[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)''.
                                 <all>