection
(b) shall be entitled to the benefits under this part beginning
on the first day of the month following the month in which such
enrollment occurs.
``(3) Limitation.--Coverage under this part shall not begin
prior to the date the Secretary determines, in accordance with
section 1860A(a)(1), that the Prescription Drug Benefit and
Cost Containment Act of 2003 shall be implemented.
``(d) Termination.--
``(1) In general.--The causes of termination specified in
section 1838 shall apply to this part in a similar manner as
such causes apply to part B.
``(2) Coverage terminated by termination of coverage under
parts a and b.--
``(A) In general.--In addition to the causes of
termination specified in paragraph (1), the Secretary
shall terminate an individual's coverage under this
part if the individual is no longer enrolled in either
part A or B.
``(B) Effective date.--The termination described in
subparagraph (A) shall be effective on the effective
date of termination of coverage under part A or (if
later) under part B.
``(3) Procedures regarding termination of a beneficiary
under a plan.--The Secretary shall establish procedures for
determining the status of an eligible beneficiary's enrollment
under this part if the beneficiary's enrollment in a plan
offered by an eligible entity under this part is terminated by
the entity for cause (pursuant to procedures established by the
Secretary under section 1860C(a)(1)).

``enrollment in a plan

``Sec. 1860C. (a) Process.--
``(1) Establishment.--
``(A) Election.--
``(i) In general.--The Secretary shall
establish a process through which an eligible
beneficiary who is enrolled under this part but
not enrolled in a Medicare+Choice plan offered
by a Medicare+Choice organization--
``(I) shall make an annual election
to enroll in any plan offered by an
eligible entity that has been awarded a
contract under this part and serves the
geographic area in which the
beneficiary resides; and
``(II) may make an annual election
to change the election under this
clause.
``(ii) Default enrollment.--Such process
shall include for the default enrollment in
such a plan in the case of an eligible
beneficiary who is enrolled under this part but
who has failed to make an election of such a
plan.
``(B) Rules.--In establishing the process under
subparagraph (A), the Secretary shall--
``(i) use rules similar to the rules for
enrollment, disenrollment, and termination of
enrollment with a Medicare+Choice plan under
section 1851, including--
``(I) the establishment of special
election periods under subsection
(e)(4) of such section; and
``(II) the application of the
guaranteed issue and renewal provisions
of subsection (g) of such section
(other than paragraph (3)(C)(i),
relating to default enrollment); and
``(ii) coordinate enrollments,
disenrollments, and terminations of enrollment
under part C with enrollments, disenrollments,
and terminations of enrollment under this part.
``(2) First enrollment period for plan enrollment.--The
process developed under paragraph (1) shall--
``(A) ensure--
``(i) that an individual who meets or will
meet the definition of an eligible beneficiary
under section 1860(2) upon the date of
implementation of the Prescription Drug Benefit
and Cost Containment Act of 2003, as determined by the Secretary in
accordance with section 1860A(a)(1), is permitted to enroll with an
eligible entity prior to such date; and
``(ii) that coverage under this part for
such an individual is effective as of such
date; and
``(B) be coordinated with the open enrollment
period under section 1860B(b)(2).
``(b) Medicare+Choice Enrollees.--
``(1) In general.--An eligible beneficiary who is enrolled
under this part and enrolled in a Medicare+Choice plan offered
by a Medicare+Choice organization shall receive coverage of
covered outpatient drugs under this part through such plan.
``(2) Rules.--Enrollment in a Medicare+Choice plan is
subject to the rules for enrollment in such a plan under
section 1851.

``providing information to beneficiaries

``Sec. 1860D. (a) Activities.--
``(1) In general.--The Secretary shall conduct activities
that are designed to broadly disseminate information to
eligible beneficiaries (and prospective eligible beneficiaries)
regarding the coverage provided under this part.
``(2) Special rule for first enrollment under the
program.--To the extent practicable, the activities described
in paragraph (1) shall ensure that individuals who meet or will
meet the definition of an eligible beneficiary under section
1860(2) upon the date of implementation of the Prescription
Drug Benefit and Cost Containment Act of 2003, as determined by
the Secretary in accordance with section 1860A(a)(1), and other
prospective eligible beneficiaries, are provided with such
information at least 30 days prior to the open enrollment
period described in section 1860B(b)(2).
``(b) Requirements.--
``(1) In general.--The activities described in subsection
(a) shall--
``(A) be similar to the activities performed by the
Secretary under section 1851(d);
``(B) be coordinated with the activities performed
by the Secretary under such section and under section
1804; and
``(C) provide for the dissemination of information
comparing the plans offered by eligible entities under
this part that are available to eligible beneficiaries
residing in an area.
``(2) Comparative information.--The comparative information
described in paragraph (1)(C) shall include a comparison of the
following:
``(A) Benefits.--The benefits provided under the
plan, including the prices beneficiaries will be
charged for covered outpatient drugs, any preferred
pharmacy networks used by the eligible entity under the
plan, and the formularies and appeals processes under
the plan.
``(B) Quality and performance.--To the extent
available, the quality and performance of the eligible
entity offering the plan.
``(C) Beneficiary cost-sharing.--The cost-sharing
required of eligible beneficiaries under the plan.
``(D) Consumer satisfaction surveys.--To the extent
available, the results of consumer satisfaction surveys
regarding the plan and the eligible entity offering
such plan.
``(E) Additional information.--Such additional
information as the Secretary may prescribe.
``(3) Information standards.--The Secretary shall develop
standards to ensure that the information provided to eligible
beneficiaries under this part is complete, accurate, and
uniform.
``(c) Use of Medicare Consumer Coalitions To Provide Information.--
``(1) In general.--The Secretary may contract with Medicare
Consumer Coalitions to conduct the informational activities
under--
``(A) this section;
``(B) section 1851(d); and
``(C) section 1804.
``(2) Selection of coalitions.--If the Secretary determines
the use of Medicare Consumer Coalitions to be appropriate, the
Secretary shall--
``(A) develop and disseminate, in such areas as the
Secretary determines appropriate, a request for
proposals for Medicare Consumer Coalitions to contract
with the Secretary in order to conduct any of the
informational activities described in paragraph (1);
and
``(B) select a proposal of a Medicare Consumer
Coalition to conduct the informational activities in
each such area, with a preference for broad
participation by organizations with experience in
providing information to beneficiaries under this title.
``(3) Payment to medicare consumer coalitions.--The
Secretary shall make payments to Medicare Consumer Coalitions
contracting under this subsection in such amounts and in such manner as
the Secretary determines appropriate.
``(4) Authorization of appropriations.--There are
authorized to be appropriated, out of any moneys in the
Treasury not otherwise appropriated, to the Secretary such sums
as may be necessary to contract with Medicare Consumer
Coalitions under this section.
``(5) Medicare consumer coalition defined.--In this
subsection, the term `Medicare Consumer Coalition' means an
entity that is a nonprofit organization operated under the
direction of a board of directors that is primarily composed of
beneficiaries under this title.

``premiums

``Sec. 1860E. (a) Annual Establishment of Monthly Part D Premium
Rates.--
``(1) Establishment of rate.--The Secretary shall determine
and promulgate, during September of each year (beginning with
the first September after the date that is 1 year after the
implementation date of the Prescription Drug Benefit and Cost
Containment Act of 2003, as determined by the Secretary in
accordance with section 1860A(a)(1)) a monthly part D premium
rate for the succeeding year.
``(2) Amount.--The Secretary shall determine the monthly
part D premium rate as follows:
``(A) Premium for initial period of
implementation.--The monthly part D premium rate for
any months occurring during the period that begins on
the implementation date of the Prescription Drug
Benefit and Cost Containment Act of 2003, as determined
by the Secretary in accordance with section 1860A(a)(1)
and ends on the first December 31 that occurs after the
September described in paragraph (1), shall be $25.
``(B) Inflation adjustment of premium for
subsequent years.--
``(i) In general.--Subject to clause (ii),
in the case of any calendar year beginning
after the period described in subparagraph (A),
the monthly part D premium rate for the year
shall be the amount described in subparagraph
(A) increased by an amount equal to--
``(I) such dollar amount,
multiplied by
``(II) the percentage (if any) by
which the amount of the average annual
per capita aggregate expenditures
payable from the Prescription Drug
Account for the year (as estimated
under section 1860J(c)(2)(C)) exceeds
the amount of such expenditures in the
period described in subparagraph (A).
``(ii) Rounding.--If the monthly part D
premium rate determined under clause (i) is not
a multiple of $1, such rate shall be rounded to
the nearest multiple of $1.
``(b) Collection of Part D Premium.--The monthly part D premium
applicable to an eligible beneficiary under this part (after
application of any increase under section 1860B(b)(1)) shall be
collected and credited to the Prescription Drug Account in the same
manner as the monthly premium determined under section 1839 is
collected and credited to the Federal Supplementary Medical Insurance
Trust Fund under section 1840.

``outpatient prescription drug benefits

``Sec. 1860F. (a) Requirement.--A plan offered by an eligible
entity under this part shall provide eligible beneficiaries enrolled in
such plan with--
``(1) coverage of covered outpatient drugs--
``(A) without the application of any deductible;
and
``(B) with the cost-sharing described in subsection
(b); and
``(2) access to negotiated prices for such drugs under
subsection (c).
``(b) Cost-sharing.--
``(1) Establishment.--
``(A) In general.--Subject to the succeeding
provisions of this subsection, an eligible beneficiary
shall be responsible for making a payment for a covered
outpatient drug furnished to the beneficiary in a year
in an amount equal to the applicable percentage of the
cost of the drug.
``(B) Applicable percentage defined.--For purposes
of subparagraph (A), the term `applicable percentage'
means, with respect to any covered outpatient drug
provided to an eligible beneficiary in a year--
``(i) 50 percent to the extent the out-of-
pocket costs of the beneficiary for such drug,
when added to the out-of-pocket costs of the
beneficiary for covered outpatient drugs
previously provided in the year, do not exceed
$3,700; and
``(ii) 0 percent to the extent such
expenses, when so added, would exceed $3,700.
``(C) Application of out-of-pocket costs.--For
purposes of subparagraph (B)--
``(i) out-of-pocket costs shall only
include costs incurred for the cost-sharing
described in this subsection; but
``(ii) such costs shall be treated as
incurred without regard to whether the
individual or another person, including a State
program or other third-party coverage, has paid
for such costs.
``(2) Reduction or substitution by eligible entity.--An
eligible entity may reduce the applicable cost-sharing amount
that an eligible beneficiary is subject to under paragraph (1)
or substitute a copayment amount if the Secretary determines
that such reduction or substitution--
``(A) is tied to the performance requirements
described in section 1860I(b)(1)(C); and
``(B) will not result in an increase in the
expenditures made from the Prescription Drug Account.
``(3) Treatment of medically necessary nonformulary
drugs.--The eligible entity shall treat a covered outpatient
drug that is not included on the formulary established by the
eligible entity (pursuant to section 1860H(c)) for the plan as
a drug so included if the nonformulary drug is determined
(pursuant to subparagraph (D) or (E) of section 1860H(a)(4)) to
be medically necessary.
``(4) Beneficiary responsible for negotiated price of
nonformulary drugs.--In the case of a covered outpatient drug
that is dispensed to an eligible beneficiary and that is not
included on the formulary established by the eligible entity
(pursuant to section 1860H(c)) for the plan (and not treated as
a drug on the formulary under paragraph (3)), the beneficiary
shall be responsible for the negotiated price for the drug (as
reported to the Secretary pursuant to section 1860H(a)(6)(A)).
``(5) Cost-sharing may not exceed negotiated price.--If the
amount of cost-sharing for a covered outpatient drug that would
otherwise be required under this subsection (but for this
paragraph) is greater than the negotiated price for the drug
(as reported to the Secretary pursuant to section
1860H(a)(6)(A)), then the amount of such cost-sharing shall be
reduced to an amount equal to such negotiated price.
``(6) Inflation adjustment for annual out-of-pocket limit
for subsequent years.--
``(A) In general.--For any year after the period
described in section 1860E(a)(2)(A), the dollar amounts
specified in clauses (i) and (ii) of paragraph (1)(B)
are equal to the dollar amounts determined under such
clauses (or this paragraph) for the previous year
increased by the annual percentage increase specified
in subparagraph (B).
``(B) Annual percentage increase specified in
subparagraph (b).--The annual percentage increase
specified in this subparagraph for a year is equal to
the annual percentage increase in average per capita
aggregate expenditures for covered outpatient drugs in
the United States for medicare beneficiaries, as
determined by the Secretary for the 12-month period
ending in July of the previous year.
``(C) Rounding.--If any amount determined under
subparagraph (A) is not a multiple of $1, such amount
shall be rounded to the nearest multiple of $1.
``(c) Access to Negotiated Prices.--
``(1) Access.--Under a plan offered by an eligible entity
with a contract under this part, the eligible entity offering
such plan shall provide eligible beneficiaries enrolled in such
plan with access to negotiated prices (including applicable
discounts) used for payment for covered outpatient drugs,
regardless of the fact that only partial benefits may be
payable under the coverage with respect to such drugs because
of the application of the cost-sharing under subsection (b).
``(2) Medicaid related provisions.--Insofar as a State
elects to provide medical assistance under title XIX for a drug
based on the prices negotiated under a plan under this part,
the requirements of section 1927 shall not apply to such drugs.
The prices negotiated under a plan under this part with respect
to covered outpatient drugs, under a Medicare+Choice plan with
respect to such drugs, or under a qualified retiree
prescription drug plan (as defined in section 1860J(e)(3)) with
respect to such drugs, on behalf of eligible beneficiaries,
shall (notwithstanding any other provision of law) not be taken
into account for the purposes of establishing the best price
under section 1927(c)(1)(C).

``entities eligible to provide outpatient drug benefit

``Sec. 1860G. (a) Establishment of Panels of Plans Available in an
Area.--
``(1) In general.--The Secretary shall establish procedures
under which the Secretary--
``(A) accepts bids submitted by eligible entities
for the plans which such entities intend to offer in an
area established under subsection (b); and
``(B) awards contracts to such entities to provide
such plans to eligible beneficiaries in the area.
``(2) Competitive procedures.--Competitive procedures (as
defined in section 4(5) of the Office of Federal Procurement
Policy Act (41 U.S.C. 403(5))) shall be used to enter into
contracts under this part.
``(b) Area for Contracts.--
``(1) Regional basis.--
``(A) In general.--Except as provided in
subparagraph (B) and subject to paragraph (2), the
contract entered into between the Secretary and an
eligible entity with respect to a plan shall require
the eligible entity to provide coverage of covered
outpatient drugs under the plan in a region established
by the Secretary under paragraph (2).
``(B) Partial regional basis.--
``(i) In general.--If determined
appropriate by the Secretary, the Secretary may
permit the coverage described in subparagraph
(A) to be provided in a partial region
determined appropriate by the Secretary.
``(ii) Requirements.--If the Secretary
permits coverage pursuant to clause (i), the
Secretary shall ensure that the partial region
in which coverage is provided is--
``(I) at least the size of the
commercial service area of the eligible
entity for that area; and
``(II) not smaller than a State.
``(2) Establishment of regions.--
``(A) In general.--In establishing regions for
contracts under this part, the Secretary shall--
``(i) take into account the number of
eligible beneficiaries in an area in order to
encourage participation by eligible entities;
and
``(ii) ensure that there are at least 10
different regions in the United States.
``(B) No administrative or judicial review.--The
establishment of regions and partial regions under this
section shall not be subject to administrative or
judicial review.
``(c) Submission of Bids.--
``(1) Submission.--
``(A) In general.--Subject to subparagraph (B),
each eligible entity desiring to offer a plan under
this part in an area shall submit a bid with respect to
such plan to the Secretary at such time, in such
manner, and accompanied by such information as the
Secretary may reasonably require.
``(B) Bid that covers multiple areas.--The
Secretary shall permit an eligible entity to submit a
single bid for multiple areas if the bid is applicable
to all such areas.
``(2) Required information.--A bid described in paragraph
(1) shall include--
``(A) a proposal for the estimated prices of
covered outpatient drugs and the projected annual
increases in such prices, including differentials
between formulary and nonformulary prices, if
applicable;
``(B) a statement regarding the amount that the
entity will charge the Secretary for managing,
administering, and delivering the benefits under the
contract;
``(C) a statement regarding whether the entity will
reduce the applicable cost-sharing amount or substitute
a copayment amount pursuant to section 1860F(b)(2) and
if so, the amount of such reduction or copayments and
how such reduction or substitution is tied to the
performance requirements described in section
1860I(b)(1)(C);
``(D) a detailed description of the performance
requirements for which the payments to the entity will
be subject to risk pursuant to section 1860I(b)(1)(C);
``(E) a detailed description of access to pharmacy
services provided under the plan, including proposed
contracts with local pharmacy providers designed to
ensure access and proposed compensation for local
pharmacists' services;
``(F) with respect to the formulary used by the
entity, a detailed description of the procedures and
standards the entity will use for--
``(i) adding new drugs to a therapeutic
class within the formulary; and
``(ii) determining when and how often the
formulary should be modified;
``(G) a detailed description of any ownership or
shared financial interests with other entities involved
in the delivery of the benefit as proposed under the
plan;
``(H) a detailed description of the entity's
estimated marketing and advertising expenditures
related to enrolling eligible beneficiaries under the
plan and retaining such enrollment; and
``(I) such other information that the Secretary
determines is necessary in order to carry out this
part, including information relating to the bidding
process under this part.
``(d) Access to Benefits in Certain Areas.--
``(1) Areas not covered by contracts.--The Secretary shall
develop procedures for the provision of covered outpatient
drugs under this part to each eligible beneficiary enrolled
under this part that resides in an area that is not covered by
any contract under this part.
``(2) Beneficiaries residing in different locations.--The
Secretary shall develop procedures to ensure that each eligible
beneficiary enrolled under this part that resides in different
areas in a year is provided the benefits under this part
throughout the entire year.
``(3) Special attention to rural and hard-to-serve areas.--
``(A) In general.--The Secretary shall ensure that
all eligible beneficiaries have access to the full
range of benefits under this part, and shall give
special attention to access, pharmacist counseling, and
delivery in rural and hard-to-serve areas (as the
Secretary may define by regulation).
``(B) Special attention defined.--For purposes of
subparagraph (A), the term `special attention' may
include bonus payments to retail pharmacists in rural
areas, extra payments to eligible entities for the cost
of rapid delivery of pharmaceuticals, and any other
actions the Secretary determines are necessary to
ensure full access to benefits under this part by
eligible beneficiaries residing in rural and hard-to-
serve areas.
``(C) GAO report.--Not later than 2 years after the
date of enactment of the Prescription Drug Benefit and
Cost Containment Act of 2003, the Comptroller General
of the United States shall submit to Congress a report
on the access to benefits under this part by eligible
beneficiaries residing in rural and hard-to-serve
areas, together with any recommendations of the
Comptroller General regarding any additional steps the
Secretary may need to take to ensure the access of
eligible beneficiaries to such benefits.
``(e) Awarding of Contracts.--
``(1) Number of contracts.--The Secretary shall, consistent
with the requirements of this part and the goal of containing
costs under this title, award in a competitive manner at least 2
contracts to offer a plan in an area, unless only 1 bidding entity (and
the plan offered by the entity) meets the minimum standards specified
under this part and by the Secretary.
``(2) Determination.--In determining which of the eligible
entities that submitted bids that meet the minimum standards
specified under this part and by the Secretary to award a
contract, the Secretary shall consider the comparative merits
of each bid, as determined on the basis of the past performance
of the entity and other relevant factors, with respect to--
``(A) how well the entity (and the plan offered by
the entity) meet such minimum standards;
``(B) the amount that the entity will charge the
Secretary for managing, administering, and delivering
the benefits under the contract;
``(C) the performance requirements for which the
payments to the entity will be subject to risk pursuant
to section 1860I(b)(1)(C);
``(D) the proposed negotiated prices of covered
outpatient drugs and annual increases in such prices;
``(E) the factors described in section 1860D(b)(2);
``(F) prior experience of the entity in managing,
administering, and delivering a prescription drug
benefit program;
``(G) effectiveness of the entity and plan in
containing costs through pricing incentives and
utilization management; and
``(H) such other factors as the Secretary deems
necessary to evaluate the merits of each bid.
``(3) Exception to conflict of interest rules.--In awarding
contracts under this part, the Secretary may waive conflict of
interest laws generally applicable to Federal acquisitions
(subject to such safeguards as the Secretary may find necessary
to impose) in circumstances where the Secretary finds that such
waiver--
``(A) is not inconsistent with the--
``(i) purposes of the programs under this
title; or
``(ii) best interests of beneficiaries
enrolled under this part; and
``(B) permits a sufficient level of competition for
such contracts, promotes efficiency of benefits
administration, or otherwise serves the objectives of
the program under this part.
``(4) No administrative or judicial review.--The
determination of the Secretary to award or not award a contract
to an eligible entity with respect to a plan under this part
shall not be subject to administrative or judicial review.
``(f) Approval of Marketing Material and Application Forms.--The
provisions of section 1851(h) shall apply to marketing material and
application forms under this part in the same manner as such provisions
apply to marketing material and application forms under part C.
``(g) Duration of Contracts.--Each contract awarded under this part
shall be for a term of at least 2 years but not more than 5 years, as
determined by the Secretary.

``minimum standards for eligible entities

``Sec. 1860H. (a) In General.--The Secretary shall not award a
contract to an eligible entity under this part unless the Secretary
finds that the eligible entity agrees to comply with such terms and
conditions as the Secretary shall specify, including the following:
``(1) Quality and financial standards.--The eligible entity
meets the quality and financial standards specified by the
Secretary.
``(2) Procedures to ensure proper utilization, compliance,
and avoidance of adverse drug reactions.--
``(A) In general.--The eligible entity has in place
drug utilization review procedures to ensure--
``(i) the appropriate utilization by
eligible beneficiaries enrolled in the plan
covered by the contract of the benefits to be
provided under the plan;
``(ii) the avoidance of adverse drug
reactions among such beneficiaries, including
problems due to therapeutic duplication, drug-
disease contraindications, drug-drug
interactions (including serious interactions
with nonprescription or over-the-counter
drugs), incorrect drug dosage or duration of
drug treatment, drug-allergy interactions, and
clinical abuse and misuse; and
``(iii) the reasonable application of peer-
reviewed medical literature pertaining to
improvements in pharmaceutical safety and
appropriate use of drugs.
``(B) Authority to use certain compendia and
literature.--The eligible entity may use the compendia
and literature referred to in clauses (i) and (ii),
respectively, of section 1927(g)(1)(B) as a source for
the utilization review under subparagraph (A).
``(3) Electronic prescription program.--
``(A) In general.--The eligible entity has in
place, as soon as practicable, an electronic
prescription drug program that includes at least the
following components, consistent with national
standards established under subparagraph (B):
``(i) Electronic transmittal of
prescriptions.--Prescriptions are only received
electronically, except in emergency cases and
other exceptional circumstances recognized by
the Secretary.
``(ii) Provision of information to
prescribing health care professional.--The
program provides, upon transmittal of a
prescription by a prescribing health care professional, for transmittal
by the pharmacist to the professional of information that includes--
``(I) information (to the extent
available and feasible) on the drugs
being prescribed for that patient and
other information relating to the
medical history or condition of the
patient that may be relevant to the
appropriate prescription for that
patient;
``(II) cost-effective alternatives
(if any) for the use of the drug
prescribed; and
``(III) information on the drugs
included in the applicable formulary.
To the extent feasible, such program shall
permit the prescribing health care professional
to provide (and be provided) related
information on an interactive, real-time basis.
``(B) Standards.--
``(i) Development.--The Secretary shall
provide for the development of national
standards relating to the electronic
prescription drug program described in
subparagraph (A). Such standards shall be
compatible with standards established under
part C of title XI.
``(ii) Advisory task force.--In developing
such standards, the Secretary shall establish a
task force that includes representatives of
physicians, hospitals, pharmacists, and
technology experts and representatives of the
Departments of Veterans Affairs and Defense and
other appropriate Federal agencies to provide
recommendations to the Secretary on such
standards, including recommendations relating
to the following:
``(I) The range of available
computerized prescribing software and
hardware and their costs to develop and
implement.
``(II) The extent to which such
systems reduce medication errors and
can be readily implemented by
physicians and hospitals.
``(III) Efforts to develop a common
software platform for computerized
prescribing.
``(IV) The cost of implementing
such systems in the range of hospital
and physician office settings,
including hardware, software, and
training costs.
``(V) Implementation issues as they
relate to part C of title XI, and
current Federal and State prescribing
laws and regulations and their impact
on implementation of computerized
prescribing.
``(iii) Deadlines.--
``(I) The Secretary shall establish
the task force under clause (ii) as
soon as possible after the date of
enactment of the Prescription Drug
Benefit and Cost Containment Act of
2003.
``(II) The task force shall submit
recommendations to the Secretary by not
later than 9 months after the date the
task force is first established under
clause (i).
``(III) The Secretary shall develop
and promulgate the national standards
referred to in clause (ii) by not later
than 1 year after the date the task
force submits recommendations to the
Secretary.
``(C) Delay in implementation not to delay
implementation of drug benefit.--Any delay in the
development and implementation of the national
standards referred to in subparagraph (B)(ii) or in the
implementation of an electronic prescription drug
program in accordance with such standards by an
eligible entity shall not delay the implementation of
the outpatient prescription drug benefit program
established under this part. In accordance with section
1860A(a)(1), the Secretary shall implement the
outpatient prescription drug benefit program as soon as
possible after the date of enactment of the
Prescription Drug Benefit and Cost Containment Act of
2003 and shall waive compliance with any requirements
related to the electronic prescription drug program
required under this paragraph to the extent necessary
until such time as the requirements for the program are
established.
``(D) Waiver of application for certain rural
providers.--If the Secretary determines that it is
unduly burdensome on providers in rural areas to comply
with the requirements under this paragraph, the
Secretary may waive such requirements for such
providers.
``(E) Grant program to provide assistance in
implementing electronic prescription drug programs.--
``(i) In general.--The Secretary is
authorized to establish a grant program to
provide assistance to health care providers in
implementing electronic prescription drug
programs pursuant to this paragraph.
``(ii) Authorization of appropriations.--
For the purpose of carrying out clause (i),
there are authorized to be appropriated such
sums as may be necessary.
``(4) Patient protections.--
``(A) Access.--
``(i) In general.--The eligible entity
ensures that the covered outpatient drugs  are
accessible and convenient to eligible beneficiaries enrolled in the
plan covered by the contract, including by offering the services 24
hours a day and 7 days a week for emergencies.
``(ii) Agreements with pharmacies.--
``(I) In general.--The eligible
entity shall enter into a participation
agreement with any pharmacy that meets
the requirements of subsection (d) to
dispense covered prescription drugs to
eligible beneficiaries under this part.
``(II) Requirement regarding
participation.--The eligible entity
shall include terms in such agreements
that secure the participation of
sufficient numbers of pharmacies to
ensure convenient access (including
adequate emergency access).
``(III) Dispensing fee.--Such
agreements shall include the payment of
a reasonable dispensing fee for covered
outpatient drugs dispensed to a
beneficiary under the agreement.
``(iii) Preferred pharmacy networks.--If
the eligible entity utilizes a preferred
pharmacy network, the network complies with the
standards under subsection (e).
``(B) Ensuring that beneficiaries are not
overcharged.--The eligible entity has procedures in
place to ensure that each pharmacy with a participation
agreement under this part with the entity complies with
the requirements under subsection (d)(1)(C) (relating
to adherence to negotiated prices).
``(C) Continuity of care.--
``(i) In general.--The eligible entity
ensures that, in the case of an eligible
beneficiary who loses coverage under this part
with such entity under circumstances that would
permit a special election period (as
established by the Secretary under section
1860C(a)(1)), the entity will continue to
provide coverage under this part to such
beneficiary until the beneficiary enrolls and
receives such coverage with another eligible
entity under this part or, if eligible, with a
Medicare+Choice organization.
``(ii) Limited period.--In no event shall
an eligible entity be required to provide the
extended coverage required under clause (i)
beyond the date which is 30 days after the
coverage with such entity would have terminated
but for this subparagraph.
``(D) Procedures regarding the determination of
drugs that are medically necessary.--
``(i) In general.--The eligible entity has
in place procedures on a case-by-case basis to
treat a drug not included on the formulary of
the plan as a drug on the formulary under this
part if the formulary drug for the treatment of
the same condition is determined--
``(I) to be not as effective for
the enrollee in preventing or slowing
the deterioration of, or improving or
maintaining, the health of the
enrollee; or
``(II) to have a significant
adverse effect on the enrollee.
``(ii) Requirement.--The procedures under
clause (i) shall require that determinations
under such clause are based on professional
medical judgment, the medical condition of the
enrollee, and other medical evidence.
``(E) Procedures regarding appeal rights with
respect to denials of care.--The eligible entity has in
place procedures to ensure--
``(i) a timely internal review for
resolution of denials of coverage (in whole or
in part and including those regarding the
coverage of drugs not included on the formulary
of the plan as drugs so included) in accordance
with the medical exigencies of the case and a
timely resolution of complaints, by enrollees
in the plan, or by providers, pharmacists, and
other individuals acting on behalf of each such
enrollee (with the enrollee's consent) in
accordance with requirements (as established by
the Secretary) that are comparable to such
requirements for Medicare+Choice organizations
under part C (and are not less favorable to the
enrollee than such requirements under such part
as in effect on the date of enactment of the
Prescription Drug Benefit and Cost Containment
Act of 2003);
``(ii) that the entity complies in a timely
manner with requirements established by the
Secretary that (I) provide for an external
review by an independent entity selected by the
Secretary of denials of coverage described in
clause (i) not resolved in the favor of the
beneficiary (or other complainant) under the
process described in such clause, and (II) are
comparable to the external review requirements
established for Medicare+Choice organizations
under part C (and are not less favorable to the
enrollee than such requirements under such part
as in effect on the date of enactment of the
Prescription Drug Benefit and Cost Containment
Act of 2003); and
``(iii) that enrollees are provided with
information regarding the appeals procedures
under this part at the time of enrollment with
the entity and upon request thereafter.
``(F) Procedures regarding patient
confidentiality.--Insofar as an eligible entity
maintains individually identifiable medical records or
other health information regarding eligible
beneficiaries enrolled in the plan that is covered by
the contract, the entity has in place procedures to--
``(i) safeguard the privacy of any
individually identifiable beneficiary
information;
``(ii) maintain such records and
information in a manner that is accurate and
timely;
``(iii) ensure timely access by such
beneficiaries to such records and information;
and
``(iv) otherwise comply with applicable
laws relating to patient confidentiality.
``(G) Procedures regarding transfer of medical
records.--
``(i) In general.--The eligible entity has
in place procedures for the timely transfer of
records and information described in
subparagraph (F) (with respect to a beneficiary
who loses coverage under this part with the
entity and enrolls with another entity
(including a Medicare+Choice organization)
under this part) to such other entity.
``(ii) Patient confidentiality.--The
procedures described in clause (i) shall comply
with the patient confidentiality procedures
described in subparagraph (F).
``(H) Procedures regarding medical errors.--The
eligible entity has in place procedures for--
``(i) working with the Secretary to deter
medical errors related to the provision of
covered outpatient drugs; and
``(ii) ensuring that pharmacies with a
contract with the entity have in place
procedures to deter medical errors related to
the provision of covered outpatient drugs.
``(5) Procedures to control fraud, abuse, and waste.--
``(A) In general.--The eligible entity has in place
procedures to control fraud, abuse, and waste.
``(B) Applicability of fraud and abuse
provisions.--The provisions of section 1128 through
1128C (relating to fraud and abuse) apply to eligible
entities with contracts under this part.
``(6) Reporting requirements.--
``(A) In general.--The eligible entity provides the
Secretary with reports containing information regarding
the following:
``(i) The negotiated prices that the
eligible entity is paying for covered
outpatient drugs.
``(ii) The prices that eligible
beneficiaries enrolled in the plan that is
covered by the contract will be charged for
covered outpatient drugs.
``(iii) The management costs of providing
such benefits.
``(iv) Utilization of such benefits.
``(v) Marketing and advertising
expenditures related to enrolling and retaining
eligible beneficiaries.
``(B) Timeframe for submitting reports.--
``(i) In general.--The eligible entity
shall submit a report described in subparagraph
(A) to the Secretary within 3 months after the
end of each 12-month period in which the
eligible entity has a contract under this part.
Such report shall contain information
concerning the benefits provided during such
12-month period.
``(ii) Last year of contract.--In the case
of the last year of a contract under this part,
the Secretary may require that a report
described in subparagraph (A) be submitted 3
months prior to the end of the contract. Such
report shall contain information concerning the
benefits provided between the period covered by
the most recent report under this subparagraph
and the date that a report is submitted under
this clause.
``(C) Confidentiality of information.--
``(i) In general.--Notwithstanding any
other provision of law and subject to clause
(ii), information disclosed by an eligible
entity pursuant to subparagraph (A) (except for
information described in clause (ii) of such
subparagraph) is confidential and shall only be
used by the Secretary for the purposes of, and
to the extent necessary, to carry out this
part.
``(ii) Utilization data.--Subject to
patient confidentiality laws, the Secretary
shall make information disclosed by an eligible
entity pursuant to subparagraph (A)(iv)
(regarding utilization data) available for
research purposes. The Secretary may charge a
reasonable fee for making such information
available.
``(7) Approval of marketing material and application
forms.--The eligible entity complies with the requirements
described in section 1860G(f).
``(8) Records and audits.--The eligible entity maintains
adequate records related to the management, administration, and
delivery of the benefits under this part and affords the
Secretary access to such records for auditing purposes.
``(b) Special Rules Regarding Cost-Effective Provision of
Benefits.--
``(1) In general.--In providing the benefits under a
contract under this part, an eligible entity shall--
``(A) employ mechanisms to provide the benefits
economically, that may include the use of--
``(i) alternative methods of distribution;
``(ii) preferred pharmacy networks
(pursuant to subsection (e)); and
``(iii) generic drug substitution;
``(B) use mechanisms to encourage eligible
beneficiaries to select cost-effective drugs or less
costly means of receiving drugs, that may include the
use of--
``(i) pharmacy incentive programs;
``(ii) therapeutic interchange programs;
and
``(iii) disease management programs;
``(C) encourage pharmacy providers to--
``(i) inform beneficiaries of the
differentials in price between generic and
brand name drug equivalents; and
``(ii) provide medication therapy
management programs in order to enhance
beneficiaries' understanding of the appropriate
use of medications and to reduce the risk of
potential adverse events associated with
medications; and
``(D) develop and implement a formulary in
accordance with subsection (c).
``(2) Restriction.--If an eligible entity uses alternative
methods of distribution pursuant to paragraph (1)(A)(i), the
entity may not require that a beneficiary use such methods in
order to obtain covered outpatient drugs.
``(c) Requirements for Formularies.--
``(1) Standards.--
``(A) In general.--The formulary developed and
implemented by the eligible entity shall comply with
standards established by the Secretary in consultation
with the Medicare Prescription Drug Advisory Committee
established under section 1860L.
``(B) No national formulary or requirement to
exclude specific drugs.--
``(i) Secretary may not establish a
national formulary.--The Secretary may not
establish a national formulary.
``(ii) No requirement to exclude specific
drugs.--The standards established by the
Secretary pursuant to subparagraph (A) may not
require that an eligible entity exclude a
specific covered outpatient drug from the
formulary developed and implemented by the
entity.
``(2) Requirements for standards.--The standards
established under paragraph (1) shall require that the eligible
entity--
``(A) use a pharmacy and therapeutic committee
(that meets the standards for a pharmacy and
therapeutic committee established by the Secretary in
consultation with such Medicare Prescription Drug
Advisory Committee) to develop and implement the
formulary;
``(B) include--
``(i) all generic covered outpatient drugs
on the formulary;
``(ii) at least 1 brand name drug from each
therapeutic class (as defined by the entity's
pharmacy and therapeutic committee in
accordance with standards established by the
Secretary in consultation with the Medicare
Pharmacy and Therapeutics  Advisory Committee)
on the formulary; and
``(iii) if there is more than 1 brand name
drug available in a therapeutic class, at least
2 brand name drugs from such class on the
formulary; and
``(C) develop procedures for the modification of
the formulary, including for the addition of new drugs
to an existing therapeutic class;
``(D) pursuant to section 1860F(b)(3), provide for
coverage of nonformulary drugs at the formulary drug
rate when determined under subparagraph (D) or (E) of
subsection (a)(3) to be medically necessary;
``(E) disclose to current and prospective
beneficiaries and to providers in the service area the
nature of the formulary restrictions, including
information regarding the drugs included on the
formulary and any difference in the cost-sharing for--
``(i) drugs included on the formulary; and
``(ii) for drugs not included on the
formulary; and
``(F) provide a reasonable amount of notice to
beneficiaries enrolled in the plan that is covered by
the contract under this part of any change on the
formulary.
``(3) Construction.--Nothing in this part shall be
construed as precluding an eligible entity from--
``(A) educating prescribing providers, pharmacists,
and beneficiaries about the medical and cost benefits
of drugs included on the formulary for the plan
(including generic drugs); or
``(B) requesting prescribing providers to consider
a drug included on the formulary prior to dispensing of
a drug not so included, as long as such a request does
not unduly delay the provision of the drug.
``(d) Terms of Participation Agreement With Pharmacies.--
``(1) In general.--A participation agreement between an
eligible entity and a pharmacy under this part (pursuant to
subsection (a)(3)(A)(ii)) shall include the following terms and
conditions:
``(A) Applicable requirements.--The pharmacy shall
meet (and throughout the contract period continue to
meet) all applicable Federal requirements and State and
local licensing requirements.
``(B) Access and quality standards.--The pharmacy
shall comply with such standards as the Secretary (and
the eligible entity) shall establish concerning the
quality of, and enrolled beneficiaries' access to,
pharmacy services under this part. Such standards shall
require the pharmacy--
``(i) not to refuse to dispense covered
outpatient drugs to any eligible beneficiary
enrolled under this part;
``(ii) to keep patient records (including
records on expenses) for all covered outpatient
drugs dispensed to such enrolled beneficiaries;
``(iii) to submit information (in a manner
specified by the Secretary to be necessary to
administer this part) on all purchases of such
drugs dispensed to such enrolled beneficiaries;
and
``(iv) to comply with periodic audits to
assure compliance with the requirements of this
part and the accuracy of information submitted.
``(C) Ensuring that beneficiaries are not
overcharged.--
``(i) Adherence to negotiated prices.--The
total charge for each covered outpatient drug
dispensed by the pharmacy to a beneficiary
enrolled in the plan, without regard to whether
the individual is financially responsible for
any or all of such charge, shall not exceed the
negotiated price for the drug (as reported to
the Secretary pursuant to subsection
(a)(6)(A)).
``(ii) Adherence to beneficiary
obligation.--The pharmacy may not charge (or
collect from) such beneficiary an amount that
exceeds the cost-sharing that the beneficiary
is responsible for under this part (as
determined under section 1860F(b) using the
negotiated price of the drug).
``(D) Additional requirements.--The pharmacy shall
meet such additional contract requirements as the
eligible entity specifies under this section.
``(2) Applicability of fraud and abuse provisions.--The
provisions of section 1128 through 1128C (relating to fraud and
abuse) apply to pharmacies participating in the program under
this part.
``(e) Preferred Pharmacy Networks.--
``(1) In general.--If an eligible entity uses a preferred
pharmacy network to deliver benefits under this part, such
network shall meet minimum access standards established by the
Secretary.
``(2) Standards.--In establishing standards under paragraph
(1), the Secretary shall take into account reasonable distances
to pharmacy services in both urban and rural areas. Such
standards shall be consistent with the requirements of this
part.

``payments

``Sec. 1860I. (a) Procedures for Payments to Eligible Entities.--
The Secretary shall establish procedures for making payments to each
eligible entity with a contract to offer a plan under this part for the
management, administration, and delivery of the benefits under the
plan.
``(b) Requirements for Procedures.--
``(1) In general.--The procedures established under
subsection (a) shall provide for the following:
``(A) Management payment.--Payment for the
management, administration, and delivery of the
benefits under the plan.
``(B) Reimbursement for negotiated costs of drugs
provided.--Payments for the negotiated costs of covered
outpatient drugs provided to eligible beneficiaries
enrolled under this part and in the plan, reduced by
any applicable cost-sharing under section 1860F(b).
``(C) Risk requirement to ensure pursuit of
performance requirements.--An adjustment of a
percentage (as determined under paragraph (2)) of the
payments made to an entity under subparagraph (A) to
ensure that the entity, in managing, administering, and
delivering the benefits under this part, pursues
performance requirements established by the Secretary,
including the following:
``(i) Control of medicare and beneficiary
costs.--The entity contains costs to the
Prescription Drug Account and to eligible
beneficiaries enrolled under this part and in
the plan offered by the entity, as measured by
generic substitution rates, price discounts,
and other factors determined appropriate by the
Secretary that do not reduce the access of such
beneficiaries to medically necessary covered
outpatient drugs.
``(ii) Quality clinical care.--The entity
provides such beneficiaries with quality
clinical care, as measured by such factors as--
``(I) the level of adverse drug
reactions and medical errors among such
beneficiaries; and
``(II) providing specific clinical
suggestions to improve health and
patient and prescriber education as
appropriate.
``(iii) Quality service.--The entity
provides such beneficiaries with quality
services, as measured by such factors as
sustained pharmacy network access, timeliness
and accuracy of service delivery in claims
processing and card production, pharmacy and
member service support access, response time in
mail delivery service, and timely action with
regard to appeals and current beneficiary
service surveys.
``(2) Percentage of payment tied to risk.--
``(A) In general.--Subject to subparagraph (B), the
Secretary shall determine the percentage (which may be
up to 100 percent) of the payments made to an entity
under paragraph (1)(A) that will be tied to the
performance requirements described in paragraph (1)(C).
``(B) Limitation on risk to ensure program
stability.--In order to provide for program stability,
the Secretary may not establish a percentage to be
adjusted under this subsection at a level that
jeopardizes the ability of an eligible entity to
administer and deliver the benefits under this part or
administer and deliver such benefits in a quality
manner.
``(3) Risk adjustment of payments based on enrollees in
plan.--To the extent that an eligible entity is at risk under
this subsection, the procedures established under subsection
(a) may include a methodology for risk adjusting the payments
made to such entity based on the differences in actuarial risk
of different enrollees being served if the Secretary determines
such adjustments to be necessary and appropriate.
``(4) Pass-through of rebates, discounts, and price
concessions obtained by the eligible entity.--The Secretary
shall establish procedures for reducing the amount of payments
to an eligible entity under paragraph (1) to take into account
any rebates, discounts, or price concessions obtained by the
entity from manufacturers of covered outpatient drugs, unless
the Secretary determines that such procedures are not in the
best interests of the medicare program or eligible
beneficiaries.
``(c) Payments to Medicare+Choice Organizations.--For provisions
related to payments to Medicare+Choice organizations for the
management, administration, and delivery of benefits under this part to
eligible beneficiaries enrolled in a Medicare+Choice plan offered by
the organization, see section 1853(c)(8).
``(d) Secondary Payer Provisions.--The provisions of section
1862(b) shall apply to the benefits provided under this part.

``employer incentive program for employment-based retiree drug coverage

``Sec. 1860J. (a) Program Authority.--The Secretary is authorized
to develop and implement a program under this section to be known as
the `Employer Incentive Program' that encourages employers and other
sponsors of employment-based health care coverage to provide adequate
prescription drug benefits to retired individuals by subsidizing, in
part, the sponsor's cost of providing coverage under qualifying plans.
``(b) Sponsor Requirements.--In order to be eligible to receive an
incentive payment under this section with respect to coverage of an
individual under a qualified retiree prescription drug plan (as defined
in subsection (e)(3)), a sponsor shall meet the following requirements:
``(1) Assurances.--The sponsor shall--
``(A) annually attest, and provide such assurances
as the Secretary may require, that the coverage offered
by the sponsor is a qualified retiree prescription drug
plan, and will remain such a plan for the duration of
the sponsor's participation in the program under this
section; and
``(B) guarantee that it will give notice to the
Secretary and covered retirees--
``(i) at least 120 days before terminating
its plan; and
``(ii) immediately upon determining that
the actuarial value of the prescription drug
benefit under the plan falls below the
actuarial value of the outpatient prescription
drug benefit under this part.
``(2) Beneficiary information.--The sponsor shall report to
the Secretary, for each calendar quarter for which it seeks an
incentive payment under this section, the names and social
security numbers of all retirees (and their spouses and
dependents) covered under such plan during such quarter and the
dates (if less than the full quarter) during which each such individual
was covered.
``(3) Audits.--The sponsor and the employment-based retiree
health coverage plan seeking incentive payments under this
section shall agree to maintain, and to afford the Secretary
access to, such records as the Secretary may require for
purposes of audits and other oversight activities necessary to
ensure the adequacy of prescription drug coverage, the accuracy
of incentive payments made, and such other matters as may be
appropriate.
``(4) Other requirements.--The sponsor shall provide such
other information, and comply with such other requirements, as
the Secretary may find necessary to administer the program
under this section.
``(c) Incentive Payments.--
``(1) In general.--A sponsor that meets the requirements of
subsection (b) with respect to a quarter in a calendar year
shall be entitled to have payment made by the Secretary on a
quarterly basis (to the sponsor or, at the sponsor's direction,
to the appropriate employment-based health plan) of an
incentive payment, in the amount determined in paragraph (2),
for each retired individual (or spouse or dependent) who--
``(A) was covered under the sponsor's qualified
retiree prescription drug plan during such quarter; and
``(B) was eligible for, but was not enrolled in,
the outpatient prescription drug benefit program under
this part.
``(2) Amount of payment.--
``(A) In general.--The amount of the payment for a
quarter shall be, for each individual described in
paragraph (1), \2/3\ of the sum of the monthly
Government contribution amounts (computed under
subparagraph (B)) for each of the 3 months in the
quarter.
``(B) Computation of monthly government
contribution amount.--For purposes of subparagraph (A),
the monthly Government contribution amount for a month
in a year is equal to the amount by which--
``(i) \1/12\ of the amount estimated under
subparagraph (C) for the year involved; exceeds
``(ii) the monthly Part D premium under
section 1860E(a) (determined without regard to
any increase under section 1860B(b)(1)) for the
month involved.
``(C) Estimate of average annual per capita
aggregate expenditures.--
``(i) In general.--The Secretary shall for
each year after the period described in section
1860E(a)(2)(A), estimate for that year an
amount equal to the average annual per capita
aggregate expenditures payable from the
Prescription Drug Account for that year.
``(ii) Timeframe for estimation.--The
Secretary shall make the estimate described in
clause (i) for a year before the beginning of
that year.
``(3) Payment date.--The payment under this section with
respect to a calendar quarter shall be payable as of the end of
the next succeeding calendar quarter.
``(d) Civil Money Penalties.--A sponsor, health plan, or other
entity that the Secretary determines has, directly or through its
agent, provided information in connection with a request for an
incentive payment under this section that the entity knew or should
have known to be false shall be subject to a civil monetary penalty in
an amount up to 3 times the total incentive amounts under subsection
(c) that were paid (or would have been payable) on the basis of such
information.
``(e) Definitions.--In this section:
``(1) Employment-based retiree health coverage.--The term
`employment-based retiree health coverage' means health
insurance or other coverage, whether provided by voluntary
insurance coverage or pursuant to statutory or contractual
obligation, of health care costs for retired individuals (or
for such individuals and their spouses and dependents) based on
their status as former employees or labor union members.
``(2) Employer.--The term `employer' has the meaning given
the term in section 3(5) of the Employee Retirement Income
Security Act of 1974 (except that such term shall include only
employers of 2 or more employees).
``(3) Qualified retiree prescription drug plan.--The term
`qualified retiree prescription drug plan' means health
insurance coverage included in employment-based retiree health
coverage that--
``(A) provides coverage of the cost of prescription
drugs with an actuarial value (as defined by the
Secretary) to each retired beneficiary that equals or
exceeds the actuarial value of the benefits provided to
an individual enrolled in the outpatient prescription
drug benefit program under this part; and
``(B) does not deny, limit, or condition the
coverage or provision of prescription drug benefits for
retired individuals based on age or any health status-
related factor described in section 2702(a)(1) of the
Public Health Service Act.
``(4) Sponsor.--The term `sponsor' has the meaning given
the term `plan sponsor' in section 3(16)(B) of the Employer
Retirement Income Security Act of 1974.
``(f) Authorization of Appropriations.--There are authorized to be
appropriated from time to time, out of any moneys in the Treasury not
otherwise appropriated, such sums as may be necessary to carry out the
program under this section.

``prescription drug account in the federal supplementary medical
insurance trust fund

``Sec. 1860K. (a) Establishment.--
``(1) In general.--There is created within the Federal
Supplementary Medical Insurance Trust Fund established by
section 1841 an account to be known as the `Prescription Drug
Account' (in this section referred to as the `Account').
``(2) Funds.--The Account shall consist of such gifts and
bequests as may be made as provided in section 201(i)(1), and
such amounts as may be deposited in, or appropriated to, the
account as provided in this part.
``(3) Separate from rest of trust fund.--Funds provided
under this part to the Account shall be kept separate from all
other funds within the Federal Supplementary Medical Insurance
Trust Fund.
``(b) Payments From Account.--
``(1) In general.--The Managing Trustee shall pay from time
to time from the Account such amounts as the Secretary
certifies are necessary to make payments to operate the program
under this part, including payments to eligible entities under
section 1860I, payments to Medicare+Choice organizations under
section 1853(c)(8), and payments with respect to administrative
expenses under this part in accordance with section 201(g).
``(2) Treatment in relation to part b premium.--Amounts
payable from the Account shall not be taken into account in
computing actuarial rates or premium amounts under section
1839.
``(c) Appropriations To Cover Benefits and Administrative Costs.--
There are appropriated to the Account in a fiscal year, out of any
moneys in the Treasury not otherwise appropriated, an amount equal to
the amount by which the benefits and administrative costs of providing
the benefits under this part in the year exceed the premiums collected
under section 1860E(b) for the year.

``medicare prescription drug advisory committee

``Sec. 1860L. (a) Establishment of Committee.--There is established
a Medicare Prescription Drug Advisory Committee (in this section
referred to as the `Committee').
``(b) Functions of Committee.--The Committee shall advise the
Secretary on policies related to--
``(1) the development of guidelines for the implementation
and administration of the outpatient prescription drug benefit
program under this part; and
``(2) the development of--
``(A) standards for a pharmacy and therapeutics
committee required of eligible entities under section
1860H(c)(2)(A);
``(B) standards required under subparagraphs (D)
and (E) of section 1860H(a)(4) for determining if a
drug is medically necessary;
``(C) standards for--
``(i) establishing therapeutic classes; and
``(ii) adding new therapeutic classes to a
formulary;
``(D) procedures to evaluate the bids submitted by
eligible entities under this part; and
``(E) procedures to ensure that eligible entities
with a contract under this part are in compliance with
the requirements under this part.
``(c) Structure and Membership of the Committee.--
``(1) Structure.--The Committee shall be composed of 19
members who shall be appointed by the Secretary as soon as
possible after the date of enactment of the Prescription Drug
Benefit and Cost Containment Act of 2003.
``(2) Membership.--
``(A) In general.--The members of the Committee
shall be chosen on the basis of their integrity,
impartiality, and good judgment, and shall be
individuals who are, by reason of their education,
experience, attainments, and understanding of
pharmaceutical cost control and quality enhancement,
exceptionally qualified to perform the duties of
members of the Committee.
``(B) Specific members.--Of the members appointed
under paragraph (1)--
``(i) five shall be chosen to represent
physicians, 2 of whom shall be geriatricians;
``(ii) two shall be chosen to represent
nurse practitioners;
``(iii) four shall be chosen to represent
pharmacists;
``(iv) one shall be chosen to represent the
Centers for Medicare & Medicaid Services;
``(v) four shall be chosen to represent
actuaries, pharmacoeconomists, researchers, and
other appropriate experts;
``(vi) one shall be chosen to represent
emerging drug technologies;
``(vii) one shall be chosen to represent
the Food and Drug Administration; and
``(viii) one shall be chosen to represent
individuals enrolled under this part.
``(d) Chairperson.--The Secretary shall designate a member of the
Committee as Chairperson. The term as Chairperson shall be for a 1-year
period.
``(e) Committee Personnel Matters.--
``(1) Members.--
``(A) Compensation.--Each member of the Committee
who is not an officer or employee of the Federal
Government shall be compensated at a rate equal to the
daily equivalent of the annual rate of basic pay
prescribed for level IV of the Executive Schedule under section 5315 of
title 5, United States Code, for each day (including travel time)
during which such member is engaged in the performance of the duties of
the Committee. All members of the Committee who are officers or
employees of the United States shall serve without compensation in
addition to that received for their services as officers or employees
of the United States.
``(B) Travel expenses.--The members of the
Committee shall be allowed travel expenses, including
per diem in lieu of subsistence, at rates authorized
for employees of agencies under subchapter I of chapter
57 of title 5, United States Code, while away from
their homes or regular places of business in the
performance of services for the Committee.
``(2) Staff.--The Committee may appoint such personnel as
the Committee considers appropriate.
``(f) Operation of the Committee.--
``(1) Meetings.--The Committee shall meet at the call of
the Chairperson (after consultation with the other members of
the Committee) not less often than quarterly to consider a
specific agenda of issues, as determined by the Chairperson
after such consultation.
``(2) Quorum.--Ten members of the Committee shall
constitute a quorum for purposes of conducting business.
``(g) Federal Advisory Committee Act.--Section 14 of the Federal
Advisory Committee Act (5 U.S.C. App.) shall not apply to the
Committee.
``(h) Transfer of Personnel, Resources, and Assets.--For purposes
of carrying out its duties, the Secretary and the Committee may provide
for the transfer to the Committee of such civil service personnel in
the employ of the Department of Health and Human Services (including
the Centers for Medicare & Medicaid Services), and such resources and
assets of the Department used in carrying out this title, as the
Committee requires.
``(i) Authorization of Appropriations.--There are authorized to be
appropriated such sums as may be necessary to carry out the purposes of
this section.''.
(b) Exclusions From Coverage.--
(1) Application to part d.--Section 1862(a) of the Social
Security Act (42 U.S.C. 1395y(a)) is amended in the matter
preceding paragraph (1) by striking ``part A or part B'' and
inserting ``part A, B, or D''.
(2) Prescription drugs not excluded from coverage if
reasonable and necessary.--Section 1862(a)(1) of the Social
Security Act (42 U.S.C. 1395y(a)(1)) is amended--
(A) in subparagraph (H), by striking ``and'' at the
end;
(B) in subparagraph (I), by striking the semicolon
at the end and inserting ``, and''; and
(C) by adding at the end the following new
subparagraph:
``(J) in the case of prescription drugs covered
under part D, which are not reasonable and necessary to
prevent or slow the deterioration of, or improve or
maintain, the health of eligible beneficiaries;''.
(c) Conforming Amendments to Federal Supplementary Medical
Insurance Trust Fund.--Section 1841 of the Social Security Act (42
U.S.C. 1395t) is amended--
(1) in the last sentence of subsection (a)--
(A) by striking ``and'' before ``such amounts'';
and
(B) by inserting before the period the following:
``, and such amounts as may be deposited in, or
appropriated to, the Prescription Drug Account
established by section 1860K'';
(2) in subsection (g), by inserting after ``by this part,''
the following: ``the payments provided for under part D (in
which case the payments shall be made from the Prescription
Drug Account in the Trust Fund),'';
(3) in subsection (h), by inserting after ``1840(d)'' the
following: ``and section 1860E(b) (in which case the payments
shall be made from the Prescription Drug Account in the Trust
Fund)''; and
(4) in subsection (i), by inserting after ``section
1840(b)(1)'' the following: ``, section 1860E(b) (in which case
the payments shall be made from the Prescription Drug Account
in the Trust Fund),''.
(d) Conforming References to Previous Part D.--
(1) In general.--Any reference in law (in effect before the
date of enactment of this Act) to part D of title XVIII of the
Social Security Act is deemed a reference to part E of such
title (as in effect after such date).
(2) Secretarial submission of legislative proposal.--Not
later than 6 months after the date of enactment of this Act,
the Secretary of Health and Human Services shall submit to
Congress a legislative proposal providing for such technical
and conforming amendments in the law as are required by the
provisions of this title.

SEC. 102. PART D BENEFITS UNDER MEDICARE+CHOICE PLANS.

(a) Eligibility, Election, and Enrollment.--Section 1851 of the
Social Security Act (42 U.S.C. 1395w-21) is amended--
(1) in subsection (a)(1)(A), by striking ``parts A and B''
and inserting ``parts A, B, and D''; and
(2) in subsection (i)(1), by striking ``parts A and B'' and
inserting ``parts A, B, and D''.
(b) Voluntary Beneficiary Enrollment for Drug Coverage.--Section
1852(a)(1)(A) of the Social Security Act (42 U.S.C. 1395w-22(a)(1)(A))
is amended by inserting ``(and under part D to individuals also
enrolled under that part)'' after ``parts A and B''.
(c) Access to Services.--Section 1852(d)(1) of the Social Security
Act (42 U.S.C. 1395w-22(d)(1)) is amended--
(1) in subparagraph (D), by striking ``and'' at the end;
(2) in subparagraph (E), by striking the period at the end
and inserting ``; and''; and
(3) by adding at the end the following new subparagraph:
``(F) in the case of covered outpatient drugs (as
defined in section 1860(1)) provided to individuals
enrolled under part D, the organization complies with
the access requirements applicable under part D.''.
(d) Payments to Organizations for Part D Benefits.--
(1) In general.--Section 1853(a)(1)(A) of the Social
Security Act (42 U.S.C. 1395w-23(a)(1)(A)) is amended--
(A) by inserting ``determined separately for the
benefits under parts A and B and under part D (for
individuals enrolled under that part)'' after ``as
calculated under subsection (c)'';
(B) by striking ``that area, adjusted for such risk
factors'' and inserting ``that area. In the case of
payment for the benefits under parts A and B, such
payment shall be adjusted for such risk factors as'';
and
(C) by inserting before the last sentence the
following: ``In the case of the payments under
subsection (c)(8) for the provision of coverage of
covered outpatient drugs to individuals enrolled under
part D, such payment shall be adjusted for the risk
factors of each enrollee as the Secretary determines to
be feasible and appropriate to ensure actuarial
equivalence.''.
(2) Amount.--Section 1853(c) of the Social Security Act (42
U.S.C. 1395w-23(c)) is amended--
(A) in paragraph (1), in the matter preceding
subparagraph (A), by inserting ``for benefits under
parts A and B'' after ``capitation rate''; and
(B) by adding at the end the following new
paragraph:
``(8) Capitation rate for part d benefits.--
``(A) In general.--In the case of a Medicare+Choice
plan that provides coverage of covered outpatient drugs
to an individual enrolled under part D, the capitation
rate for such coverage shall be the amount described in
subparagraph (B). Such payments shall be made in the
same manner and at the same time as the payments to the
Medicare+Choice organization offering the plan for
benefits under parts A and B are otherwise made, but
such payments shall be payable from the Prescription
Drug Account in the Federal Supplementary Medical
Insurance Trust Fund under section 1841.
``(B) Amount.--The amount described in this
paragraph is an amount equal to \1/12\ of the average
annual per capita aggregate expenditures payable from
the Prescription Drug Account for the year (as
estimated under section 1860J(c)(2)(C)).''.
(e) Limitation on Enrollee Liability.--Section 1854(e) of the
Social Security Act (42 U.S.C. 1395w-24(e)) is amended by adding at the
end the following new paragraph:
``(5) Special rule for part d benefits.--With respect to
outpatient prescription drug benefits under part D, a
Medicare+Choice organization may not require that an enrollee
pay any deductible or pay a cost-sharing amount that exceeds
the amount of cost-sharing applicable for such benefits for an
eligible beneficiary under part D.''.
(f) Requirement for Additional Benefits.--Section 1854(f)(1) of the
Social Security Act (42 U.S.C. 1395w-24(f)(1)) is amended by adding at
the end the following new sentence: ``Such determination shall be made
separately for the benefits under parts A and B and for prescription
drug benefits under part D.''.
(g) Effective Date.--The amendments made by this section shall
apply to items and services provided under a Medicare+Choice plan on or
after the implementation date of the Prescription Drug Benefit and Cost
Containment Act of 2003, as determined by the Secretary of Health and
Human Services in accordance with section 1860A(a)(1) of the Social
Security Act (as added by section 101).

SEC. 103. ADDITIONAL ASSISTANCE FOR LOW-INCOME BENEFICIARIES.

(a) Inclusion in Medicare Cost-Sharing.--Section 1905(p)(3) of the
Social Security Act (42 U.S.C. 1396d(p)(3)) is amended--
(1) in subparagraph (A)--
(A) in clause (i), by striking ``and'' at the end;
(B) in clause (ii), by inserting ``and'' at the
end; and
(C) by adding at the end the following new clause:
``(iii) premiums under section 1860E(a).''; and
(2) in subparagraph (B)--
(A) by inserting ``(i)'' after ``(B)''; and
(B) by adding at the end the following new clause:
``(ii) Cost-sharing described in section 1860F(b).''.
(b) Expansion of Medical Assistance.--Section 1902(a)(10)(E) of the
Social Security Act (42 U.S.C. 1396a(a)(10)(E)) is amended--
(1) in clause (iii)--
(A) by striking ``section 1905(p)(3)(A)(ii)'' and
inserting ``clauses (ii) and (iii) of section
1905(p)(3)(A) and for medicare cost-sharing described
in section 1905(p)(3)(B)(ii),''; and
(B) by striking ``and'' at the end;
(2) by redesignating clause (iv) as clause (vi); and
(3) by inserting after clause (iii) the following new
clauses:
``(iv) for making medical assistance available for
medicare cost-sharing described in section
1905(p)(3)(A)(iii) and for medicare cost-sharing
described in section 1905(p)(3)(B)(ii) for individuals
who would be qualified medicare beneficiaries described
in section 1905(p)(1) but for the fact that their
income exceeds 120 percent but does not exceed 135
percent of such official poverty line for a family of
the size involved;
``(v) for making medical assistance available for
medicare cost-sharing described in section
1905(p)(3)(A)(iii) on a linear sliding scale based on
the income of such individuals for individuals who
would be qualified medicare beneficiaries described in
section 1905(p)(1) but for the fact that their income
exceeds 135 percent but does not exceed 175 percent of
such official poverty line for a family of the size
involved; and''.
(c) Nonapplicability of Resource Requirements to Medicare Part D
Cost-Sharing.--Section 1905(p)(1) of the Social Security Act (42 U.S.C.
1396d(p)(1)) is amended by adding at the end the following flush
sentence:
``In determining if an individual is a qualified medicare beneficiary
under this paragraph, subparagraph (C) shall not be applied for
purposes of providing the individual with medicare cost-sharing
described in section 1905(p)(3)(A)(iii) or for medicare cost-sharing
described in section 1905(p)(3)(B)(ii).''.
(d) Nonapplicability of Payment Differential Requirements to
Medicare Part D Cost-Sharing.--Section 1902(n)(2) of the Social
Security Act (42 U.S.C. 1396a(n)(2)) is amended by adding at the end
the following new sentence: ``The preceding sentence shall not apply to
the cost-sharing described in section 1860F(b).''.
(e) Increase in Federal Medical Assistance Percentages for
Additional Assistance for Low-Income Beneficiaries.--
(1) In general.--The first sentence of section 1905(b) of
the Social Security Act (42 U.S.C. 1396d(b)) is amended--
(A) by striking ``and'' before ``(4)''; and
(B) by inserting before the period at the end the
following: ``, and (5) the Federal medical assistance
percentage shall be equal to the Medicare Drug Benefit
Low-Income Assistance percentage (as defined in
subsection (x)) with respect to medical assistance
provided for medicare cost-sharing described in
subparagraph (A)(iii) or (B)(ii) of subsection (p)(3)
and for administrative expenditures incurred by the
State that are attributable to providing such medicare
cost-sharing''.
(2) Definition of medicare drug benefit low-income
assistance percentage.--Section 1905 of the Social Security Act
(42 U.S.C. 1396d) is amended by adding at the end the following
new subsection:
``(x)(1) For purposes of clause (5) of subsection (b), and except
as provided in paragraph (2), the Medicare Drug Benefit Low-Income
Assistance percentage is 100 percent.
``(2) With respect to medicare cost-sharing described in
subparagraph (A)(iii) or (B)(ii) of subsection (p)(3) provided to
individuals eligible for medical assistance under section
1902(a)(10)(A)(i)(I), 1902(a)(10)(A)(i)(II) or 1902(f) and
administrative expenditures incurred by the State that are attributable
to providing such medicare cost-sharing to such individuals, the
Medicare Drug Benefit Low-Income Assistance percentage for purposes of
clause (5) of subsection (b) shall be equal to the lesser of--
``(A) in the case of fiscal year 2005--
``(i) 100 percent; or
``(ii) the Federal medical assistance percentage
determined for the State for fiscal year 2005 increased
by the number of percentage points equal to 10 percent
of the number of percentage points by which (I) such
Federal medical assistance percentage for the State is
less than (II) 100 percent; and
``(B) in the case of fiscal year 2006 and any subsequent
fiscal year--
``(i) 100 percent; or
``(ii) the percentage determined under subparagraph
(A)(ii) for the previous fiscal year increased by the
number of percentage points equal to 10 percent of the
number of percentage points by which (I) the Federal
medical assistance percentage for the State for fiscal
year 2005 is less than (II) 100 percent.''.
(f) Treatment of Territories.--Section 1108(g) of the Social
Security Act (42 U.S.C. 1308(g)) is amended by adding at the end the
following new paragraph:
``(3) Notwithstanding the preceding provisions of this subsection,
with respect to fiscal year 2005 and any fiscal year thereafter, the
amount otherwise determined under this subsection (and subsection (f))
for the fiscal year for a Commonwealth or territory shall be increased
by the ratio (as estimated by the Secretary) of--
``(A) the aggregate amount of payments made to the 50
States and the District of Columbia for the fiscal year under
title XIX that are attributable to making medical assistance
available for individuals described in clauses (i), (iii),
(iv), and (v) of section 1902(a)(10)(E) for payment of medicare
cost-sharing described in section 1905(p)(3)(A)(iii) and for
medicare cost-sharing described in section 1905(p)(3)(B)(ii);
to
``(B) the aggregate amount of total payments made to such
States and District for the fiscal year under such title.''.
(g) Amendment to Best Price.--Section 1927(c)(1)(C)(i) of the
Social Security Act (42 U.S.C. 1396r-8(c)(1)(C)(i)) is amended--
(1) by striking ``and'' at the end of subclause (III);
(2) by striking the period at the end of subclause (IV) and
inserting ``; and''; and
(3) by adding at the end the following new subclause:
``(V) any prices charged which are
negotiated under a plan under part D of
title XVIII with respect to covered
outpatient drugs, under a
Medicare+Choice plan under part C of
such title with respect to such drugs,
or by a qualified retiree prescription
drug plan (as defined in section
1860J(e)(3)) with respect to such
drugs, on behalf of eligible
beneficiaries (as defined in section
1860(2).''.
(h) Conforming Amendments.--Section 1933 of the Social Security Act
(42 U.S.C. 1396u-3) is amended--
(1) in subsection (a), by striking ``section
1902(a)(10)(E)(iv)'' and inserting ``section
1902(a)(10)(E)(vi)'';
(2) in subsection (c)(2)(A)--
(A) in clause (i), by striking ``section
1902(a)(10)(E)(iv)(I)'' and inserting ``section
1902(a)(10)(E)(vi)(I)''; and
(B) in clause (ii), by striking ``section
1902(a)(10)(E)(iv)(II)'' and inserting ``section
1902(a)(10)(E)(vi)(II)'';
(3) in subsection (d), by striking ``section
1902(a)(10)(E)(iv)'' and inserting ``section
1902(a)(10)(E)(vi)''; and
(4) in subsection (e), by striking ``section
1902(a)(10)(E)(iv)'' and inserting ``section
1902(a)(10)(E)(vi)''.
(i) Effective Date.--The amendments made by this section shall
apply for medical assistance provided under section 1902(a)(10)(E) of
the Social Security Act (42 U.S.C. 1396a(a)(10)(E)) on and after the
implementation date of the Prescription Drug Benefit and Cost
Containment Act of 2003, as determined by the Secretary of Health and
Human Services in accordance with section 1860A(a)(1) of the Social
Security Act (as added by section 101).
(j) Rule of Construction.--Nothing in the amendments made by this
section shall be construed as precluding a State from using State funds
to provide coverage of outpatient prescription drugs that is in
addition to the coverage of such drugs required under title XIX of the
Social Security Act (42 U.S.C. 1396 et seq.), as amended by this
section.
(k) Sense of the Senate.--It is the sense of the Senate that during
consideration of any conference report for this legislation, conferees
should explore ways to provide incentives to States (and in particular
to those States that, as of the date of enactment of this Act, offer
some form of prescription drug assistance to the elderly and the
disabled) to maintain existing State commitments to provide
prescription drug assistance to the elderly and disabled or to
supplement the drug benefit established by the conference report.

SEC. 104. MEDIGAP REVISIONS.

Section 1882 of the Social Security Act (42 U.S.C. 1395ss) is
amended by adding at the end the following new subsection:
``(v) Modernized Benefit Packages for Medicare Supplemental
Policies.--
``(1) Revision of benefit packages.--
``(A) In general.--Notwithstanding subsection (p),
the benefit packages classified as `H', `I', and `J'
under the standards established by subsection (p)(2)
(including the benefit package classified as `J' with a
high deductible feature, as described in subsection
(p)(11)) shall be revised so that--
``(i) the coverage of outpatient
prescription drugs available under such benefit
packages is replaced with coverage of
outpatient prescription drugs that complements
but does not duplicate the coverage of
outpatient prescription drugs that is otherwise
available under this title;
``(ii) the revised benefit packages provide
a range of coverage options for outpatient
prescription drugs for beneficiaries, but do
not provide coverage for more than 90 percent
of the cost-sharing amount applicable to an
individual under section 1860F(b);
``(iii) uniform language and definitions
are used with respect to such revised benefits;
``(iv) uniform format is used in the policy
with respect to such revised benefits;
``(v) such revised standards meet any
additional requirements imposed by the
amendments made by the Prescription Drug
Benefit and Cost Containment Act of 2003; and
``(vi) except as revised under the
preceding clauses or as provided under
subsection (p)(1)(E), the benefit packages are
identical to the benefit packages that were
available on the date of enactment of the
Prescription Drug Benefit and Cost Containment
Act of 2003.
``(B) Manner of revision.--The benefit packages
revised under this section shall be revised in the
manner described in subparagraph (E) of subsection
(p)(1), except that for purposes of subparagraph (C) of
such subsection, the standards established under this
subsection shall take effect not later than the
implementation date of the Prescription Drug Benefit
and Cost Containment Act of 2003, as determined by the
Secretary of Health and Human Services in accordance
with section 1860A(a)(1).
``(2) Construction of benefits in other medicare
supplemental policies.--Nothing in the benefit packages
classified as `A' through `G' under the standards established
by subsection (p)(2) (including the benefit package classified
as `F' with a high deductible feature, as described in
subsection (p)(11)) shall be construed as providing coverage
for benefits for which payment may be made under part D.
``(3) Guaranteed issuance and renewal of revised
policies.--The provisions of subsections (q) and (s), including
provisions of subsection (s)(3) (relating to special enrollment
periods in cases of termination or disenrollment), shall apply
to medicare supplemental policies revised under this subsection
in the same manner as such provisions apply to medicare
supplemental policies issued under the standards established
under subsection (p).
``(4) Opportunity of current policyholders to purchase
revised policies.--
``(A) In general.--No medicare supplemental policy
of an issuer with a benefit package that is revised
under paragraph (1) shall be deemed to meet the
standards in subsection (c) unless the issuer--
``(i) provides written notice during the
60-day period immediately preceding the period
established for the open enrollment period
established under section 1860B(b)(2), to each
individual who is a policyholder or certificate
holder of a medicare supplemental policy issued
by that issuer (at the most recent available
address of that individual) of the offer
described in clause (ii) and of the fact that
such individual will no longer be covered under
such policy as of the implementation date of
the Prescription Drug Benefit and Cost
Containment Act of 2003, as determined by the
Secretary of Health and Human Services in
accordance with section 1860A(a)(1); and
``(ii) offers the policyholder or
certificate holder under the terms described in
subparagraph (B), during at least the period
established under section 1860B(b)(2), a
medicare supplemental policy with the benefit
package that the Secretary determines is most
comparable to the policy in which the
individual is enrolled with coverage effective
as of the date on which the individual is first
entitled to benefits under part D.
``(B) Terms of offer described.--The terms
described in this subparagraph are terms which do not--
``(i) deny or condition the issuance or
effectiveness of a medicare supplemental policy
described in subparagraph (A)(ii) that is
offered and is available for issuance to new
enrollees by such issuer;
``(ii) discriminate in the pricing of such
policy because of health status, claims
experience, receipt of health care, or medical
condition; or
``(iii) impose an exclusion of benefits
based on a preexisting condition under such
policy.
``(5) Penalties.--Each penalty under this section shall
apply with respect to policies revised under this subsection as
if such policies were issued under the standards established
under subsection (p), including the penalties under subsections
(a), (d), (p)(8), (p)(9), (q)(5), (r)(6)(A), (s)(4), and
(t)(2)(D).''.

SEC. 105. COVERAGE OF IMMUNOSUPPRESSIVE DRUGS FOR ALL MEDICARE
BENEFICIARIES UNDER PART B.

(a) Coverage Regardless of Whether Medicare Paid for Transplant.--
Section 1861(s)(2)(J) of the Social Security Act (42 U.S.C.
1395x(s)(2)(J)) is amended by striking ``, to an individual who
receives'' and all that follows before the semicolon at the end and
inserting ``to an individual who has received an organ transplant''.
(b) Continued Entitlement to Immunosuppressive Drugs.--
(1) Kidney transplant recipients.--Section 226A(b)(2) of
the Social Security Act (42 U.S.C. 426-1(b)(2)) is amended by
inserting ``(except for coverage of immunosuppressive drugs
under section 1861(s)(2)(J))'' after ``shall end''.
(2) Other transplant recipients.--The flush matter
following paragraph (2)(C)(ii)(II) of section 226(b) of the
Social Security Act (42 U.S.C. 426(b)) is amended by striking
``of this subsection)'' and inserting ``of this subsection and
except for coverage of immunosuppressive drugs under section
1861(s)(2)(J))''.
(3) Application.--Section 1836 of the Social Security Act
(42 U.S.C. 1395o) is amended--
(A) by striking ``Every individual who'' and
inserting ``(a) In General.--Every individual who'';
and
(B) by adding at the end the following new
subsection:
``(b) Special Rules Applicable to Individuals Only Eligible for
Coverage of Immunosuppressive Drugs.--
``(1) In general.--In the case of an individual whose
eligibility for benefits under this title has ended except for
the coverage of immunosuppressive drugs by reason of section
226(b) or 226A(b)(2), the following rules shall apply:
``(A) The individual shall be deemed to be enrolled
under this part for purposes of receiving coverage of
such drugs.
``(B) The individual shall be responsible for the
full amount of the premium under section 1839 in order
to receive such coverage.
``(C) The provision of such drugs shall be subject
to the application of--
``(i) the deductible under section 1833(b);
and
``(ii) the coinsurance amount applicable
for such drugs (as determined under this part).
``(D) If the individual is an inpatient of a
hospital or other entity, the individual is entitled to
receive coverage of such drugs under this part.
``(2) Establishment of procedures in order to implement
coverage.--The Secretary shall establish procedures for--
``(A) identifying beneficiaries that are entitled
to coverage of immunosuppressive drugs by reason of
section 226(b) or 226A(b)(2); and
``(B) distinguishing such beneficiaries from
beneficiaries that are enrolled under this part for the
complete package of benefits under this part.''.
(4) Technical amendment.--Subsection (c) of section 226A of
the Social Security Act (42 U.S.C. 426-1), as added by section
201(a)(3)(D)(ii) of the Social Security Independence and
Program Improvements Act of 1994 (Public Law 103-296; 108 Stat.
1497), is redesignated as subsection (d).
(c) Extension of Secondary Payer Requirements for ESRD
Beneficiaries.--Section 1862(b)(1)(C) of the Social Security Act (42
U.S.C. 1395y(b)(1)(C)) is amended by adding at the end the following
new sentence: ``With regard to immunosuppressive drugs furnished on or
after the date of enactment of this sentence, this subparagraph shall
be applied without regard to any time limitation.''.
(d) Effective Date.--The amendments made by this section shall
apply to drugs furnished on or after the date of enactment of this Act.

SEC. 106. HHS STUDY AND REPORT ON UNIFORM PHARMACY BENEFIT CARDS.

(a) Studies.--The Secretary of Health and Human Services shall
conduct a study to determine the feasibility and advisability of
establishing a uniform format for pharmacy benefit cards provided to
beneficiaries by eligible entities under the outpatient prescription
drug benefit program under part D of title XVIII of the Social Security
Act (as added by section 101).
(b) Report.--Not later than 2 years after the date of enactment of
this Act, the Secretary of Health and Human Services shall submit to
Congress a report on the results of the study conducted under
subsection (a) together with any recommendations for legislation that
the Secretary determines to be appropriate as a result of such study.

SEC. 107. EXPANSION OF MEMBERSHIP AND DUTIES OF MEDICARE PAYMENT
ADVISORY COMMISSION (MEDPAC).

(a) Expansion of Membership.--
(1) In general.--Section 1805(c) of the Social Security Act
(42 U.S.C. 1395b-6(c)) is amended--
(A) in paragraph (1), by striking ``17'' and
inserting ``19''; and
(B) in paragraph (2)(B), by inserting ``experts in
the area of pharmacology and prescription drug benefit
programs,'' after ``other health professionals,''.
(2) Initial terms of additional members.--
(A) In general.--For purposes of staggering the
initial terms of members of the Medicare Payment
Advisory Commission under section 1805(c)(3) of the
Social Security Act (42 U.S.C. 1395b-6(c)(3)), the
initial terms of the 2 additional members of the
Commission provided for by the amendment under
paragraph (1)(A) are as follows:
(i) One member shall be appointed for 1
year.
(ii) One member shall be appointed for 2
years.
(B) Commencement of terms.--Such terms shall begin
on January 1, 2004.
(b) Expansion of Duties.--Section 1805(b)(2) of the Social Security
Act (42 U.S.C. 1395b-6(b)(2)) is amended by adding at the end the
following new subparagraph:
``(D) Prescription medicine benefit program.--
Specifically, the Commission shall review, with respect
to the outpatient prescription drug benefit program
under part D, the impact of such program on--
``(i) the pharmaceutical market, including
costs and pricing of pharmaceuticals,
beneficiary access to such pharmaceuticals, and
trends in research and development;
``(ii) franchise, independent, and rural
pharmacies; and
``(iii) beneficiary access to outpatient
prescription drugs, including an assessment of
out-of-pocket spending, generic and brand name
drug utilization, and pharmacists' services.''.

TITLE II--PRESCRIPTION DRUG COST CONTAINMENT AND QUALITY ASSURANCE

SEC. 201. FILING OF PATENT INFORMATION WITH THE FOOD AND DRUG
ADMINISTRATION.

(a) Filing After Approval of an Application.--
(1) In general.--Section 505 of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 355) (as amended by section
210(a)(2)(B)(ii)) is amended in subsection (c) by striking
paragraph (2) and inserting the following:
``(2) Patent information.--
``(A) In general.--Not later than the date that is
30 days after the date of an order approving an
application under subsection (b) (unless the Secretary
extends the date because of extraordinary or unusual
circumstances), the holder of the application shall
file with the Secretary the patent information
described in subparagraph (C) with respect to any
patent--
``(i)(I) that claims the drug for which the
application was approved; or
``(II) that claims an approved method of
using the drug; and
``(ii) with respect to which a claim of
patent infringement could reasonably be
asserted if a person not licensed by the owner
engaged in the manufacture, use, or sale of the
drug.
``(B) Subsequently issued patents.--In a case in
which a patent described in subparagraph (A) is issued
after the date of an order approving an application
under subsection (b), the holder of the application
shall file with the Secretary the patent information
described in subparagraph (C) not later than the date
that is 30 days after the date on which the patent is
issued (unless the Secretary extends the date because
of extraordinary or unusual circumstances).
``(C) Patent information.--The patent information
required to be filed under subparagraph (A) or (B)
includes--
``(i) the patent number;
``(ii) the expiration date of the patent;
``(iii) with respect to each claim of the
patent--
``(I) whether the patent claims the
drug or claims a method of using the
drug; and
``(II) whether the claim covers--
``(aa) a drug substance;
``(bb) a drug formulation;
``(cc) a drug composition;
or
``(dd) a method of use;
``(iv) if the patent claims a method of
use, the approved use covered by the claim;
``(v) the identity of the owner of the
patent (including the identity of any agent of
the patent owner); and
``(vi) a declaration that the applicant, as
of the date of the filing, has provided
complete and accurate patent information for
all patents described in subparagraph (A).
``(D) Publication.--On filing of patent information
required under subparagraph (A) or (B), the Secretary
shall--
``(i) immediately publish the information
described in clauses (i) through (iv) of
subparagraph (C); and
``(ii) make the information described in
clauses (v) and (vi) of subparagraph (C)
available to the public on request.
``(E) Civil action for correction or deletion of
patent information.--
``(i) In general.--A person that has filed
an application under subsection (b)(2) or (j)
for a drug may bring a civil action against the
holder of the approved application for the drug
seeking an order requiring that the holder of
the application amend the application--
``(I) to correct patent information
filed under subparagraph (A); or
``(II) to delete the patent
information in its entirety for the
reason that--
``(aa) the patent does not
claim the drug for which the
application was approved; or
``(bb) the patent does not
claim an approved method of
using the drug.
``(ii) Limitations.--Clause (i) does not
authorize--
``(I) a civil action to correct
patent information filed under
subparagraph (B); or
``(II) an award of damages in a
civil action under clause (i).
``(F) No claim for patent infringement.--An owner
of a patent with respect to which a holder of an
application fails to file information on or before the
date required under subparagraph (A) or (B) shall be
barred  from bringing a civil action for infringement
of the patent against a person that--
``(i) has filed an application under
subsection (b)(2) or (j); or
``(ii) manufactures, uses, offers to sell,
or sells a drug approved under an application
under subsection (b)(2) or (j).''.
(2) Transition provision.--
(A) Filing of patent information.--Each holder of
an application for approval of a new drug under section
505(b) of the Federal Food, Drug, and Cosmetic Act (21
U.S.C. 355(b)) that has been approved before the date
of enactment of this Act shall amend the application to
include the patent information required under the
amendment made by paragraph (1) not later than the date
that is 30 days after the date of enactment of this Act
(unless the Secretary of Health and Human Services
extends the date because of extraordinary or unusual
circumstances).
(B) No claim for patent infringement.--An owner of
a patent with respect to which a holder of an
application under subsection (b) of section 505 of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355)
fails to file information on or before the date
required under subparagraph (A) shall be barred from
bringing a civil action for infringement of the patent
against a person that--
(i) has filed an application under
subsection (b)(2) or (j) of that section; or
(ii) manufactures, uses, offers to sell, or
sells a drug approved under an application
under subsection (b)(2) or (j) of that section.
(b) Filing With an Application.--Section 505 of the Federal Food,
Drug, and Cosmetic Act (21 U.S.C. 355) is amended--
(1) in subsection (b)(2)--
(A) in subparagraph (A), by striking ``and'' at the
end;
(B) in subparagraph (B), by striking the period at
the end and inserting ``; and''; and
(C) by adding at the end the following:
``(C) with respect to a patent that claims both the
drug and a method of using the drug or claims more than
1 method of using the drug for which the application is
filed--
``(i) a certification under subparagraph
(A)(iv) on a claim-by-claim basis; and
``(ii) a statement under subparagraph (B)
regarding the method of use claim.''; and
(2) in subsection (j)(2)(A), by inserting after clause
(viii) the following:
``With respect to a patent that claims both the drug and a method of
using the drug or claims more than 1 method of using the drug for which
the application is filed, the application shall contain a certification
under clause (vii)(IV) on a claim-by-claim basis and a statement under
clause (viii) regarding the method of use claim.''.

SEC. 202. LIMITATION OF 30-MONTH STAY TO CERTAIN PATENTS.

(a) Abbreviated New Drug Applications.--Section 505(j)(5) of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)(5)) is amended--
(1) in subparagraph (B)--
(A) in clause (iii)--
(i) by striking ``(iii) If the applicant
made a certification described in subclause
(IV) of paragraph (2)(A)(vii),'' and inserting
the following:
``(iii) Subclause (iv) certification with
respect to certain patents.--If the applicant
made a certification described in paragraph
(2)(A)(vii)(IV) with respect to a patent (other
than a patent that claims a process for
manufacturing the listed drug) for which patent
information was filed with the Secretary under
subsection (c)(2)(A),''; and
(ii) by adding at the end the following:
``The 30-month period provided under the second
sentence of this clause shall not apply to a
certification under paragraph (2)(A)(vii)(IV)
made with respect to a patent for which patent
information was filed with the Secretary under
subsection (c)(2)(B).'';
(B) by redesignating clause (iv) as clause (v); and
(C) by inserting after clause (iii) the following:
``(iv) Subclause (iv) certification with
respect to other patents.--
``(I) In general.--If the applicant
made a certification described in
paragraph (2)(A)(vii)(IV) with respect
to a patent not described in clause
(iii) for which patent information was
published by the Secretary under
subsection (c)(2)(D), the approval
shall be made effective on the date
that is 45 days after the date on which
the notice provided under paragraph
(2)(B) was received, unless a civil
action for infringement of the patent,
accompanied by a motion for preliminary
injunction to enjoin the applicant from
engaging in the commercial manufacture
or sale of the drug, was filed on or
before the date that is 45 days after
the date on which the notice was
received, in which case the approval
shall be made effective--
``(aa) on the date of a
court action declining to grant
a preliminary injunction; or
``(bb) if the court has
granted a preliminary
injunction prohibiting the
applicant from engaging in the
commercial manufacture or sale
of the drug--

``(AA) on issuance
by a court of a
determination that the
patent is invalid or is
not infringed;

``(BB) on issuance
by a court of an order
revoking the
preliminary injunction
or permitting the
applicant to engage in
the commercial
manufacture or sale of
the drug; or

``(CC) on the date
specified in a court
order under section
271(e)(4)(A) of title
35, United States Code,
if the court determines
that the patent is
infringed.

``(II) Cooperation.--Each of the
parties shall reasonably cooperate in
expediting a civil action under
subclause (I).
``(III) Expedited notification.--If
the notice under paragraph (2)(B)
contains an address for the receipt of
expedited notification of a civil
action under subclause (I), the
plaintiff shall, on the date on
which the complaint is filed, simultaneously cause a notification of
the civil action to be delivered to that address by the next business
day.''; and
(2) by inserting after subparagraph (B) the following:
``(C) Failure to bring infringement action.--If, in
connection with an application under this subsection,
the applicant provides an owner of a patent notice
under paragraph (2)(B) with respect to the patent, and
the owner of the patent fails to bring a civil action
against the applicant for infringement of the patent on
or before the date that is 45 days after the date on
which the notice is received, the owner of the patent
shall be barred from bringing a civil action for
infringement of the patent in connection with the
development, manufacture, use, offer to sell, or sale
of the drug for which the application was filed or
approved under this subsection.''.
(b) Other Applications.--Section 505(c) of the Federal Food, Drug,
and Cosmetic Act (21 U.S.C. 355(c)) (as amended by section
210(a)(3)(A)(iii)) is amended--
(1) in paragraph (3)--
(A) in subparagraph (C)--
(i) by striking ``(C) If the applicant made
a certification described in clause (iv) of
subsection (b)(2)(A),'' and inserting the
following:
``(C) Clause (iv) certification with respect to
certain patents.--If the applicant made a certification
described in subsection (b)(2)(A)(iv) with respect to a
patent (other than a patent that claims a process for
manufacturing the listed drug) for which patent
information was filed with the Secretary under
paragraph (2)(A),''; and
(ii) by adding at the end the following:
``The 30-month period provided under the second
sentence of this subparagraph shall not apply
to a certification under subsection
(b)(2)(A)(iv) made with respect to a patent for
which patent information was filed with the
Secretary under paragraph (2)(B).''; and
(B) by inserting after subparagraph (C) the
following:
``(D) Clause (iv) certification with respect to
other patents.--
``(i) In general.--If the applicant made a
certification described in subsection
(b)(2)(A)(iv) with respect to a patent not
described in subparagraph (C) for which patent
information was published by the Secretary
under paragraph (2)(D), the approval shall be
made effective on the date that is 45 days
after the date on which the notice provided
under subsection (b)(3) was received, unless a
civil action for infringement of the patent,
accompanied by a motion for preliminary
injunction to enjoin the applicant from
engaging in the commercial manufacture or sale
of the drug, was filed on or before the date
that is 45 days after the date on which the
notice was received, in which case the approval
shall be made effective--
``(I) on the date of a court action
declining to grant a preliminary
injunction; or
``(II) if the court has granted a
preliminary injunction prohibiting the
applicant from engaging in the
commercial manufacture or sale of the
drug--
``(aa) on issuance by a
court of a determination that
the patent is invalid or is not
infringed;
``(bb) on issuance by a
court of an order revoking the
preliminary injunction or
permitting the applicant to
engage in the commercial
manufacture or sale of the
drug; or
``(cc) on the date
specified in a court order
under section 271(e)(4)(A) of
title 35, United States Code,
if the court determines that
the patent is infringed.
``(ii) Cooperation.--Each of the parties
shall reasonably cooperate in expediting a
civil action under clause (i).
``(iii) Expedited notification.--If the
notice under subsection (b)(3) contains an
address for the receipt of expedited
notification of a civil action under clause
(i), the plaintiff shall, on the date on which
the complaint is filed, simultaneously cause a
notification of the civil action to be
delivered to that address by the next business
day.''; and
(2) by inserting after paragraph (3) the following:
``(4) Failure to bring infringement action.--If, in
connection with an application under subsection (b)(2), the
applicant provides an owner of a patent notice under subsection
(b)(3) with respect to the patent, and the owner of the patent
fails to bring a civil action against the applicant for
infringement of the patent on or before the date that is 45
days after the date on which the notice is received, the owner
of the patent shall be barred from bringing a civil action for
infringement of the patent in connection with the development,
manufacture, use, offer to sell, or sale of the drug for which
the application was filed or approved under subsection
(b)(2).''.
(c) Effective Date.--
(1) In general.--The amendments made by subsections (a) and
(b) shall be effective with respect to any certification under
subsection (b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) of section 505
of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355)
made after the date of enactment of this Act in an application filed
under subsection (b)(2) or (j) of that section.
(2) Transition provision.--In the case of applications
under section 505(b) of the Federal Food, Drug, and Cosmetic
Act (21 U.S.C. 355(b)) filed before the date of enactment of
this Act--
(A) a patent (other than a patent that claims a
process for manufacturing a listed drug) for which
information was submitted to the Secretary of Health
and Human Services under section 505(b)(1) of the
Federal Food, Drug, and Cosmetic Act (as in effect on
the day before the date of enactment of this Act) shall
be subject to subsections (c)(3)(C) and (j)(5)(B)(iii)
of section 505 of the Federal Food, Drug, and Cosmetic
Act (as amended by this section); and
(B) any other patent (including a patent for which
information was submitted to the Secretary under
section 505(c)(2) of that Act (as in effect on the day
before the date of enactment of this Act)) shall be
subject to subsections (c)(3)(D) and (j)(5)(B)(iv) of
section 505 of the Federal Food, Drug, and Cosmetic Act
(as amended by this section).

SEC. 203. EXCLUSIVITY FOR ACCELERATED GENERIC DRUG APPLICANTS.

(a) In General.--Section 505(j)(5) of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 355(j)(5)) (as amended by section 202(a)) is
amended--
(1) in subparagraph (B)(v), by striking subclause (II) and
inserting the following:
``(II) the earlier of--
``(aa) the date of a final
decision of a court (from which
no appeal has been or can be
taken, other than a petition to
the Supreme Court for a writ of
certiorari) holding that the
patent that is the subject of
the certification is invalid or
not infringed; or
``(bb) the date of a
settlement order or consent
decree signed by a Federal
judge that enters a final
judgment and includes a finding
that the patent that is the
subject of the certification is
invalid or not infringed;'';
and
(2) by inserting after subparagraph (C) the following:
``(D) Forfeiture of 180-day period.--
``(i) Definitions.--In this subparagraph:
``(I) Application.--The term
`application' means an application for
approval of a drug under this
subsection containing a certification
under paragraph (2)(A)(vii)(IV) with
respect to a patent.
``(II) First application.--The term
`first application' means the first
application to be filed for approval of
the drug.
``(III) Forfeiture event.--The term
`forfeiture event', with respect to an
application under this subsection,
means the occurrence of any of the
following:
``(aa) Failure to market.--
The applicant fails to market
the drug by the later of--

``(AA) the date
that is 60 days after
the date on which the
approval of the
application for the
drug is made effective
under clause (iii) or
(iv) of subparagraph
(B) (unless the
Secretary extends the
date because of
extraordinary or
unusual circumstances);
or

``(BB) if 1 or more
civil actions have been
brought against the
applicant for
infringement of a
patent subject to a
certification under
paragraph
(2)(A)(vii)(IV) or 1 or
more civil actions have
been brought by the
applicant for a
declaratory judgment
that such a patent is
invalid or not
infringed, the date
that is 60 days after
the date of a final
decision (from which no
appeal has been or can
be taken, other  than a
petition to the Supreme Court for a writ of certiorari) in the last of
those civil actions to be decided (unless the Secretary extends the
date because of extraordinary or unusual circumstances).
``(bb) Withdrawal of
application.--The applicant
withdraws the application.
``(cc) Amendment of
certification.--The applicant,
voluntarily or as a result of a
settlement or defeat in patent
litigation, amends the
certification from a
certification under paragraph
(2)(A)(vii)(IV) to a
certification under paragraph
(2)(A)(vii)(III).
``(dd) Failure to obtain
approval.--The applicant fails
to obtain tentative approval of
an application within 30 months
after the date on which the
application is filed, unless
the failure is caused by--

``(AA) a change in
the requirements for
approval of the
application imposed
after the date on which
the application is
filed; or

``(BB) other
extraordinary
circumstances
warranting an
exception, as
determined by the
Secretary.

``(ee) Failure to challenge
patent.--In a case in which,
after the date on which the
applicant submitted the
application, new patent
information is submitted under
subsection (c)(2) for the
listed drug for a patent for
which certification is required
under paragraph (2)(A), the
applicant fails to submit, not
later than the date that is 60
days after the date on which
the Secretary publishes the new
patent information under
paragraph (7)(A)(iii) (unless
the Secretary extends the date
because of extraordinary or
unusual circumstances)--

``(AA) a
certification described
in paragraph
(2)(A)(vii)(IV) with
respect to the patent
to which the new patent
information relates; or

``(BB) a statement
that any method of use
claim of that patent
does not claim a use
for which the applicant
is seeking approval
under this subsection
in accordance with
paragraph (2)(A)(viii).

``(ff) Unlawful conduct.--
The Federal Trade Commission
determines that the applicant
engaged in unlawful conduct
with respect to the application
in violation of section 1 of
the Sherman Act (15 U.S.C. 1).
``(IV) Subsequent application.--The
term `subsequent application' means an
application for approval of a drug that
is filed subsequent to the filing of a
first application for approval of that
drug.
``(ii) Forfeiture of 180-day period.--
``(I) In general.--Except as
provided in subclause (II), if a
forfeiture event occurs with respect to
a first application--
``(aa) the 180-day period
under subparagraph (B)(v) shall
be forfeited by the first
applicant; and
``(bb) any subsequent
application shall become
effective as provided under
clause (i), (ii), (iii), or
(iv) of subparagraph (B), and
clause (v) of subparagraph (B)
shall not apply to the
subsequent application.
``(II) Forfeiture to first
subsequent applicant.--If the
subsequent application that is the
first to be made effective under
subclause (I) was the first among a
number of subsequent applications to be
filed--
``(aa) that first
subsequent application shall be
treated as the first
application under this
subparagraph (including
subclause (I)) and as the
previous application under
subparagraph (B)(v); and
``(bb) any other subsequent
applications shall become
effective as provided under
clause (i), (ii), (iii), or
(iv) of subparagraph (B), but
clause (v) of subparagraph (B)
shall apply to any such
subsequent application.
``(iii) Availability.--The 180-day period
under subparagraph (B)(v) shall be available to
a first applicant submitting an application for
a drug with respect to any patent without
regard to whether an application has been
submitted for the drug under this subsection
containing such a  certification with respect
to a different patent.
``(iv) Applicability.--The 180-day period
described in subparagraph (B)(v) shall apply to
an application only if a civil action is
brought against the applicant for infringement
of a patent that is the subject of the
certification.''.
(b) Applicability.--The amendment made by subsection (a) shall be
effective only with respect to an application filed under section
505(j) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j))
after the date of enactment of this Act for a listed drug for which no
certification under section 505(j)(2)(A)(vii)(IV) of that Act was made
before the date of enactment of this Act, except that if a forfeiture
event described in section 505(j)(5)(D)(i)(III)(ff) of that Act occurs
in the case of an applicant, the applicant shall forfeit the 180-day
period under section 505(j)(5)(B)(v) of that Act without regard to when
the applicant made a certification under section 505(j)(2)(A)(vii)(IV)
of that Act.

SEC. 204. FAIR TREATMENT FOR INNOVATORS.

(a) Basis for Application.--Section 505 of the Federal Food, Drug,
and Cosmetic Act (21 U.S.C. 355) is amended--
(1) in subsection (b)(3)(B), by striking the second
sentence and inserting ``The notice shall include a detailed
statement of the factual and legal basis of the applicant's
opinion that, as of the date of the notice, the patent is not
valid or is not infringed, and shall include, as appropriate
for the relevant patent, a description of the applicant's
proposed drug substance, drug formulation, drug composition, or
method of use. All information disclosed under this
subparagraph shall be treated as confidential and may be used
only for purposes relating to patent adjudication. Nothing in
this subparagraph precludes the applicant from amending the
factual or legal basis on which the applicant relies in patent
litigation.''; and
(2) in subsection (j)(2)(B)(ii), by striking the second
sentence and inserting ``The notice shall include a detailed
statement of the factual and legal basis of the opinion of the
applicant that, as of the date of the notice, the patent is not
valid or is not infringed, and shall include, as appropriate
for the relevant patent, a description of the applicant's
proposed drug substance, drug formulation, drug composition, or
method of use. All information disclosed under this
subparagraph shall be treated as confidential and may be used
only for purposes relating to patent adjudication. Nothing in
this subparagraph precludes the applicant from amending the
factual or legal basis on which the applicant relies in patent
litigation.''.
(b) Injunctive Relief.--Section 505(j)(5)(B) of the Federal Food,
Drug, and Cosmetic Act (21 U.S.C. 355(j)(5)(B)) (as amended by section
202(a)(1)) is amended--
(1) in clause (iii), by adding at the end the following:
``A court shall not regard the extent of the ability of an
applicant to pay monetary damages as a whole or partial basis
on which to deny a preliminary or permanent injunction under
this clause.''; and
(2) in clause (iv), by adding at the end the following:
``(IV) Injunctive relief.--A court shall not regard
the extent of the ability of an applicant to pay
monetary damages as a whole or partial basis on which
to deny a preliminary or permanent injunction under
this clause.''.

SEC. 205. BIOEQUIVALENCE.

(a) In General.--The amendments to part 320 of title 21, Code of
Federal Regulations, promulgated by the Commissioner of Food and Drugs
on July 17, 1991 (57 Fed. Reg. 17997 (April 28, 1992)), shall continue
in effect as an exercise of authorities under sections 501, 502, 505,
and 701 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 351,
352, 355, 371).
(b) Effect.--Subsection (a) does not affect the authority of the
Commissioner of Food and Drugs to amend part 320 of title 21, Code of
Federal Regulations.
(c) Effect of Section.--This section shall not be construed to
alter the authority of the Secretary of Health and Human Services to
regulate biological products under the Federal Food, Drug, and Cosmetic
Act (21 U.S.C. 301 et seq.). Any such authority shall be exercised
under that Act as in effect on the day before the date of enactment of
this Act.

SEC. 206. CLARIFICATION OF STATE AUTHORITY RELATING TO MEDICAID DRUG
REBATE AGREEMENTS.

Section 1927 of the Social Security Act (42 U.S.C. 1396r-8) is
amended by adding at the end the following:
``(l) Rule of Construction.--Nothing in this section shall be
construed as prohibiting a State from--
``(1) directly entering into rebate agreements (on the
State's own initiative or under a section 1115 waiver approved
by the Secretary before, on, or after the date of enactment of
this subsection)  that are similar to a rebate agreement
described in subsection (b) with a manufacturer for purposes of
ensuring the affordability of outpatient prescription drugs in order to
provide access to such drugs by residents of a State who are not
otherwise eligible for medical assistance under this title; or
``(2) making prior authorization (that satisfies the
requirements of subsection (d) and that does not violate any
requirements of this title that are designed to ensure access
to medically necessary prescribed drugs for individuals
enrolled in the State program under this title) a condition of
not participating in such a similar rebate agreement.''.

SEC. 207. IMPORTATION OF PRESCRIPTION DRUGS.

(a) In General.--Chapter VIII of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 381 et seq.) is amended by striking section 804
and inserting the following:

``SEC. 804. IMPORTATION OF PRESCRIPTION DRUGS.

``(a) Definitions.--In this section:
``(1) Importer.--The term `importer' means a pharmacist or
wholesaler.
``(2) Pharmacist.--The term `pharmacist' means a person
licensed by a State to practice pharmacy, including the
dispensing and selling of prescription drugs.
``(3) Prescription drug.--The term `prescription drug'
means a drug subject to section 503(b), other than--
``(A) a controlled substance (as defined in section
102 of the Controlled Substances Act (21 U.S.C. 802));
``(B) a biological product (as defined in section
351 of the Public Health Service Act (42 U.S.C. 262));
``(C) an infused drug (including a peritoneal
dialysis solution);
``(D) an intravenously injected drug; or
``(E) a drug that is inhaled during surgery.
``(4) Qualifying laboratory.--The term `qualifying
laboratory' means a laboratory in the United States that has
been approved by the Secretary for the purposes of this
section.
``(5) Wholesaler.--
``(A) In general.--The term `wholesaler' means a
person licensed as a wholesaler or distributor of
prescription drugs in the United States under section
503(e)(2)(A).
``(B) Exclusion.--The term `wholesaler' does not
include a person authorized to import drugs under
section 801(d)(1).
``(b) Regulations.--The Secretary, after consultation with the
United States Trade Representative and the Commissioner of Customs,
shall promulgate regulations permitting pharmacists and wholesalers to
import prescription drugs from Canada into the United States.
``(c) Limitation.--The regulations under subsection (b) shall--
``(1) require that safeguards be in place to ensure that
each prescription drug imported under the regulations complies
with section 505 (including with respect to being safe and
effective for the intended use of the prescription drug), with
sections 501 and 502, and with other applicable requirements of
this Act;
``(2) require that an importer of a prescription drug under
the regulations comply with subsections (d)(1) and (e); and
``(3) contain any additional provisions determined by the
Secretary to be appropriate as a safeguard to protect the
public health or as a means to facilitate the importation of
prescription drugs.
``(d) Information and Records.--
``(1) In general.--The regulations under subsection (b)
shall require an importer of a prescription drug under
subsection (b) to submit to the Secretary the following
information and documentation:
``(A) The name and quantity of the active
ingredient of the prescription drug.
``(B) A description of the dosage form of the
prescription drug.
``(C) The date on which the prescription drug is
shipped.
``(D) The quantity of the prescription drug that is
shipped.
``(E) The point of origin and destination of the
prescription drug.
``(F) The price paid by the importer for the
prescription drug.
``(G) Documentation from the foreign seller
specifying--
``(i) the original source of the
prescription drug; and
``(ii) the quantity of each lot of the
prescription drug originally received by the
seller from that source.
``(H) The lot or control number assigned to the
prescription drug by the manufacturer of the
prescription drug.
``(I) The name, address, telephone number, and
professional license number (if any) of the importer.
``(J)(i) In the case of a prescription drug that is
shipped directly from the first foreign recipient of
the prescription drug from the manufacturer:
``(I) Documentation demonstrating that the
prescription drug was received by the recipient
from the manufacturer and subsequently shipped
by the first foreign recipient to the importer.
``(II) Documentation of the quantity of
each lot of the prescription drug received by
the first foreign recipient demonstrating that
the quantity being imported into the United
States is not more than the quantity that was
received by the first foreign recipient.
``(III)(aa) In the case of an initial
imported shipment, documentation demonstrating
that each batch of the prescription drug in the
shipment was statistically sampled and tested
for authenticity and degradation.
``(bb) In the case of any subsequent
shipment, documentation demonstrating that a
statistically valid sample of the shipment was
tested for authenticity and degradation.
``(ii) In the case of a prescription drug that is
not shipped directly from the first foreign recipient
of the prescription drug from the manufacturer,
documentation demonstrating that each batch in each
shipment offered for importation into the United States
was statistically sampled and tested for authenticity
and degradation.
``(K) Certification from the importer or
manufacturer of the prescription drug that the
prescription drug--
``(i) is approved for marketing in the
United States; and
``(ii) meets all labeling requirements
under this Act.
``(L) Laboratory records, including complete data
derived from all tests necessary to ensure that the
prescription drug is in compliance with established
specifications and standards.
``(M) Documentation demonstrating that the testing
required by subparagraphs (J) and (L) was conducted at
a qualifying laboratory.
``(N) Any other information that the Secretary
determines is necessary to ensure the protection of the
public health.
``(2) Maintenance by the secretary.--The Secretary shall
maintain information and documentation submitted under
paragraph (1) for such period of time as the Secretary
determines to be necessary.
``(e) Testing.--The regulations under subsection (b) shall
require--
``(1) that testing described in subparagraphs (J) and (L)
of subsection (d)(1) be conducted by the importer or by the
manufacturer of the prescription drug at a qualified
laboratory;
``(2) if the tests are conducted by the importer--
``(A) that information needed to--
``(i) authenticate the prescription drug
being tested; and
``(ii) confirm that the labeling of the
prescription drug complies with labeling
requirements under this Act;
be supplied by the manufacturer of the prescription
drug to the pharmacist or wholesaler; and
``(B) that the information supplied under
subparagraph (A) be kept in strict confidence and used
only for purposes of testing or otherwise complying
with this Act; and
``(3) may include such additional provisions as the
Secretary determines to be appropriate to provide for the
protection of trade secrets and commercial or financial
information that is privileged or confidential.
``(f) Registration of Foreign Sellers.--Any establishment within
Canada engaged in the distribution of a prescription drug that is
imported or offered for importation into the United States shall
register with the Secretary the name and place of business of the
establishment.
``(g) Suspension of Importation.--The Secretary shall require that
importations of a specific prescription drug or importations by a
specific importer under subsection (b) be immediately suspended on
discovery of a pattern of importation of the prescription drugs or by
the importer that is counterfeit or in violation of any requirement
under this section, until an investigation is completed and the
Secretary determines that the public is adequately protected from
counterfeit and violative prescription drugs being imported under
subsection (b).
``(h) Approved Labeling.--The manufacturer of a prescription drug
shall provide an importer written authorization for the importer to
use, at no cost, the approved labeling for the prescription drug.
``(i) Prohibition of Discrimination.--
``(1) In general.--It shall be unlawful for a manufacturer
of a prescription drug to discriminate against, or cause any
other person to discriminate against, a pharmacist or
wholesaler that purchases or offers to purchase a prescription
drug from the manufacturer or from any person that distributes
a prescription drug manufactured by the drug manufacturer.
``(2) Discrimination.--For the purposes of paragraph (1), a
manufacturer of a prescription drug shall be considered to
discriminate against a pharmacist or wholesaler if the
manufacturer enters into a contract for sale of a prescription
drug, places a limit on supply, or employs any other measure,
that has the effect of--
``(A) providing pharmacists or wholesalers access
to prescription drugs on terms or conditions that are
less favorable than the terms or conditions provided to
a foreign purchaser (other than a charitable or
humanitarian organization) of the prescription drug; or
``(B) restricting the access of pharmacists or
wholesalers to a prescription drug that is permitted to
be imported into the United States under this section.
``(j) Charitable Contributions.--Notwithstanding any other
provision of this section, section 801(d)(1) continues to apply to a
prescription drug that is donated or otherwise supplied at no charge by
the manufacturer of the drug to a charitable or humanitarian
organization (including the United Nations and affiliates) or to a
government of a foreign country.
``(k) Waiver Authority for Importation by Individuals.--
``(1) Declarations.--Congress declares that in the
enforcement against individuals of the prohibition of
importation of prescription drugs and devices, the Secretary
should--
``(A) focus enforcement on cases in which the
importation by an individual poses a significant threat
to public health; and
``(B) exercise discretion to permit individuals to
make such importations in circumstances in which--
``(i) the importation is clearly for
personal use; and
``(ii) the prescription drug or device
imported does not appear to present an
unreasonable risk to the individual.
``(2) Waiver authority.--
``(A) In general.--The Secretary may grant to
individuals, by regulation or on a case-by-case basis,
a waiver of the prohibition of importation of a
prescription drug or device or class of prescription
drugs or devices, under such conditions as the
Secretary determines to be appropriate.
``(B) Guidance on case-by-case waivers.--The
Secretary shall publish, and update as necessary,
guidance that accurately describes circumstances in
which the Secretary will consistently grant waivers on
a case-by-case basis under subparagraph (A), so that
individuals may know with the greatest practicable
degree of certainty whether a particular importation
for personal use will be permitted.
``(3) Drugs imported from canada.--In particular, the
Secretary shall by regulation grant individuals a waiver to
permit individuals to import into the United States a
prescription drug that--
``(A) is imported from a licensed pharmacy for
personal use by an individual, not for resale, in
quantities that do not exceed a 90-day supply;
``(B) is accompanied by a copy of a valid
prescription;
``(C) is imported from Canada, from a seller
registered with the Secretary;
``(D) is a prescription drug approved by the
Secretary under chapter V;
``(E) is in the form of a final finished dosage
that was manufactured in an establishment registered
under section 510; and
``(F) is imported under such other conditions as
the Secretary determines to be necessary to ensure
public safety.
``(l) Studies; Reports.--
``(1) By the institute of medicine of the national academy
of sciences.--
``(A) Study.--
``(i) In general.--The Secretary shall
request that the Institute of Medicine of the
National Academy of Sciences conduct a study
of--
``(I) importations of prescription
drugs made under the regulations under
subsection (b); and
``(II) information and
documentation submitted under
subsection (d).
``(ii) Requirements.--In conducting the
study, the Institute of Medicine shall--
``(I) evaluate the compliance of
importers with the regulations under
subsection (b);
``(II) compare the number of
shipments under the regulations under
subsection (b) during the study period
that are determined to be counterfeit,
misbranded, or adulterated, and compare
that number with the number of
shipments made during the study period
within the United States that are
determined to be counterfeit,
misbranded, or adulterated; and
``(III) consult with the Secretary,
the United States Trade Representative,
and the Commissioner of Patents and
Trademarks to evaluate the effect of
importations under the regulations
under subsection (b) on trade and
patent rights under Federal law.
``(B) Report.--Not later than 2 years after the
effective date of the regulations under subsection (b),
the Institute of Medicine shall submit to Congress a
report describing the findings of the study under
subparagraph (A).
``(2) By the comptroller general.--
``(A) Study.--The Comptroller General of the United
States shall conduct a study to determine the effect of
this section on the price of prescription drugs sold to
consumers at retail.
``(B) Report.--Not later than 18 months after the
effective date of the regulations under subsection (b),
the Comptroller General of the United States shall
submit to Congress a report describing the findings of
the study under subparagraph (A).
``(m) Construction.--Nothing in this section limits the authority
of the Secretary relating to the importation of prescription drugs,
other than with respect to section 801(d)(1) as provided in this
section.
``(n) Authorization of Appropriations.--There are authorized to be
appropriated such sums as are necessary to carry out this section.''.
(b) Conforming Amendments.--The Federal Food, Drug, and Cosmetic
Act is amended--
(1) in section 301(aa) (21 U.S.C. 331(aa)), by striking
``covered product in violation of section 804'' and inserting
``prescription drug in violation of section 804''; and
(2) in section 303(a)(6) (21 U.S.C. 333(a)(6)), by striking
``covered product pursuant to section 804(a)'' and inserting
``prescription drug under section 804(b)''.

SEC. 208. PEDIATRIC LABELING OF DRUGS AND BIOLOGICAL PRODUCTS.

(a) In General.--Subchapter A of chapter V of the Federal Food,
Drug, and Cosmetic Act (21 U.S.C. 351 et seq.) is amended by inserting
after section 505A the following:

``SEC. 505B. PEDIATRIC LABELING OF DRUGS AND BIOLOGICAL PRODUCTS.

``(a) New Drugs and Biological Products.--
``(1) In general.--A person that submits an application (or
supplement to an application)--
``(A) under section 505 for a new active
ingredient, new indication, new dosage form, new dosing
regimen, or new route of administration; or
``(B) under section 351 of the Public Health
Service Act (42 U.S.C. 262) for a new active
ingredient, new indication, new dosage form, new dosing
regimen, or new route of administration;
shall submit with the application the assessments described in
paragraph (2).
``(2) Assessments.--
``(A) In general.--The assessments referred to in
paragraph (1) shall contain data, gathered using
appropriate formulations, that are adequate--
``(i) to assess the safety and
effectiveness of the drug, or the biological
product licensed under section 351 of the
Public Health Service Act (42 U.S.C. 262), for
the claimed indications in all relevant
pediatric subpopulations; and
``(ii) to support dosing and administration
for each pediatric subpopulation for which the
drug, or the biological product licensed under
section 351 of the Public Health Service Act
(42 U.S.C. 262), is safe and effective.
``(B) Similar course of disease or similar effect
of drug or biological product.--If the course of the
disease and the effects of the drug are sufficiently
similar in adults and pediatric patients, the Secretary
may conclude that pediatric effectiveness can be
extrapolated from adequate and well-controlled studies
in adults, usually supplemented with other information
obtained in pediatric patients, such as pharmacokinetic
studies.
``(3) Deferral.--On the initiative of the Secretary or at
the request of the applicant, the Secretary may defer
submission of some or all assessments required under paragraph
(1) until a specified date after approval of the drug or
issuance of the license for a biological product if--
``(A) the Secretary finds that--
``(i) the drug or biological product is
ready for approval for use in adults before
pediatric studies are complete; or
``(ii) pediatric studies should be delayed
until additional safety or effectiveness data
have been collected; and
``(B) the applicant submits to the Secretary--
``(i) a certified description of the
planned or ongoing studies; and
``(ii) evidence that the studies are being
conducted or will be conducted with due
diligence.
``(4) Waivers.--
``(A) Full waiver.--At the request of an applicant,
the Secretary shall grant a full waiver, as
appropriate, of the requirement to submit assessments
under this subsection if--
``(i) necessary studies are impossible or
highly impractical;
``(ii) there is evidence strongly
suggesting that the drug or biological product
would be ineffective or unsafe in all pediatric
age groups; or
``(iii) the drug or biological product--
``(I) does not represent a
meaningful therapeutic benefit over
existing therapies for pediatric
patients; and
``(II) is not likely to be used in
a substantial number of pediatric
patients.
``(B) Partial waiver.--At the request of an
applicant, the Secretary shall grant a partial waiver,
as appropriate, of the requirement to submit
assessments under this subsection with respect to a
specific pediatric age group if--
``(i) necessary studies are impossible or
highly impractical;
``(ii) there is evidence strongly
suggesting that the drug or biological product
would be ineffective or unsafe in that age
group;
``(iii) the drug or biological product--
``(I) does not represent a
meaningful therapeutic benefit over
existing therapies for pediatric
patients in that age group; and
``(II) is not likely to be used in
a substantial number of pediatric
patients in that age group; or
``(iv) the applicant demonstrates that
reasonable attempts to produce a pediatric
formulation necessary for that age group have
failed.
``(C) Labeling requirement.--If the Secretary
grants a full or partial waiver because there is
evidence that a drug or biological product would be
ineffective or unsafe in pediatric populations, the
information shall be included in the labeling for the
drug or biological product.
``(b) Marketed Drugs and Biological Products.--
``(1) In general.--After providing notice and an
opportunity for written response and a meeting, which may
include an advisory committee meeting, the Secretary may by
order require the holder of an approved application relating to
a drug under section 505 or the holder of a license for a
biological product under section 351 of the Public Health
Service Act (42 U.S.C. 262) to submit by a specified date the
assessments described in subsection (a) if the Secretary finds
that--
``(A)(i) the drug or biological product is used for
a substantial number of pediatric patients for the
labeled indications; and
``(ii) the absence of adequate labeling could pose
significant risks to pediatric patients; or
``(B)(i) there is reason to believe that the drug
or biological product would represent a meaningful
therapeutic benefit over existing therapies for
pediatric patients for 1 or more of the claimed
indications; and
``(ii) the absence of adequate labeling could pose
significant risks to pediatric patients.
``(2) Waivers.--
``(A) Full waiver.--At the request of an applicant,
the Secretary shall grant a full waiver, as
appropriate, of the requirement to submit assessments
under this subsection if--
``(i) necessary studies are impossible or
highly impractical; or
``(ii) there is evidence strongly
suggesting that the drug or biological product
would be ineffective or unsafe in all pediatric
age groups.
``(B) Partial waiver.--At the request of an
applicant, the Secretary shall grant a partial waiver,
as appropriate, of the requirement to submit
assessments under this subsection with respect to a
specific pediatric age group if--
``(i) necessary studies are impossible or
highly impractical;
``(ii) there is evidence strongly
suggesting that the drug or biological product
would be ineffective or unsafe in that age
group;
``(iii)(I) the drug or biological product
does not represent a meaningful therapeutic
benefit over existing therapies for pediatric
patients in that age group;
``(II) the drug or biological product is
not likely to be used in a substantial number
of pediatric patients in that age group; and
``(III) the absence of adequate labeling
could not pose significant risks to pediatric
patients; or
``(iv) the applicant demonstrates that
reasonable attempts to produce a pediatric
formulation necessary for that age group have
failed.
``(C) Labeling requirement.--If the Secretary
grants a full or partial waiver because there is
evidence that a drug or biological product would be
ineffective or unsafe in pediatric populations, the
information shall be included in the labeling for the
drug or biological product.
``(3) Relationship to other pediatric provisions.--
``(A) No assessment without written request.--No
assessment may be required under paragraph (1) for a
drug subject to an approved application under section
505 unless--
``(i) the Secretary has issued a written
request for related pediatric studies under
section 505A(d) or section 409I of the Public
Health Service Act; and
``(ii)(I) if the request was made under
section 505A(d)--
``(aa) the recipient of the written
request does not agree to the request;
or
``(bb) the Secretary does not
receive a response as specified under
section 505A(d)(4)(A); or
``(II) if the request was made under
section 409I of the Public Health Service Act--
``(aa) the recipient of the written
request does not agree to the request;
or
``(bb) the Secretary does not
receive a response as specified under
section 409I(c)(2) of that Act.
``(B) No effect on other authority.--Nothing in
this subsection shall be construed to alter any
requirement under section 505A(d)(4) or section 409I of
the Public Health Service Act. Subject to paragraph
(2)(A), nothing in this subsection, section 505A(d)(4),
or section 409I or 499 of the Public Health Service Act
shall be construed to preclude the Secretary from
exercising the authority of the Secretary under this
subsection.
``(c) Failure To Submit Assessments.--If a person fails to submit a
supplemental application containing the information or request for
approval of a pediatric formulation described in subsection (a) or (b)
within the time specified by the Secretary, the drug or biological
product may be considered by the Secretary to be misbranded and subject
to enforcement actions accordingly (except that the drug or biological
product shall not be subject to action under section 303), and the
failure shall not be the basis for a proceeding to withdraw approval
for a drug under section 505(e) or revoke the license for a biological
product under section 351 of the Public Health Service Act (42 U.S.C.
262).
``(d) Meetings.--The Secretary shall meet at appropriate times in
the investigational new drug process with the sponsor to discuss
background information that the sponsor shall submit on plans and
timelines for pediatric studies, or any planned request for waiver or
deferral of pediatric studies.
(b) Conforming Amendments.--
(1) Section 505(b)(1) of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 355(b)(1)) is amended in the second
sentence--
(A) by striking ``and (F)'' and inserting ``(F)'';
and
(B) by striking the period at the end and inserting
``, and (G) any assessments required under section
505B.''.
(2) Section 505A(h) of the Federal Food, Drug, and Cosmetic
Act (21 U.S.C. 355a(h)) is amended--
(A) in the subsection heading, by striking
``Regulations'' and inserting ``Pediatric Study
Requirements''; and
(B) by striking ``pursuant to regulations
promulgated by the Secretary'' and inserting ``by a
provision of law (including a regulation) other than
this section''.
(3) Section 351(a)(2) of the Public Health Service Act (42
U.S.C. 262(a)(2)) is amended--
(A) by redesignating subparagraph (B) as
subparagraph (C); and
(B) by inserting after subparagraph (A) the
following:
``(B) Pediatric studies.--A person that submits an
application for a license under this paragraph shall
submit to the Secretary as part of the application any
assessments required under section 505B of the Federal
Food, Drug, and Cosmetic Act.''.
(c) Final Rule.--Except to the extent that the final rule is
inconsistent with the amendment made by subsection (a), the final rule
promulgating regulations requiring manufacturers to assess the safety
and effectiveness of new drugs and biological products in pediatric
patients (63 Fed. Reg. 66632 (December 2, 1998)), shall be considered
to implement the amendment made by subsection (a).
(d) No Effect on Authority.--Section 505B of the Federal Food,
Drug, and Cosmetic Act (as added by subsection (a)) does not affect
whatever existing authority the Secretary of Health and Human Services
has to require pediatric assessments regarding the safety and efficacy
of drugs and biological products in addition to the assessments
required under that section. The authority, if any, of the Secretary of
Health and Human Services regarding specific populations other than the
pediatric population shall be exercised in accordance with the Federal
Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.) as in effect on
the day before the date of enactment of this Act.
(e) Technical Correction.--Section 505A of the Federal Food, Drug,
and Cosmetic Act (21 U.S.C. 355a) is amended in subparagraphs (A) and
(B) of subsection (b)(2) and subparagraphs (A) and (B) of subsection
(c)(2) by striking ``505(j)(4)(B)'' and inserting ``505(j)(5)(B)''.

SEC. 209. REPORT.

(a) In General.--Not later than the date that is 5 years after the
date of enactment of this Act, the Federal Trade Commission shall
submit to Congress a report describing the extent to which
implementation of the amendments made by this title--
(1) has enabled products to come to market in a fair and
expeditious manner, consistent with the rights of patent owners
under intellectual property law; and
(2) has promoted lower prices of drugs and greater access
to drugs through price competition.
(b) Authorization of Appropriations.--There is authorized to be
appropriated to carry out this section $5,000,000.

SEC. 210. CONFORMING AND TECHNICAL AMENDMENTS.

(a) Section 505.--Section 505 of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 355) is amended--
(1) in subsection (a), by striking ``(a) No person'' and
inserting ``(a) In General.--No person'';
(2) in subsection (b)--
(A) by striking ``(b)(1) Any person'' and inserting
the following:
``(b) Applications.--
``(1) Requirements.--
``(A) In general.--Any person'';
(B) in paragraph (1)--
(i) in the second sentence--
(I) by redesignating subparagraphs
(A) through (F) as clauses (i) through
(vi), respectively, and adjusting the
margins appropriately;
(II) by striking ``Such persons''
and inserting the following:
``(B) Information to be submitted with
application.--A person that submits an application
under subparagraph (A)''; and
(III) by striking ``application''
and inserting ``application--'';
(ii) by striking the third through fifth
sentences; and
(iii) in the sixth sentence--
(I) by striking ``The Secretary''
and inserting the following:
``(C) Guidance.--The Secretary''; and
(II) by striking ``clause (A)'' and
inserting ``subparagraph (B)(i)''; and
(C) in paragraph (2)--
(i) by striking ``clause (A) of such
paragraph'' and inserting ``paragraph
(1)(B)(i)'';
(ii) in subparagraphs (A) and (B), by
striking ``paragraph (1) or''; and
(iii) in subparagraph (B)--
(I) by striking ``paragraph
(1)(A)'' and inserting ``paragraph
(1)(B)(i)''; and
(II) by striking ``patent'' each
place it appears and inserting
``claim'';
(3) in subsection (c)--
(A) in paragraph (3)--
(i) in subparagraph (A)--
(I) by striking ``(A) If the
applicant'' and inserting the
following:
``(A) Clause (i) or (ii) certification.--If the
applicant''; and
(II) by striking ``may'' and
inserting ``shall'';
(ii) in subparagraph (B)--
(I) by striking ``(B) If the
applicant'' and inserting the
following:
``(B) Clause (iii) certification.--If the
applicant''; and
(II) by striking ``may'' and
inserting ``shall'';
(iii) by redesignating subparagraph (D) as
subparagraph (E); and
(iv) in subparagraph (E) (as redesignated
by clause (iii)), by striking ``clause (A) of
subsection (b)(1)'' each place it appears and
inserting ``subsection (b)(1)(B)(i)''; and
(B) by redesignating paragraph (4) as paragraph
(5); and
(4) in subsection (j)--
(A) in paragraph (2)(A)--
(i) in clause (vi), by striking ``clauses
(B) through ((F)'' and inserting ``subclauses
(ii) through (vi) of subsection (b)(1)'';
(ii) in clause (vii), by striking ``(b)
or''; and
(iii) in clause (viii)--
(I) by striking ``(b) or''; and
(II) by striking ``patent'' each
place it appears and inserting
``claim''; and
(B) in paragraph (5)--
(i) in subparagraph (B)--
(I) in clause (i)--
(aa) by striking ``(i) If
the applicant'' and inserting
the following:
``(i) Subclause (i) or (ii)
certification.--If the applicant''; and
(bb) by striking ``may''
and inserting ``shall'';
(II) in clause (ii)--
(aa) by striking ``(ii) If
the applicant'' and inserting
the following:
``(i) Subclause (iii) certification.--If
the applicant''; and
(bb) by striking ``may''
and inserting ``shall'';
(III) in clause (iii), by striking
``(2)(B)(i)'' each place it appears and
inserting ``(2)(B)''; and
(IV) in clause (v) (as redesignated
by section 4(a)(1)(B)), by striking
``continuing'' and inserting
``containing''; and
(ii) by redesignating subparagraphs (C) and
(D) as subparagraphs (E) and (F), respectively.
(b) Section 505A.--Section 505A of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 355a) is amended--
(1) in subsections (b)(1)(A)(i) and (c)(1)(A)(i)--
(A) by striking ``(c)(3)(D)(ii)'' each place it
appears and inserting ``(c)(3)(E)(ii)''; and
(B) by striking ``(j)(5)(D)(ii)'' each place it
appears and inserting ``(j)(5)(F)(ii)'';
(2) in subsections (b)(1)(A)(ii) and (c)(1)(A)(ii)--
(A) by striking ``(c)(3)(D)'' each place it appears
and inserting ``(c)(3)(E)''; and
(B) by striking ``(j)(5)(D)'' each place it appears
and inserting ``(j)(5)(F)'';
(3) in subsections (e) and (l)--
(A) by striking ``505(c)(3)(D)'' each place it
appears and inserting ``505(c)(3)(E)''; and
(B) by striking ``505(j)(5)(D)'' each place it
appears and inserting ``505(j)(5)(F)''; and
(4) in subsection (k), by striking ``505(j)(5)(B)(iv)'' and
inserting ``505(j)(5)(B)(v)''.
(c) Section 527.--Section 527(a) of the Federal Food, Drug, and
Cosmetic Act (21 U.S.C. 360cc(a)) is amended in the second sentence by
striking ``505(c)(2)'' and inserting ``505(c)(1)(B)''.
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