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<PRE>[DOCID: f:h3626ih.txt]






107th CONGRESS
  2d Session
                                H. R. 3626

   To amend title XVIII of the Social Security Act to provide for an 
    outpatient prescription drug benefit under the Medicare Program.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 24, 2002

Mrs. Emerson (for herself and Mr. Ross) introduced the following bill; 
  which was referred to the Committee on Energy and Commerce, and in 
    addition to the Committee on Ways and Means, for a period to be 
subsequently determined by the Speaker, in each case for consideration 
  of such provisions as fall within the jurisdiction of the committee 
                               concerned

_______________________________________________________________________

                                 A BILL


 
   To amend title XVIII of the Social Security Act to provide for an 
    outpatient prescription drug benefit under the Medicare Program.

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

SECTION 1. SHORT TITLE; FINDINGS.

    (a) Short Title.--This Act may be cited as the ``Medicare Drug and 
Service Coverage Act of 2002''.
    (b) Findings.--Congress makes the following findings:
            (1) It is important for seniors to have access to 
        prescription drugs for life and health. Prescription drugs are 
        an important part of medical therapy, but medicare does not 
        have a voluntary prescription drug benefit for seniors who need 
        and want drug coverage.
            (2) A comprehensive prescription drug benefit program for 
        seniors would help assure that seniors have access to necessary 
        prescription drugs and medication therapy management services, 
        which are among the most cost-effective medical interventions 
        available in the health care system.
            (3) Seniors use more pharmaceuticals than any other 
        population group, and are in greater need of medication therapy 
        management services to assist them in proper medication 
        utilization. These services will help reduce the chance for 
        adverse medication events, which result in increased medicare 
        spending for hospitalizations, nursing home stays, emergency 
        room visits, and physician office visits.
            (4) A new prescription drug benefit for seniors should be 
        structured so that seniors have access to the distribution 
        method of their choice without any form of economic or other 
        inducement to use an alternative distribution system.
            (5) To assure appropriate and meaningful cost controls 
        under the program, and in order to have their drugs covered, 
        manufacturers should be required to contribute to cost 
        reductions in the medicare program.

SEC. 2. PRESCRIPTION DRUG BENEFIT PROGRAM.

    (a) In General.--Title XVIII of the Social Security Act is 
amended--
            (1) by redesignating part D as part E; and
            (2) by inserting after part C the following new part:

         ``Part D--Outpatient Prescription Drug Benefit Program

       ``outpatient prescription drug benefit program established

    ``Sec. 1860. There is established a voluntary prescription drug 
benefit program to provide covered outpatient drugs and medication 
therapy management services in accordance with the provisions of this 
part for beneficiaries who elect to enroll under such program, to be 
financed with contributions from funds appropriated by the Federal 
Government and premiums collected from participating beneficiaries.

                          ``scope of benefits

    ``Sec. 1860A. (a) Covered Outpatient Prescription Drugs and 
Associated Services.--
            ``(1) In general.--The benefits provided to a beneficiary 
        under this part shall consist of payments made in accordance 
        with the provisions of this part for the following services 
        furnished by any pharmacy provider (as defined in section 
        1860I(e):
                    ``(A) Prescription drugs.--Covered outpatient 
                prescription drugs, as specified in subsection (b).
                    ``(B) Medication preparation services.--Covered 
                medication preparation services, as specified in 
                subsection (c).
                    ``(C) Medication therapy management services.--
                Covered medication therapy management services, as 
                specified in subsection(d).
            ``(2) Willing pharmacy providers.--Any pharmacy provider 
        that is authorized by the applicable State agency to engage in 
        the practice of pharmacy may participate in the program 
        established under this part.
    ``(b) Covered Outpatient Prescription Drugs.--
            ``(1) In general.--Subject to paragraph (2), benefits under 
        this part for outpatient prescription drugs means, subject to 
        section 1860B, payment for all prescribed drugs within the 
        meaning of the term covered outpatient prescription drugs, as 
        defined in section 1860I(a).
            ``(2) Avoidance of duplicate payment under medicare.--
        Payment under paragraph (1) for covered outpatient prescription 
        drugs may only be made, with respect to such drugs for which 
        payment may be made under part A or B, only if benefits under 
        part A or part B for such drugs have been exhausted.
    ``(c) Covered Medication Preparation Services.--Covered medication 
preparation services, for purposes of this part, means services 
provided by pharmacy providers involving prescription drug compounding, 
the provision of special packaging, and such other services involved in 
the preparation and delivery of prescription drugs as the Secretary may 
prescribe.
    ``(d) Covered Medication Therapy Management Services.--
            ``(1) In general.--Covered medication therapy management 
        services means--
                    ``(A) services or programs furnished by a pharmacy 
                provider which are designed--
                            ``(i) to assure that medications are used 
                        appropriately by beneficiaries;
                            ``(ii) to enhance beneficiaries' 
                        understanding of the appropriate use of 
                        medications;
                            ``(iii) to increase beneficiaries' 
                        compliance with prescription medication 
                        regimens;
                            ``(iv) to reduce the risk of potential 
                        adverse events associated with medications; and
                            ``(v) to reduce the need for other costly 
                        medical services through better management of 
                        medication therapy; and
                    ``(B) services provided in collaboration with 
                physicians, pharmacists, and other health care 
                professionals when necessary, involving case 
                management, disease management, patient training and 
                education, medication refill reminders, medication 
                therapy problem resolution, laboratory testing 
                conducted to monitor medication therapy, other services 
                that enhance the use of prescription medications, and 
                such other professional services consistent with the 
                scope of the practice of pharmacy as defined by 
                applicable State law or regulation.
            ``(2) Program operation.--The program established under 
        this subsection will--
                    ``(A) identify and provide medication therapy 
                management services to beneficiaries at risk for 
                potential medication problems, such as beneficiaries 
                taking multiple medications and beneficiaries with 
     
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           complex or chronic medical conditions;
                    ``(B) be developed and structured in cooperation 
                with organizations representing pharmacy providers, 
                including identifying those medication therapy 
                management services that will be provided, as well as 
                payment mechanisms for such services;
                    ``(C) structure and update payments to reflect the 
                resources and time involved in the provision of such 
                services, the level of risk associated with the use of 
                particular medications, and the health status of 
                beneficiaries to whom medication therapy management 
                services are provided; and
                    ``(D) provide for ongoing evaluation and 
                documentation of these services in improving quality of 
                care and reducing health care costs.

        ``payment of benefits; benefit limits; beneficiary copay

    ``Sec. 1860B. (a) Establishment of Account.--There is established 
within the Supplementary Medical Insurance Trust Fund an account to be 
known as the Prescription Drug Benefit Insurance Account (hereinafter 
in this part referred to as the `Account').
    ``(b) Payment of Benefits.--Subject to the succeeding provisions of 
this section, there shall be paid from the Account to a pharmacy 
provider that furnishes services for which payment may be made under 
this part to an individual who is enrolled under this part an amount, 
for each such service, equal to the lesser of--
            ``(1) the reasonable charges for the benefits, as 
        determined under section 1860G; or
            ``(2) the pharmacy provider's customary charges with 
        respect to such benefits.
    ``(c) Annual Deductible.--Before applying subsection (b) with 
respect to expenses incurred by an individual enrolled under this part 
during any calendar year, the total amount of the expenses incurred by 
such individual during such year (which would, except for this 
subsection, constitute incurred expenses from which benefits payable 
under subsection (b) are determinable) shall be reduced by a deductible 
of $250.
    ``(d) Coinsurance.--
            ``(1) In general.--Subject to paragraphs (3) and (4), the 
        amount payable for services for which payment may be made under 
        this part furnished an individual enrolled under this part 
        shall be reduced by a coinsurance amount equal to established 
        under paragraph (2).
            ``(2) Establishing annual coinsurance percentage.--Each 
        year the Secretary shall, with the advice of the Medicare 
        Prescription Drug Benefit Advisory Commission established in 
        section 1860H, determine and promulgate a coinsurance amount 
        (as a percentage of the benefits provided) that qualified 
        beneficiaries pay with benefits covered under this program for 
        the next calendar year and in accordance with the limitations 
        of this subsection.
            ``(3) Maximum coinsurance.--The coinsurance established in 
        paragraph (2) may not exceed 20 percent.
            ``(4) Limits on varying coinsurance amounts.--The Secretary 
        may not vary the coinsurance amounts or make any 
        differentiation of scope or quantity of benefits coverage 
        provided based on the method of providing the services.

                   ``procedure for payment of claims

    ``Sec. 1860C. Payment for services described in section 1860A may 
be made only to pharmacy providers and only if a claim is filed for 
such payment in such form and manner as the Secretary may by regulation 
require. In no case may payment be made later than 12 months following 
the year in which such services are furnished.

                      ``eligibility and enrollment

    ``Sec. 1860D. Every individual who, during or after 2003, is 
entitled to hospital insurance benefits under part A and is enrolled in 
part B shall be eligible to enroll in the program under this part in 
such form and manner as the Secretary may require by regulation.

                       ``premium fees and payment

    ``Sec. 1860E. (a) Annual Establishment of Premium Amount.--Each 
year the Secretary shall, with the advice of the Medicare Prescription 
Drug Benefit Advisory Commission established in section 1860H, 
determine and promulgate a monthly premium for beneficiaries who enroll 
under this part, taking into account the total amount of payments 
expected to be made from Account for furnishing services under this 
part for the next calendar year and in accordance with the provisions 
of this section.
    ``(b) Payment of Premiums.--An individual enrolled in the program 
under this part shall pay the premium established under subsection (a) 
to the Secretary at such times and in such manner as the Secretary 
shall by regulation require.
    ``(c) Deposit of Funds.--Amounts paid to the Secretary under 
subsection (a) shall be deposited in the Treasury to the credit of the 
Account.

             ``administration of benefits through carriers

    ``Sec. 1860F. (a) In General.--The Secretary shall contract with 
carriers designated in accordance with subsection (d), based on a 
competitive bid, fixed fee per transaction basis, to perform some or 
all of the following administrative functions:
            ``(1) Process and adjudicate claims.--The carrier shall 
        receive, process, and make payment for claims to pharmacy 
        providers through an online, real time claims adjudication 
        system that conforms to current industry standards, and shall 
        disburse and account for funds in making payments to pharmacy 
        providers under this part.
            ``(2) Communicate information.--The carrier shall serve as 
        a channel of communication of eligibility and coverage 
        information to beneficiaries and pharmacy providers.
            ``(3) Quality assurance.--The carrier shall provide the 
        information and computer system support, either directly or 
        through a contract with an outside entity, for the pharmacy 
        provider to conduct a drug utilization review program 
        conforming to the standards established by section 1927(g)(2), 
        with modifications as the Secretary determines by regulation to 
        be appropriate.
            ``(4) Protection against fraud and abuse.--The carrier 
        shall conduct activities to control fraud, abuse, and waste in 
        accordance with regulations promulgated by the Secretary.
            ``(5) Collection of payments.--The carrier shall collect 
        payments from participating pharmaceutical manufacturers as 
        specified in subsection (e).
    ``(b) Limits on Carrier Function.--The Secretary shall not contract 
with carriers--
            ``(1) to make determinations of the rates and amounts of 
        payments to be made to pharmacy providers under this part;
            ``(2) to make determinations of any limitations on covered 
        benefits, such as the nature, scope, choice, or amount of 
        benefits available, as referred to in section 1860A;
            ``(3) to make determinations of pharmacy provider 
        eligibility;
            ``(4) to carry out any tasks beyond the administrative and 
        ministerial duties authorized by this section, including 
        aggregate purchasing; or
            ``(5) to practice medicine or pharmacy.
    ``(c) Requirements for Paying Claims and Grievance Procedures.--
Each contract under this section that provides for the disbursement of 
funds as described in subsection (a)(1) shall provide that--
            ``(1) payment shall be issued, mailed, or otherwise 
        transmitted for claims submitted under this part in accordance 
        with the procedures established by section 1842(c); and
            ``(2) each carrier shall have in place such procedures as 
        the Secretary shall specify for hearing and resolving 
        grievances brought by enrolled beneficiaries against the 
        c
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arrier or pharmacy provider and the pharmacy provider against 
        the carrier concerning benefits under this part.
    ``(d) Eligible Entities.--Each carrier responsible for 
administering the program established under this part shall meet at 
least the following criteria:
            ``(1) Performance capability.--The entity shall have 
        sufficient expertise, personnel, and resources to perform the 
        contracted benefit administrations.
            ``(2) Performance rating.--The entity shall be subject to 
        such review as required by the Secretary, both prior to issuing 
        a contract under this part and in review of performance 
        administering contracts under this part.
            ``(3) Financial integrity.--The entity and its officers, 
        directors, agents, and managing employees shall have a 
        satisfactory record of professional competence and professional 
        and financial integrity, and the entity shall have adequate 
        financial resources to perform services under the contract 
        without risk of insolvency.
            ``(4) Capability to maintain records.--The entity shall 
        have systems to maintain adequate records and afford the 
        Secretary access to such records (including for audit 
        purposes).
            ``(5) Compliance with industry standards.--The entity shall 
        comply with standards adopted by the National Council on 
        Prescription Drug Programs for uniform identification cards, 
        telecommunication standards, and drug utilization review 
        messaging.
            ``(6) Cost and pricing data.--The entity shall submit to 
        the Secretary as part of its bid submission all relevant cost 
        and pricing data, including all fees charged by the entity for 
        performing the administrative functions pursuant to any 
        competitively bid contract awarded to the carrier under this 
        section, plus any and all administrative fees or other payments 
        received by the entity from drug manufacturers pursuant to the 
        contract award.
            ``(7) Capability to generate reports.--The entity shall 
        have systems to make such reports and submissions of financial 
        and utilization data as the Secretary may require, including 
        reports describing the nature and type of direct and indirect 
        manufacturers' payments received by the carrier, assurance that 
        payments made to pharmacy providers are based on such standards 
        as the Secretary may prescribe, and any other types of 
        administrative or claims processing fees received by the 
        carrier.
    ``(e) Manufacturer Payments.--
            ``(1) In general.--The Secretary shall only make payment 
        under this part for innovator multiple source drugs or single 
        source drugs (as defined in clauses (ii) and (iv), 
        respectively, of section 1927(k)(7)(A)) for which payment may 
        be made  under this part of a manufacturer if that manufacturer 
has entered into and has in effect an agreement with the Secretary that 
requires the manufacturer to make periodic payments in the amount 
described in this subsection. A payment agreement shall be effective 
for an initial period of not less than 1 year and shall be 
automatically renewed for a period of not less than 1 year.
            ``(2) Amount of payment.--
                    ``(A) In general.--The payment amount for a covered 
                outpatient prescription drug furnished under this part 
                shall be equal to not less than the sum of the basic 
                rebate amount (determined under subparagraph (B)) for 
                each dosage form and strength of such drug increased by 
                the amount of the inflation adjustment rebate 
                (determined under subparagraph (C)) for each dosage 
                form and strength of such drug.
                    ``(B) Basic rebate amount.--The basic rebate amount 
                shall be equal to the product of the total number of 
                units of each dosage form and strength paid for by the 
                carrier in the payment period (as defined in section 
                1927(b)), and the average manufacturers' price (as 
                defined in section 1860I) for the quarter for the 
                dosage form and strength of the covered outpatient drug 
                minus not less than 18 percent of the average 
                manufacturers' price for the quarter, or such amount as 
                determined by the Secretary through negotiations with 
                the manufacturer of such drug.
                    ``(C) Inflation adjustment amount.--The amount of 
                the basic rebate payment shall be increased by an 
                amount equal to the product of the number of units of 
                each dosage form and strength paid for by the carrier 
                in the payment period and the amount by which the 
                average manufacturers' price for such drug and dosage 
                form and strength for the calendar quarter increased in 
                excess of the percentage by which the consumer price 
                index for all urban consumers increased during the 
                calendar quarter.
            ``(3) Carrier responsibility.--The carrier shall report to 
        each manufacturer not later than 60 days after the end of each 
        payment period and in a form consistent with a standard 
        reporting format established by the Secretary, information on 
        the total number of units of each dosage form and strength and 
        package size of each covered outpatient drug dispensed in the 
        quarter for which payment was made under the plan during the 
        period, and shall promptly transmit a copy of such report to 
        the Secretary.
            ``(4) Manufacturer responsibility.--The manufacturer shall 
        remit payments to the Secretary through the carrier not later 
        than 30 days after receiving information from the carrier on 
        the total number of units of each dosage form and strength of 
        the manufacturers' drugs paid for by the carrier in the 
        quarter.
            ``(5) Collection of payments.--The Secretary shall deposit 
        the payments collected under this subsection from manufacturers 
        in the Account, and shall use the payments to reduce the 
        premiums paid by beneficiaries for the purpose of providing the 
        prescription drug benefit.

          ``pharmacy provider eligibility and payment amounts

    ``Sec. 1860G. (a) In General.--Any pharmacy provider that meets the 
requirements of this section shall be eligible to enter into an 
agreement with the Secretary to furnish covered benefits to enrolled 
beneficiaries.
    ``(b) Terms of Agreement.--An agreement under this section shall 
include the following terms and requirements:
            ``(1) Licensing.--The pharmacy provider shall meet (and 
        throughout the contract period will continue to meet) all 
        applicable Federal, State, and local licensing requirements.
            ``(2) Performance standards.--The pharmacy provider shall 
        comply with quality assurance standards applicable to 
        pharmacists under section 1927(g).
            ``(3) Payment.--The Secretary shall, after consultation 
        with the Medicare Prescription Drug Benefit Advisory Commission 
        established in section 1860H, establish payment rates to--
                    ``(A) pharmacy providers that--
                            ``(i) are reasonable and adequate to cover 
                        all direct and indirect costs of furnishing the 
                        items and services covered by this part, and a 
                        reasonable return;
                            ``(ii) are sufficient to enlist enough 
                        pharmacy providers to ensure that items and 
                        services covered under this part are available 
       
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                 to beneficiaries at least to the extent that 
                        such items and services are available to the 
                        general public;
                            ``(iii) do not vary based on the size or 
                        corporate structure of the pharmacy provider or 
                        factors commonly associated with the size of 
                        the provider, such as prescription volume;
                            ``(iv) provide appropriate incentives for 
                        dispensing lower cost multiple source 
                        prescription drugs; and
                            ``(v) recognize and provide appropriate 
                        payment incentives for pharmacy providers 
                        located in rural and underserved areas (as the 
                        Secretary may define by regulation); and
                    ``(B) carriers that reflect the administrative 
                costs of providing administration of the prescription 
                drug benefit as specified under section 1860F.

        ``medicare prescription drug benefit advisory commission

    ``Sec. 1860H. (a) Establishment.--There is established the Medicare 
Prescription Drug Benefit Advisory Commission.
    ``(b) Composition.--The Commission, appointed by the Secretary, 
shall consist of an equal number of actively practicing physicians, 
consumers, and actively practicing pharmacists. Other individuals may 
advise the Commission as necessary, but may not participate as 
Commission members.
    ``(c) Duties.--
            ``(1) Consultation with secretary.--The Medicare 
        Prescription Drug Benefit Advisory Commission shall consult 
        with the Secretary as required by this part.
            ``(2) Review of payment policies and annual reports.--The 
        Medicare Prescription Drug Benefit Advisory Commission shall--
                    ``(A) review payment and eligibility policies under 
                this part and make recommendations to Congress 
                concerning such payment policies;
                    ``(B) review the impact on cost and quality of care 
                of medication therapy management services; and
                    ``(C) by not later than May 1 of each year 
                (beginning in 2004), submit a report to Congress 
                containing the results of such reviews and 
                recommendations concerning such policies.

                             ``definitions

    ``Sec. 1860I. In this part:
    ``(a) Covered Outpatient Prescription Drug.--
            ``(1) In general.--Subject to paragraph (2), the term 
        `covered outpatient prescription drug' means--
                    ``(A) a drug or biological that may be dispensed 
                only upon a prescription;
                    ``(B) insulin certified under section 506 of the 
                Federal Food, Drug, and Cosmetic Act, and needles, 
                syringes, and disposable pumps for the administration 
                of such insulin; and
                    ``(C) such nonprescription drugs as defined under 
                section 503 of the Federal Food, Drug, and Cosmetic Act 
                that are prescribed and determined medically necessary 
                by a physician or other health care provider licensed 
                by the State to prescribe medications.
            ``(2) Exclusion of cosmetic agents and fertility agents.--
        Such term does not include medications or classes of outpatient 
        prescription drugs described in subparagraphs (B) and (C) of 
        section 1927(d)(2).
    ``(b) Average Manufacturers' Price.--The term `average 
manufacturers' price' means, with respect to a prescription drug of a 
manufacturer provided under this part for a calendar quarter, the 
average unit price paid to the manufacturer by wholesalers for drugs 
distributed to the retail pharmacy class of trade (excluding direct 
sales to hospitals, health maintenance organizations, and wholesalers 
where the drug is relabeled under the distributor's national drug 
code.) Average manufacturers' price includes cash discounts allowed and 
all other price reductions that reduce the actual price paid.
    ``(c) Carrier.--The term `carrier' means the entity responsible for 
administering the prescription drug benefit program under this part. A 
carrier may be a prescription claims processing vendor, wholesale and 
community pharmacy delivery system, health care provider, insurer, or 
any other type of entity as the Secretary may specify.
    ``(d) Pharmacy Provider.--The term `pharmacy provider' means a 
pharmacist or pharmacy that--
            ``(1) is authorized by applicable State agencies to engage 
        in the practice of pharmacy;
            ``(2) meets the requirements of section 1860G; and
            ``(3) participates in the program under this part.''.
    (b) Conforming Amendments.--
            (1) Amendments to federal supplementary health insurance 
        trust fund.--Section 1841 of the Social Security Act (42 U.S.C. 
        1395t) is amended--
                    (A) in the last sentence of subsection (a)--
                            (i) by striking ``and'' after ``section 
                        201(i)(I)''; and
                            (ii) by inserting before the period the 
                        following: ``, and such amounts as may be 
                        deposited in, or appropriated to, the 
                        Prescription Drug Benefit Insurance Account 
                        established by section 1860B''; and
                    (B) in subsection (g), by inserting after ``by this 
                part,'' the following: ``the payments provided for 
                under part D (in which case the payments shall come 
                from the Prescription Drug Benefit Insurance Account in 
                the Supplementary Medical Insurance Trust Fund),''.
            (2) Exclusions from coverage.--
                    (A) Application to part d.--Section 1862(a) of such 
                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''.
                    (B) Prescription medications not excluded from 
                coverage if appropriately prescribed.--Section 
                1862(a)(1) of such Act (42 U.S.C. 1395y(a)(1)) is 
                amended--
                            (i) in subparagraph (H), by striking 
                        ``and'' at the end;
                            (ii) in subparagraph (I), by striking the 
                        semicolon at the end and inserting ``, and''; 
                        and
                            (iii) by adding at the end the following 
                        new subparagraph:
                    ``(J) in the case of prescription medications 
                covered under part D, which are not prescribed in 
                accordance with such part;''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act, and shall apply with 
respect to benefits for prescription drugs furnished on or after 
January 1, 2003.

SEC. 3. GAO STUDY AND BIENNIAL REPORTS ON SAVINGS.

    (a) Ongoing Study.--The Comptroller General of the United States, 
in consultation with the Medicare Prescription Drug Benefit Advisory 
Commission established under section 1860H of the Social Security Act 
(as added by section 2(a)), shall conduct an ongoing study and analysis 
of the prescription drug benefit program under part D of the Social 
Security Act (as added by such section), with an analysis of the 
savings to the medicare program resulting from such drug benefit 
program, including savings to medicare parts A and B, by reason of, for 
example, the reduction in the number or length of hospital visits.
    (b) Report.--Not later than January 1, 2004, and every 2 years 
thereafter, the Comptroller General of the United States shall submi
2cb
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to Congress a report on the results of the study conducted under this 
section, together with any recommendation for legislation determined to 
be appropriate as a result of such study.

SEC. 4. AUTHORIZATION OF APPROPRIATIONS.

    There are authorized to be appropriated from time to time, out of 
any moneys in the Treasury not otherwise appropriated, to the 
Prescription Drug Benefit Insurance Account within the Supplementary 
Medical Insurance Trust Fund established under section 1841, an amount 
equal to the amount by which the benefits and administrative costs of 
providing the benefits under this part exceed the premiums collected 
under section 1860E.
                                 &lt;all&gt;

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