[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4395 Introduced in House (IH)]







109th CONGRESS
  1st Session
                                H. R. 4395

To amend titles XVIII and XIX of the Social Security Act to provide for 
 an improved voluntary Medicare prescription drug benefit, to provide 
 greater access to affordable pharmaceuticals, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           November 18, 2005

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

_______________________________________________________________________

                                 A BILL


 
To amend titles XVIII and XIX of the Social Security Act to provide for 
 an improved voluntary Medicare prescription drug benefit, 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; REFERENCES IN ACT; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Medicare 
Prescription Drug Affordability Act of 2005''.
    (b) Amendments to Social Security Act.--Except as otherwise 
specifically provided, whenever in this Act an amendment is expressed 
in terms of an amendment to or repeal of a section or other provision, 
the reference shall be considered to be made to that section or other 
provision of the Social Security Act.
    (c) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; references in act; table of contents.
              TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT

Sec. 101. Substitution of voluntary Medicare outpatient prescription 
                            drug program.
``Part D--Voluntary Prescription Drug Benefit for the Aged and Disabled

        ``Sec. 1860D-1. Medicare outpatient prescription drug benefit.
        ``Sec. 1860D-2. Negotiating fair prices with pharmaceutical 
                            manufacturers.
        ``Sec. 1860D-3. Contract authority.
        ``Sec. 1860D-4. Eligibility; voluntary enrollment; coverage.
        ``Sec. 1860D-5. Provision of, and entitlement to, benefits; 
                            reduction in coinsurance for lower income 
                            beneficiaries.
        ``Sec. 1860D-6. Administration; quality assurance.
        ``Sec. 1860D-7. Federal Medicare Prescription Drug Trust Fund.
        ``Sec. 1860D-8. Compensation for employers covering retiree 
                            drug costs.
        ``Sec. 1860D-9. Medicare Prescription Drug Advisory Committee.
Sec. 102. Provision of Medicare outpatient prescription drug coverage 
                            under the MedicareAdvantage program.
Sec. 103. Medigap revisions.
Sec. 104. Assistance for low income beneficiaries.
Sec. 105. Expansion of membership and duties of Medicare Payment 
                            Advisory Commission (MEDPAC).
                  TITLE II--AFFORDABLE PHARMACEUTICALS

             Subtitle A--Importation of Prescription Drugs

Sec. 201. Short title.
Sec. 202. Findings.
Sec. 203. Purposes.
Sec. 204. Importation of prescription drugs.
Sec. 205. Use of counterfeit-resistant technologies to prevent 
                            counterfeiting.
        ``Sec. 505C. Counterfeit-resistant technologies.
Subtitle B--Quality Control and Cost Containment Blue Ribbon Task Force

Sec. 211. Task Force.
                     TITLE III--DEFENSE OF MEDICARE

Sec. 301. Elimination of privatization of Medicare.
Sec. 302. Repeal of MA regional plan stabilization fund.
Sec. 303. Repeal of health savings accounts.
Sec. 304. Application of risk adjustment reflecting characteristics for 
                            the entire Medicare population.
Sec. 305. Phase-in to payment at 100 percent of fee-for-service rate.
Sec. 306. Repeal of Medicare expenditure cap.
Sec. 307. Continuous open enrollment in MedicareAdvantage plans.
Sec. 308. Effective date.

              TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT

SEC. 101. SUBSTITUTION OF VOLUNTARY MEDICARE OUTPATIENT PRESCRIPTION 
              DRUG PROGRAM.

    (a) In General.--Subject to subsection (b), part D of title XVIII, 
as inserted by section 101(a)(2) of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (Public Law 108-173), is 
amended to read as follows:

``Part D--Voluntary Prescription Drug Benefit for the Aged and Disabled

            ``medicare outpatient prescription drug benefit

    ``Sec. 1860D-1.
    Subject to the succeeding provisions of this part, the voluntary 
prescription drug benefit program under this part provides the 
following:
            ``(1) No premium.--There is no monthly premium.
            ``(2) No deductible.--There is no annual deductible.
            ``(3) Coinsurance.--The coinsurance is 10 percent.
            ``(4) Out-of-pocket limit.--The annual limit on out-of-
        pocket spending on covered drugs is $1,500.
            ``(5) Reduced cost-sharing for lower-income individuals.--
        Under the provisions of the medicaid program, for individuals 
        with income not exceeding 150 percent of the poverty level, 
        coinsurance is reduced to not exceed a copayment of $1 for a 
        generic drug or $3 for a brand name drug.

      ``negotiating fair prices with pharmaceutical manufacturers

    ``Sec. 1860D-2. (a) Authority to Negotiate Prices With 
Manufacturers.--The Secretary shall, consistent with the requirements 
of this part and the goals of providing quality care and containing 
costs under this part, negotiate contracts with manufacturers of 
covered outpatient prescription drugs that provide for the maximum 
prices that may be charged to individuals enrolled under this part by 
participating pharmacies for dispensing such drugs to such individuals.
    ``(b) Promotion of Breakthrough Drugs.--In conducting negotiations 
with manufacturers under this part, the Secretary shall take into 
account the goal of promoting the development of breakthrough drugs (as 
defined in section 1860D-9(b)).

                          ``contract authority

    ``Sec. 1860D-3. (a) Contract Authority.--
            ``(1) In general.--The Secretary is responsible for the 
        administration of this part and shall enter into contracts with 
        appropriate pharmacy contractors on a national or regional 
        basis to administer the benefits under this part.
            ``(2) Procedures.--The Secretary shall establish procedures 
        under which the Secretary--
                    ``(A) accepts bids submitted by entities to serve 
                as pharmacy contractors under this part in a region or 
                on a national basis;
                    ``(B) awards contracts to such contractors to 
                administer benefits under this part to eligible 
                beneficiaries in the region or on a national basis; and
                    ``(C) provides for the termination (and nonrenewal) 
                of a contract in the case of a contractor's failure to 
                meet the requirements of the contract and this part.
            ``(3) 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.
            ``(4) Terms and conditions.--Such contracts shall have such 
        terms and conditions as the Secretary shall specify and shall 
        be for such terms (of at least 2 years, but not to exceed 5 
        years) as the Secretary shall specify consistent with this 
        part.
            ``(5) Use of pharmacy contractors in price negotiations.--
        Such contracts shall require the contractor involved to 
        negotiate contracts with manufacturers that provide for maximum 
        prices for covered outpatient prescription drugs that are lower 
        than the maximum prices negotiated under section 1860D-2(a), if 
        applicable. The price reductions shall be passed on to eligible 
        beneficiaries and the Secretary shall hold the contractor 
        accountable for meeting performance requirements with respect 
        to price reductions and limiting price increases.
            ``(6) Area for contracts.--
                    ``(A) Regional basis.--
                            ``(i) In general.--Except as provided in 
                        clause (ii) and subject to subparagraph (B), 
                        the contract entered into between the Secretary 
                        and a pharmacy contractor shall require the 
                        contractor to administer the benefits under 
                        this part in a region determined by the 
                        Secretary under subparagraph (B) or on a 
                        national basis.
                            ``(ii) Partial regional basis.--
                                    ``(I) In general.--If determined 
                                appropriate by the Secretary, the 
                                Secretary may permit the benefits to be 
                                administered in a partial region 
                                determined appropriate by the 
                                Secretary.
                                    ``(II) Requirements.--If the 
                                Secretary permits administration 
                                pursuant to subclause (I), the 
                                Secretary shall ensure that the partial 
                                region in which administration is 
                                effected is no smaller than a State and 
                                is at least the size of the commercial 
                                service area of the contractor for that 
                                area.
                    ``(B) Determination.--
                            ``(i) In general.--In determining regions 
                        for contracts under this part, the Secretary 
                        shall--
                                    ``(I) take into account the number 
                                of individuals enrolled under this part 
                                in an area in order to encourage 
                                participation by pharmacy contractors; 
                                and
                                    ``(II) ensure that there are at 
                                least 10 different regions in the 
                                United States.
                            ``(ii) No administrative or judicial 
                        review.--The determination of administrative 
                        areas under this paragraph shall not be subject 
                        to administrative or judicial review.
            ``(7) Submission of bids.--
                    `` (A) Submission.--
                            ``(i) In general.--Subject to subparagraph 
                        (B), each entity desiring to serve as a 
                        pharmacy contractor under this part in an area 
                        shall submit a bid with respect to such area to 
                        the Secretary at such time, in such manner, and 
                        accompanied by such information as the 
                        Secretary may reasonably require.
                            ``(ii) Bid that covers multiple areas.--The 
                        Secretary shall permit an entity to submit a 
                        single bid for multiple areas if the bid is 
                        applicable to all such areas.
                    ``(B) Required information.--The bids described in 
                subparagraph (A) shall include--
                            ``(i) a proposal for the estimated prices 
                        of covered outpatient prescription drugs and 
                        the projected annual increases in such prices, 
                        including the additional reduction in price 
                        negotiated below the Secretary's maximum price 
                        and differentials between preferred and 
                        nonpreferred prices, if applicable;
                            ``(ii) a statement regarding the amount 
                        that the entity will charge the Secretary for 
                        administering the benefits under the contract;
                            ``(iii) a statement regarding whether the 
                        entity will reduce the applicable coinsurance 
                        percentage pursuant to section 1860D-
                        6(a)(1)(A)(ii) and if so, the amount of such 
                        reduction and how such reduction is tied to the 
                        performance requirements described in 
                        subsection (c)(4)(A)(ii);
                            ``(iv) a detailed description of the 
                        performance requirements for which the 
                        administrative fee of the entity will be 
                        subject to risk pursuant to subsection 
                        (c)(4)(A)(ii);
                            ``(v) a detailed description of access to 
                        pharmacy services provided by the entity, 
                        including information regarding whether the 
                        pharmacy contractor will use a preferred 
                        pharmacy network, and, if so, how the pharmacy 
                        contractor will ensure access to pharmacies 
                        that choose to be outside of that network, and 
                        whether there will be increased cost-sharing 
                        for beneficiaries if they obtain drugs at such 
                        pharmacies;
                            ``(vi) a detailed description of the 
                        procedures and standards the entity will use 
                        for--
                                    ``(I) selecting preferred 
                                prescription drugs; and
                                    ``(II) determining when and how 
                                often the list of preferred 
                                prescription drugs should be modified;
                            ``(vii) a detailed description of any 
                        ownership or shared financial interests with 
                        pharmaceutical manufacturers, pharmacies, and 
                        other entities involved in the administration 
                        or delivery of benefits under this part as 
                        proposed in the bid;
                            ``(viii) a detailed description of the 
                        entity's estimated marketing and advertising 
                        expenditures related to enrolling and retaining 
                        eligible beneficiaries; and
                            ``(ix) 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.
                The procedures under clause (vi) shall include the use 
                of a pharmaceutical and therapeutics committee the 
                members of which include practicing pharmacists.
            ``(8) Awarding of contracts.--
                    ``(A) Number of contracts.--The Secretary shall, 
                consistent with the requirements of this part and the 
                goals of providing quality care and of containing costs 
                under this part, award in a competitive manner at least 
                2 contracts to administer benefits under this part in 
                each area specified under paragraph (6), unless only 1 
                pharmacy contractor submitting a bid meets the minimum 
                standards specified under this part and by the 
                Secretary.
                    ``(B) Determination.--In determining which of the 
                pharmacy contractors 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 relevant factors, with 
                respect to--
                            ``(i) how well the contractor meets such 
                        minimum standards;
                            ``(ii) the amount that the contractor will 
                        charge the Secretary for administering the 
                        benefits under the contract;
                            ``(iii) the performance standards 
                        established under subsection (c)(2) and 
                        performance requirements for which the 
                        administrative fee of the entity will be 
                        subject to risk pursuant to subsection 
                        (c)(4)(A)(ii);
                            ``(iv) the proposed negotiated prices of 
                        covered outpatient drugs and annual increases 
                        in such prices;
                            ``(v) factors relating to benefits, quality 
                        and performance, beneficiary cost-sharing, and 
                        consumer satisfaction;
                            ``(vi) past performance and prior 
                        experience of the contractor in administering a 
                        prescription drug benefit program;
                            ``(vii) effectiveness of the contractor in 
                        containing costs through pricing incentives and 
                        utilization management; and
                            ``(viii) such other factors as the 
                        Secretary deems necessary to evaluate the 
                        merits of each bid.
                    ``(C) Exception to conflict of interest rules.--In 
                awarding contracts with pharmacy contractors 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--
                            ``(i) is not inconsistent with the--
                                    ``(I) purposes of the programs 
                                under this part; or
                                    ``(II) best interests of 
                                beneficiaries enrolled under this part; 
                                and
                            ``(ii) 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.
                    ``(D) No administrative or judicial review.--The 
                determination of the Secretary to award or not award a 
                contract to a pharmacy contractor under this part shall 
                not be subject to administrative or judicial review.
            ``(9) Access to benefits in certain areas.--
                    ``(A) Areas not covered by contracts.--The 
                Secretary shall develop procedures for the provision of 
                covered outpatient prescription 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.
                    ``(B) 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.
    ``(b) Quality, Financial, and Other Standards and Programs.--In 
consultation with appropriate pharmacy contractors, pharmacists, and 
health care professionals with expertise in prescribing, dispensing, 
and the appropriate use of prescription drugs, the Secretary shall 
establish standards and programs for the administration of this part to 
ensure appropriate prescribing, dispensing, and utilization of 
outpatient drugs under this part, to avoid adverse drug reactions, and 
to continually reduce errors in the delivery of medically appropriate 
covered benefits. The Secretary shall not award a contract to a 
pharmacy contractor under this part unless the Secretary finds that the 
contractor agrees to comply with such standards and programs and other 
terms and conditions as the Secretary shall specify. The standards and 
programs under this subsection shall be applied to any administrative 
agreements described in subsection (a) the Secretary enters into. Such 
standards and programs shall include the following:
            ``(1) Access.--
                    ``(A) In general.--The pharmacy contractor shall 
                ensure that covered outpatient prescription drugs are 
                accessible and convenient to eligible beneficiaries 
                enrolled under this part for whom benefits are 
                administered by the pharmacy contractor, including by 
                offering the services 24 hours a day and 7 days a week 
                for emergencies.
                    ``(B) On-line review.--The pharmacy contractor 
                shall provide for on-line prospective review available 
                24 hours a day and 7 days a week in order to evaluate 
                each prescription for drug therapy problems due to 
                duplication, interaction, or incorrect dosage or 
                duration of therapy.
                    ``(C) Guaranteed access to drugs in rural and hard-
                to-serve areas.--The Secretary shall ensure that all 
                beneficiaries have guaranteed access to the full range 
                of pharmaceuticals under this part, and shall give 
                special attention to access, pharmacist counseling, and 
                delivery in rural and hard-to-serve areas, including 
                through the use of incentives such as bonus payments to 
                retail pharmacists in rural areas and extra payments to 
                the pharmacy contractor for the cost of rapid delivery 
                of pharmaceuticals and any other actions necessary.
                    ``(D) Preferred pharmacy networks.--
                            ``(i) In general.--If a pharmacy contractor 
                        uses a preferred pharmacy network to deliver 
                        benefits under this part, such network shall 
                        meet minimum access standards established by 
                        the Secretary.
                            ``(ii) Standards.--In establishing 
                        standards under clause (i), the Secretary shall 
                        take into account reasonable distances to 
                        pharmacy services in both urban and rural 
                        areas.
                    ``(E) Adherence to negotiated prices.--The pharmacy 
                contractor shall have in place procedures to assure 
                compliance of pharmacies with the requirements of 
                subsection (d)(3)(C) (relating to adherence to 
                negotiated prices).
                    ``(F) Continuity of care.--
                            ``(i) In general.--The pharmacy contractor 
                        shall ensure 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 
                        1860D-4(b)(3)), the contractor will continue to 
                        provide coverage under this part to such 
                        beneficiary until the beneficiary enrolls and 
                        receives such coverage with another pharmacy 
                        contractor under this part or, if eligible, 
                        with a MedicareAdvantage organization.
                            ``(ii) Limited period.--In no event shall a 
                        pharmacy contractor be required to provide the 
                        extended coverage required under clause (i) 
                        beyond the date which is 30 days after the 
                        coverage with such contractor would have 
                        terminated but for this subparagraph.
            ``(2) Enrollee guidelines.--The pharmacy contractor shall, 
        consistent with State law, apply guidelines for counseling 
        enrollees regarding--
                    ``(A) the proper use of covered outpatient 
                prescription drugs; and
                    ``(B) interactions and contra-indications.
            ``(3) Education.--The pharmacy contractor shall apply 
        methods to identify and educate providers, pharmacists, and 
        enrollees regarding--
                    ``(A) instances or patterns concerning the 
                unnecessary or inappropriate prescribing or dispensing 
                of covered outpatient prescription drugs;
                    ``(B) instances or patterns of substandard care;
                    ``(C) potential adverse reactions to covered 
                outpatient prescription drugs;
                    ``(D) inappropriate use of antibiotics;
                    ``(E) appropriate use of generic products; and
                    ``(F) the importance of using covered outpatient 
                prescription drugs in accordance with the instruction 
                of prescribing providers.
            ``(4) Coordination.--The pharmacy contractor shall 
        coordinate with State prescription drug programs, other 
        pharmacy contractors, pharmacies, and other relevant entities 
        as necessary to ensure appropriate coordination of benefits 
        with respect to enrolled individuals when such individual is 
        traveling outside the home service area, and under such other 
        circumstances as the Secretary may specify.
            ``(5) Cost data.--
                    ``(A) The pharmacy contractor shall make data on 
                prescription drug negotiated prices (including data on 
                discounts) available to the Secretary.
                    ``(B) The Secretary shall require, either directly 
                or through a pharmacy contractor, that participating 
                pharmacists, physicians, and manufacturers--
                            ``(i) maintain their prescription drug cost 
                        data (including data on discounts) in a form 
                        and manner specified by the Secretary;
                            ``(ii) make such prescription drug cost 
                        data available for review and audit by the 
                        Secretary; and
                            ``(iii) certify that the prescription drug 
                        cost data are current, accurate, and complete, 
                        and reflect all discounts obtained by the 
                        pharmacist or physician in the purchasing of 
                        covered outpatient prescription drugs.
        Discounts referred to in subparagraphs (A) and (B) shall 
        include all volume discounts, manufacturer rebates, prompt 
        payment discounts, free goods, in-kind services, or any other 
        thing of financial value provided explicitly or implicitly in 
        exchange for the purchase of a covered outpatient prescription 
        drug.
            ``(6) Reporting.--The pharmacy contractor shall provide the 
        Secretary with periodic reports on--
                    ``(A) the contractor's costs of administering this 
                part;
                    ``(B) utilization of benefits under this part;
                    ``(C) marketing and advertising expenditures 
                related to enrolling and retaining individuals under 
                this part; and
                    ``(D) grievances and appeals.
            ``(7) Records and audits.--The pharmacy contractor shall 
        maintain adequate records related to the administration of 
        benefits under this part and afford the Secretary access to 
        such records for auditing purposes.
            ``(8) Approval of marketing material and application 
        forms.--The pharmacy contractor shall comply with requirements 
        of section 1851(h) (relating to marketing material and 
        application forms) with respect to this part in the same manner 
        as such requirements apply under part C, except that the 
        provisions of paragraph (4)(A) of such section shall not apply 
        with respect to discounts or rebates provided in accordance 
        with this part.
    ``(c) Incentives for Cost and Utilization Management and Quality 
Improvement.--
            ``(1) In general.--The Secretary shall include in a 
        contract awarded under subsection (b) with a pharmacy 
        contractor such incentives for cost and utilization management 
        and quality improvement as the Secretary may deem appropriate. 
        The contract may provide financial or other incentives to 
        encourage greater savings to the program under this part.
            ``(2) Performance standards.--The Secretary shall provide 
        for performance standards (which may include monetary bonuses 
        if the standards are met and penalties if the standards are not 
        met), including standards relating to the time taken to answer 
        member and pharmacy inquiries (written or by telephone), the 
        accuracy of responses, claims processing accuracy, online 
        system availability, appeal procedure turnaround time, system 
        availability, the accuracy and timeliness of reports, and level 
        of beneficiary satisfaction.
            ``(3) Other incentives.--Such incentives under this 
        subsection may also include--
                    ``(A) financial incentives under which savings 
                derived from the substitution of generic and other 
                preferred multi-source drugs in lieu of nongeneric and 
                nonpreferred drugs are made available to pharmacy 
                contractors, pharmacies, beneficiaries, and the Federal 
                Medicare Prescription Drug Trust Fund; and
                    ``(B) any other incentive that the Secretary deems 
                appropriate and likely to be effective in managing 
                costs or utilization or improving quality that does not 
                reduce the access of beneficiaries to medically 
                necessary covered outpatient drugs.
            ``(4) Requirements for procedures.--
                    ``(A) In general.--The Secretary shall establish 
                procedures for making payments to each pharmacy 
                contractor with a contract under this part for the 
                administration of the benefits under this part. The 
                procedures shall provide for the following:
                            ``(i) Administrative payment.--Payment of 
                        administrative fees for such administration.
                            ``(ii) Risk requirement.--An adjustment of 
                        a percentage (determined under subparagraph 
                        (B)) of the administrative fee payments made to 
                        a pharmacy contractor to ensure that the 
                        contractor, in administering the benefits under 
                        this part, pursues performance requirements 
                        established by the Secretary, including the 
                        following:
                                    ``(I) Quality service.--The 
                                contractor provides eligible 
                                beneficiaries for whom it administers 
                                benefits 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, and timely action with regard 
                                to appeals and current beneficiary 
                                service surveys.
                                    ``(II) Quality clinical care.--The 
                                contractor provides such beneficiaries 
                                with quality clinical care, as measured 
                                by such factors as providing 
                                notification to such beneficiaries and 
                                to providers in order to prevent 
                                adverse drug reactions and reduce 
                                medication errors and specific clinical 
                                suggestions to improve health and 
                                patient and prescriber education as 
                                appropriate.
                                    ``(III) Control of medicare 
                                costs.--The contractor contains costs 
                                under this part to the Federal Medicare 
                                Prescription Drug Trust Fund and 
                                enrollees, as measured by generic 
                                substitution rates, price discounts, 
                                and other factors determined 
                                appropriate by the Secretary that do 
                                not reduce the access of beneficiaries 
                                to medically necessary covered 
                                outpatient prescription drugs.
                    ``(B) Percentage of payment tied to risk.--
                            ``(i) In general.--Subject to clause (ii), 
                        the Secretary shall determine the percentage of 
                        the administrative payments to a pharmacy 
                        contractor that will be tied to the performance 
                        requirements described in subparagraph (A)(ii).
                            ``(ii) 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 paragraph 
                        at a level that jeopardizes the ability of a 
                        pharmacy contractor to administer the benefits 
                        under this part or administer such benefits in 
                        a quality manner.
                    ``(C) Risk adjustment of payments based on 
                enrollees in plan.--To the extent that a pharmacy 
                contractor is at risk under this paragraph, the 
                procedures established under this paragraph may include 
                a methodology for risk adjusting the payments made to 
                such contractor based on the differences in actuarial 
                risk of different enrollees being served if the 
                Secretary determines such adjustments to be necessary 
                and appropriate.
    ``(d) Authority Relating to Pharmacy Participation.--
            ``(1) In general.--Subject to the succeeding provisions of 
        this subsection, a pharmacy contractor may establish consistent 
        with this part conditions for the participation of pharmacies, 
        including conditions relating to quality (including reduction 
        of medical errors) and technology.
            ``(2) Agreements with pharmacies.--Each pharmacy contractor 
        shall enter into a participation agreement with any pharmacy 
        that meets the requirements of this subsection and section 
        1860D-6 to furnish covered outpatient prescription drugs to 
        individuals enrolled under this part.
            ``(3) Terms of agreement.--An agreement under this 
        subsection 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 
                such a pharmacy contractor) shall establish concerning 
                the quality of, and enrolled individuals' access to, 
                pharmacy services under this part. Such standards shall 
                require the pharmacy--
                            ``(i) not to refuse to dispense covered 
                        outpatient prescription drugs to any individual 
                        enrolled under this part;
                            ``(ii) to keep patient records (including 
                        records on expenses) for all covered outpatient 
                        prescription drugs dispensed to such enrolled 
                        individuals;
                            ``(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 individuals; 
                        and
                            ``(iv) to comply with periodic audits to 
                        assure compliance with the requirements of this 
                        part and the accuracy of information submitted.
                    ``(C) Adherence to negotiated prices.--(i) The 
                total charge for each prescription drug dispensed by 
                the pharmacy to an enrolled individual under this part, 
                without regard to whether the individual is financially 
                responsible for any or all of such charge, shall not 
                exceed the price negotiated under section 1860D-2(a) 
                or, if lower, negotiated under subsection (a)(5) (or, 
                if less, the retail price for the drug involved) with 
                respect to such drug plus a reasonable dispensing fee 
                determined contractually with the pharmacy contractor.
                    ``(ii) The pharmacy does not charge (or collect 
                from) an enrolled individual an amount that exceeds the 
                individual's obligation (as determined in accordance 
                with the provisions of this part) of the applicable 
                price described in clause (i).
                    ``(D) Electronic transmittal of payment.--At the 
                option of a participating pharmacy, the pharmacy shall 
                be promptly provided in an electronic manner 
                reimbursement for prescription drugs dispensed under 
                this part.
                    ``(E) Additional requirements.--The pharmacy shall 
                meet such additional contract requirements as the 
                applicable pharmacy contractor specifies under this 
                section.
            ``(4) 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.

             ``eligibility; voluntary enrollment; coverage

    ``Sec. 1860D-4. (a) Eligibility.--
            ``(1) In general.--Each individual who is entitled to 
        hospital insurance benefits under part A or is eligible to be 
        enrolled in the medical insurance program under part B shall, 
        subject to subsection (b)(3), be enrolled in accordance with 
        this section for outpatient prescription drug benefits under 
        this part.
            ``(2) Publicity.--The Secretary shall widely disseminate, 
        through public service announcements and other means, the 
        benefits availability through enrollment under this part. The 
        Secretary shall enter into arrangements with hospitals and 
        senior centers for educating medicare beneficiaries concerning 
        enrollment and the benefits under this part.
            ``(3) Authorization of appropriations.-- There are 
        authorized to be appropriated $10,000,000 to carry out 
        paragraph (2) and the issuance of the pamphlet described in 
        subsection (b)(2)(B).
    ``(b) Automatic Enrollment Without Need for Separate Application.--
            ``(1) In general.--The Secretary shall automatically enroll 
        under this part each eligible individual described in 
        subsection (a) without the need for any separate application.
            ``(2) Issuance of medicare prescription drug card; 
        information pamphlet.--
                    ``(A) In general.--The Secretary shall provide for 
                the issuance, through the mail to each individual 
                enrolled under this section, of a medicare prescription 
                drug card evidencing such enrollment. Such card shall 
                be designed to indicate whether or not the individual 
                is eligible for lowered cost-sharing under section 
                1860D-5(e)(2).
                    ``(B) Information pamphlet.-- The issuance of such 
                card shall be accompanied by a brief pamphlet that 
                describes the benefits available under this part and 
                how to use them.
            ``(3) Voluntary program.--Nothing in this section shall 
        prevent an individual from voluntarily electing not to be 
        enrolled under this part. No penalty shall be imposed under 
        this part at any time for an individual who voluntarily decides 
        to enroll or not enroll in the program under this part.
            ``(4) Information.--
                    ``(A) In general.--The Secretary shall broadly 
                distribute information to individuals who satisfy 
                subsection (a) on the benefits provided under this 
                part. The Secretary shall periodically make available 
                information on the cost differentials to enrollees for 
                the use of generic drugs and other drugs.
                    ``(B) Toll-free hotline.--The Secretary shall 
                maintain a toll-free telephone hotline (which may be a 
                hotline already used by the Secretary under this title) 
                for purposes of providing assistance to beneficiaries 
                in the program under this part, including responding to 
                questions concerning coverage, enrollment, benefits, 
                grievances and appeals procedures, and other aspects of 
                such program.
            ``(5) Enrollee defined.--For purposes of this part, the 
        term `enrollee' means an individual enrolled for benefits under 
        this part.
    ``(c) Coverage Period.--
            ``(1) In general.--The period during which an individual is 
        entitled to benefits under this part (in this subsection 
        referred to as the individual's `coverage period') shall begin 
        on such a date as the Secretary shall establish consistent with 
        the type of coverage rules described in subsections (a) and (e) 
        of section 1838, except that in no case shall a coverage period 
        begin before July 1, 2006. No payments may be made under this 
        part with respect to the expenses of an individual unless such 
        expenses were incurred by such individual during a period 
        which, with respect to the individual, is a coverage period.
            ``(2) Termination.--The Secretary shall provide for the 
        application of provisions under this subsection similar to the 
        provisions in section 1838(b).
    ``(d) Provision of Benefits to MedicareAdvantage Enrollees.--In the 
case of an individual who is enrolled under this part and is enrolled 
in an MA plan under part C, the individual shall be provided the 
benefits under this part through such plan and not through payment 
under this part.
    ``(e) Election of Pharmacy Contractor to Administer Benefits.--The 
Secretary shall establish a process whereby each individual enrolled 
under this part and residing in a region may elect the pharmacy 
contractor that will administer the benefits under this part with 
respect to the individual. Such process shall permit the individual to 
make an initial election and to change such an election on at least an 
annual basis and under such other circumstances as the Secretary shall 
specify.

``provision of, and entitlement to, benefits; reduction in coinsurance 
                     for lower income beneficiaries

    ``Sec. 1860D-5. (a) Benefits.--Subject to the succeeding provisions 
of this section, the benefits provided to an enrollee by the program 
under this part shall consist of the following:
            ``(1) Covered outpatient prescription drug benefits.--
        Entitlement to have payment made on the individual's behalf for 
        covered outpatient prescription drugs.
            ``(2) Limitation on cost-sharing for part b outpatient 
        prescription drugs.--
                    ``(A) In general.--Once an enrollee has incurred 
                aggregate countable cost-sharing (as defined in 
                subparagraph (B)) equal to the stop-loss limit 
                specified in subsection (c)(4) for expenses in a year, 
                entitlement to the elimination of cost-sharing 
                otherwise applicable under part B for additional 
                expenses incurred in the year for outpatient 
                prescription drugs or biologicals for which payment is 
                made under part B.
                    ``(B) Countable cost-sharing defined.--For purposes 
                of this part, the term `countable cost-sharing' means--
                            ``(i) out-of-pocket expenses for outpatient 
                        prescription drugs with respect to which 
                        benefits are payable under part B, and
                            ``(ii) cost-sharing under subsections 
                        (c)(3)(B) and (c)(3)(C)(i).
    ``(b) Covered Outpatient Prescription Drug Defined.--
            ``(1) In general.--Except as provided in paragraph (2), for 
        purposes of this part the term `covered outpatient prescription 
        drug' means any of the following products:
                    ``(A) 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)(I) 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--
                            ``(II) 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)(I) 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--
                            ``(II) 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.
                    ``(B) 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.
                    ``(C) Insulin approved under appropriate Federal 
                law, and needles, syringes, and disposable pumps for 
                the administration of such insulin.
                    ``(D) A prescribed drug or biological product that 
                would meet the requirements of subparagraph (A) or (B) 
                but that is available over-the-counter in addition to 
                being available upon prescription, but only if the 
                particular dosage form or strength prescribed and 
                required for the individual is not available over-the-
                counter.
                    ``(E) Smoking cessation agents (as specified by the 
                Secretary).
            ``(2) Exclusion.--The term `covered outpatient prescription 
        drug' does not include--
                    ``(A) drugs or classes of drugs, or their medical 
                uses, which may be excluded from coverage or otherwise 
                restricted under section 1927(d)(2), other than 
                subparagraph (E) thereof (relating to smoking cessation 
                agents), as the Secretary may specify and does not 
                include such other drugs, classes, and uses as the 
                Secretary may specify consistent with the goals of 
                providing quality care and containing costs under this 
                part;
                    ``(B) except as provided in paragraphs (1)(D) and 
                (1)(E), any product which may be distributed to 
                individuals without a prescription;
                    ``(C) any product when furnished as part of, or as 
                incident to, a diagnostic service or any other item or 
                service for which payment may be made under this title; 
                or
                    ``(D) any product that is covered under part B of 
                this title.
    ``(c) Payment of Benefits.--
            ``(1) Covered outpatient prescription drugs.--There shall 
        be paid from the Federal Medicare Prescription Drug Trust Fund, 
        in the case of each enrollee who incurs expenses for 
        prescription drugs with respect to which benefits are payable 
        under this part under subsection (a)(1), amounts equal to the 
        sum of--
                    ``(A) the price for which the drug is made 
                available under this part (consistent with sections 
                1860D-2 and 1860D-3), reduced by any applicable cost-
                sharing under paragraphs (2) and (3); and
                    ``(B) a reasonable dispensing fee.
        The price under subparagraph (A) shall in no case exceed the 
        retail price for the prescription drug involved.
            ``(2) No deductible.--There is no deductible applicable to 
        payment of benefits under this part.
            ``(3) Coinsurance.--
                    ``(A) In general.--The amount of payment under 
                paragraph (1) for expenses incurred in a year shall be 
                further reduced (subject to the stop-loss limit under 
                paragraph (4)) by coinsurance as provided under this 
                paragraph.
                    ``(B) Preferred drugs.--Subject to subsection (e), 
                the coinsurance under this paragraph in the case of a 
                preferred drug (including a drug treated as a preferred 
                drug under paragraph (5)), is equal to 10 percent of 
                the price applicable under paragraph (1)(A) (or such 
                lower percentage as may be provided for under section 
                1860D-6(a)(1)(A)(ii)). In this part, the term 
                `preferred drug' means, with respect to drugs 
                classified within a therapeutic class, those drugs 
                which have been designated as a preferred drug by the 
                Secretary or the pharmacy contractor involved with 
                respect to that class and (in the case of a nongeneric 
                drug) with respect to which a contract has been 
                negotiated under this part.
                    ``(C) Nonpreferred drugs.--Subject to subsection 
                (e), the coinsurance under this paragraph in the case 
                of a nonpreferred drug that is not treated as a 
                preferred drug under paragraph (5) is equal to the sum 
                of--
                            ``(i) 10 percent of the price for lowest 
                        price preferred drug that is within the same 
                        therapeutic class; and
                            ``(ii) the amount by which--
                                    ``(I) the price at which the 
                                nonpreferred drug is made available to 
                                the enrollee; exceeds
                                    ``(II) the price of such lowest 
                                price preferred drug.
            ``(4) No coinsurance once out-of-pocket expenditures equal 
        stop-loss limit.--Once an enrollee has incurred aggregate 
        countable cost-sharing under paragraph (3) (including cost-
        sharing under part B attributable to outpatient prescription 
        drugs or biologicals) equal to the amount specified in section 
        1860D-1(4) (subject to adjustment under paragraph (8)) for 
        expenses in a year--
                    ``(A) there shall be no coinsurance under paragraph 
                (3) for additional expenses incurred in the year 
                involved; and
                    ``(B) there shall be no coinsurance under part B 
                for additional expenses incurred in the year involved 
                for outpatient prescription drugs and biologicals.
            ``(5) Appeals rights relating to coverage of nonpreferred 
        drugs.--
                    ``(A) Procedures regarding the determination of 
                drugs that are medically necessary.--Each pharmacy 
                contractor shall have in place procedures on a case-by-
                case basis to treat a nonpreferred drug as a preferred 
                drug under this part if the preferred drug is 
                determined to be not as effective for the enrollee or 
                to have significant adverse effect on the enrollee. 
                Such procedures shall require that such determinations 
                are based on professional medical judgment, the medical 
                condition of the enrollee, and other medical evidence.
                    ``(B) Procedures regarding denials of care.--Such 
                contractor shall have 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 nonpreferred drugs) 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 MA organizations under part C;
                            ``(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 MA organizations under part C; 
                        and
                            ``(iii) that enrollees are provided with 
                        information regarding the appeals procedures 
                        under this part at the time of enrollment with 
                        a pharmacy contractor under this part and upon 
                        request thereafter.
            ``(6) Transfer of funds to cover costs of part b 
        prescription drug catastrophic benefit.--With respect to 
        benefits described in subsection (a)(2), there shall be 
        transferred from the Federal Medicare Prescription Drug Trust 
        Fund to the Federal Supplementary Medical Insurance Trust Fund 
        amounts equivalent to the elimination of cost-sharing described 
        in such subsection.
            ``(7) Permitting application under part b of negotiated 
        prices.--For purposes of making payment under part B for drugs 
        that would be covered outpatient prescription drugs but for the 
        exclusion under subparagraph (B) or (C) of subsection (b)(2), 
        the Secretary may elect to apply the payment basis used for 
        payment of covered outpatient prescription drugs under this 
        part instead of the payment basis otherwise used under such 
        part, if it results in a lower cost to the program.
            ``(8) Inflation adjustment.--
                    ``(A) In general.--With respect to expenses 
                incurred in a year after 2006, the stop-loss limit 
                under paragraph (3) is equal to the stop-loss limit 
                determined under such paragraph (or this subparagraph) 
                for the previous year increased by such percentage 
                increase. The Secretary shall adjust such percentage 
                increase in subsequent years to take into account 
                misestimations made of the per capita program 
                expenditures under this subparagraph in previous years. 
                Any increase under this subparagraph that is not a 
                multiple of $10 shall be rounded to the nearest 
                multiple of $10.
                    ``(B) Estimation of increase in per capita program 
                expenditures.--The Secretary shall before the beginning 
                of each year (beginning with 2007) estimate the 
                percentage increase in average per capita aggregate 
                expenditures from the Federal Medicare Prescription 
                Drug Trust Fund for the year involved compared to the 
                previous year.
                    ``(C) Reconciliation.--The Secretary shall also 
                compute (beginning with 2008) the actual percentage 
                increase in such aggregate expenditures in order to 
                provide for reconciliation of deductibles, and stop-
                loss limits, under the second sentence of subparagraph 
                (A) and under section 1860D-5(d)(2).
    ``(d) No Monthly Premiums.--In accordance with section 1860D-1(1) 
there is no monthly premium for prescription drug benefits under this 
part.
    ``(e) Reductions in Coinsurance for Lower Income Beneficiaries.--
            ``(1) Institutionalized individuals.--In the case of an 
        individual who is a full-benefit dual eligible individual (as 
        defined in paragraph (4)(C)) and who is an institutionalized 
        individual or couple (as defined in section 1902(q)(1)(B)), the 
        coinsurance under subsection (c)(4) shall be eliminated.
            ``(2) Individuals with income below 150 percent of the 
        poverty level.--In the case of an individual who is not 
        described in paragraph (1) and whose family income does not 
        exceed 150 percent of the poverty level applicable to a family 
        of the size involved, the coinsurance under subsection (c)(4) 
        shall not exceed--
                    ``(A) $1 in the case of a preferred drug described 
                in subsection (c)(3)(B); or
                    ``(B) $3 in the case of a nonpreferred drug 
                described in subsection (c)(3)(C).
            ``(3) Process of qualification for reduced coinsurance.--
                    ``(A) In general.--The Secretary shall provide a 
                process for the qualification of beneficiaries for 
                reduced coinsurance under this subsection. Such process 
                shall be coordinated, to the maximum extent 
                practicable, with State medicaid programs, but shall 
                also permit individuals to qualify on the basis of 
                simple, 1-page applications made directly to the 
                Secretary (or the Secretary's designee, such as through 
                a local pharmacy).
                    ``(B) No assets test.--An individual's eligibility 
                for reduced coinsurance under this subsection shall be 
                determined without regard to the amount of the assets 
                of the individual or family members.
            ``(4) Definitions.--In this part:
                    ``(A) Family income.--The Secretary shall define 
                the term `family income'.
                    ``(B) Poverty level.--The term `poverty line' has 
                the meaning given the term `poverty line' in section 
                673(2) of the Community Services Block Grant Act (42 
                U.S.C. 9902(2)), including any revision required by 
                such section.
                    ``(C) Full-benefit dual eligible individual 
                defined.--
                            ``(i) In general.--The term `full-benefit 
                        dual eligible individual' means, with respect 
                        to a month, an individual residing in a State 
                        who--
                                    ``(I) has coverage for the month 
                                for covered part D drugs under this 
                                part (including under an MA plan under 
                                part C); and
                                    ``(II) is determined eligible by 
                                the State for medical assistance for 
                                full benefits under title XIX for such 
                                month under section 1902(a)(10)(A) or 
                                1902(a)(10)(C), by reason of section 
                                1902(f), or under any other category of 
                                eligibility for medical assistance for 
                                full benefits under such title, as 
                                determined by the Secretary.
                            ``(ii) Treatment of medically needy and 
                        other individuals required to spend down.--In 
                        applying clause (i) in the case of an 
                        individual determined to be eligible by the 
                        State for medical assistance under section 
                        1902(a)(10)(C) or by reason of section 1902(f), 
                        the individual shall be treated as meeting the 
                        requirement of clause (i)(II) for any month if 
                        such medical assistance is provided for in any 
                        part of the month.
            ``(5) Treatment of residents of territories.--The Secretary 
        shall provide for such adjustment in the application of this 
        subsection to residents of the territories as may be necessary 
        to take into account differences in average family income for 
        such residents compared to average family income for eligible 
        individuals residing in the 50 States or the District of 
        Columbia.

                  ``administration; quality assurance

    ``Sec. 1860D-6. (a) Rules Relating to Provision of Benefits.--
            ``(1) Provision of benefits.--
                    ``(A) In general.--In providing benefits under this 
                part, the Secretary (directly or through the contracts 
                with pharmacy contractors) shall employ mechanisms to 
                provide benefits appropriately and efficiently, and 
                those mechanisms may include--
                            ``(i) the use of--
                                    ``(I) price negotiations 
                                (consistent with subsection (b));
                                    ``(II) reduced coinsurance (below 
                                20 percent) to encourage the 
                                utilization of appropriate preferred 
                                prescription drugs; and
                                    ``(III) methods to reduce 
                                medication errors and encourage 
                                appropriate use of medications; and
                            ``(ii) permitting pharmacy contractors, as 
                        approved by the Secretary, to make exceptions 
                        to section 1860D-5(c)(3)(C) (relating to cost-
                        sharing for non-preferred drugs) to secure best 
                        prices for enrollees so long as the payment 
                        amount under section 1860D-5(c)(1) does not 
                        equal zero.
                    ``(B) Construction.--Nothing in this subsection 
                shall be construed to prevent the Secretary (directly 
                or through the contracts with pharmacy contractors) 
                from using incentives to encourage enrollees to select 
                generic or other cost-effective drugs, so long as--
                            ``(i) such incentives are designed not to 
                        result in any increase in the aggregate 
                        expenditures under the Federal Medicare 
                        Prescription Drug Trust Fund; and
                            ``(ii) a beneficiary's coinsurance shall be 
                        no greater than 20 percent in the case of a 
                        preferred drug (including a nonpreferred drug 
                        treated as a preferred drug under section 
                        1860D-5(c)(5)).
            ``(2) Construction.--Nothing in this part shall preclude 
        the Secretary or a pharmacy contractor from--
                    ``(A) educating prescribing providers, pharmacists, 
                and enrollees about medical and cost benefits of 
                preferred drugs;
                    ``(B) requesting prescribing providers to consider 
                a preferred drug prior to dispensing of a nonpreferred 
                drug, as long as such request does not unduly delay the 
                provision of the drug;
                    ``(C) using mechanisms to encourage enrollees under 
                this part to select cost-effective drugs or less costly 
                means of receiving or administering drugs, including 
                the use of therapeutic interchange programs, disease 
                management programs, and notification to the 
                beneficiary that a more affordable generic drug 
                equivalent was not selected by the prescribing provider 
                and a statement of the lost cost savings to the 
                beneficiary;
                    ``(D) using price negotiations to achieve reduced 
                prices on covered outpatient prescription drugs, 
                including new drugs, drugs for which there are few 
                therapeutic alternatives, and drugs of particular 
                clinical importance to individuals enrolled under this 
                part; and
                    ``(E) utilizing information on drug prices of OECD 
                countries and of other payors in the United States in 
                the negotiation of prices under this part.
    ``(b) Price Negotiations Process.--
            ``(1) Requirements with respect to preferred drugs.--
        Negotiations of contracts with manufacturers with respect to 
        covered outpatient prescription drugs under this part shall be 
        conducted in a manner so that--
                    ``(A) there is at least a contract for a drug 
                within each therapeutic class (as defined by the 
                Secretary in consultation with such Medicare 
                Prescription Drug Advisory Committee);
                    ``(B) if there is more than 1 drug available in a 
                therapeutic class, there are contracts for at least 2 
                drugs within such class unless determined clinically 
                inappropriate in accordance with standards established 
                by the Secretary; and
                    ``(C) if there are more than 2 drugs available in a 
                therapeutic class, there is a contract for at least 2 
                drugs within such class and a contract for generic drug 
                substitute if available unless determined clinically 
                inappropriate in accordance with standards established 
                by the Secretary.
            ``(2) Establishment of therapeutic classes.--The Secretary, 
        in consultation with the Medicare Prescription Drug Advisory 
        Committee (established under section 1860D-9), shall establish 
        for purposes of this part therapeutic classes and assign to 
        such classes covered outpatient prescription drugs.
            ``(3) Disclosure concerning preferred drugs.--The Secretary 
        shall provide, through pharmacy contractors or otherwise, for--
                    ``(A) disclosure to current and prospective 
                enrollees and to participating providers and pharmacies 
                in each service area a list of the preferred drugs and 
                differences in applicable cost-sharing between such 
                drugs and nonpreferred drugs; and
                    ``(B) advance disclosure to current enrollees and 
                to participating providers and pharmacies in each 
                service area of changes to any such list of preferred 
                drugs and differences in applicable cost-sharing.
            ``(4) No review.--The Secretary's establishment of 
        therapeutic classes and the assignment of drugs to such classes 
        and the Secretary's determination of what is a breakthrough 
        drug are not subject to administrative or judicial review.
    ``(c) Confidentiality.--The Secretary shall ensure that the 
confidentiality of individually identifiable health information 
relating to the provision of benefits under this part is protected, 
consistent with the standards for the privacy of such information 
promulgated by the Secretary under the Health Insurance Portability and 
Accountability Act of 1996, or any subsequent comprehensive and more 
protective set of confidentiality standards enacted into law or 
promulgated by the Secretary. Nothing in this subsection shall be 
construed as preventing the coordination of data with a State 
prescription drug program so long as such program has in place 
confidentiality standards that are equal to or exceed the standards 
used by the Secretary.
    ``(d) Fraud and Abuse Safeguards.--The Secretary, through the 
Office of the Inspector General, is authorized and directed to issue 
regulations establishing appropriate safeguards to prevent fraud and 
abuse under this part. Such safeguards, at a minimum, should include 
compliance programs, certification data, audits, and recordkeeping 
practices. In developing such regulations, the Secretary shall consult 
with the Attorney General and other law enforcement and regulatory 
agencies.
    ``(e) Use of 800 Number.--Through the tollfree number provided 
under section 1804(b), the Secretary shall provide a means for 
beneficiaries to discuss problems and challenges with costs or access 
to prescription drugs under this part.
    ``(f) Use of Website.--The Internet website maintained by the 
Secretary for purposes of this title shall include information on the 
price of, access to, and quality of prescription drugs provided under 
this part.

            ``federal medicare prescription drug trust fund

    ``Sec. 1860D-7. (a) Establishment.--There is hereby created on the 
books of the Treasury of the United States a trust fund to be known as 
the `Federal Medicare Prescription Drug Trust Fund' (in this section 
referred to as the `Trust Fund'). The Trust Fund 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, such fund as 
provided in this part.
    ``(b) Application of SMI Trust Fund Provisions.--The provisions of 
subsections (b) through (i) of section 1841 shall apply to this part 
and the Trust Fund in the same manner as they apply to part B and the 
Federal Supplementary Medical Insurance Trust Fund, respectively.

        ``compensation for employers covering retiree drug costs

    ``Sec. 1860D-8. (a) In General.--In the case of an individual who 
is eligible to be enrolled under this part and is a participant or 
beneficiary under a group health plan that provides outpatient 
prescription drug coverage to retirees the actuarial value of which is 
not less than the actuarial value of the coverage provided under this 
part, the Secretary shall make payments to such plan subject to the 
provisions of this section. Such payments shall be treated as payments 
under this part for purposes of sections 1860D-7 and 1860D-4(e)(2). In 
applying the previous sentence with respect to section 1860D-4(e)(2), 
the amount of the Government contribution referred to in section 
1844(a)(1)(A) is deemed to be equal to the aggregate amount of the 
payments made under this section.
    ``(b) Requirements.--To receive payment under this section, a group 
health plan shall comply with the following requirements:
            ``(1) Compliance with requirements.--The group health plan 
        shall comply with the requirements of this Act and other 
        reasonable, necessary, and related requirements that are needed 
        to administer this section, as determined by the Secretary.
            ``(2) Annual assurances and notice before termination.--The 
        sponsor of the plan shall--
                    ``(A) annually attest, and provide such assurances 
                as the Secretary may require, that the coverage offered 
                under the group health plan meets the requirements of 
                this section and will continue to meet such 
                requirements 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 enrollees--
                            ``(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 required under subsection (a).
            ``(3) Beneficiary information.--The sponsor of the plan 
        shall report to the Secretary, for each calendar quarter for 
        which it seeks a payment under this section, the names and 
        social security numbers of all enrollees described in 
        subsection (a) covered under such plan during such quarter and 
        the dates (if less than the full quarter) during which each 
        such individual was covered.
            ``(4) Audits.--The sponsor or plan seeking payment 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 payments made, and such other matters as may be 
        appropriate.
    ``(c) Payment.--
            ``(1) In general.--The sponsor of a group health plan that 
        meets the requirements of subsection (b) with respect to a 
        quarter in a calendar year shall be entitled to have payment 
        made on a quarterly basis of the amount specified in paragraph 
        (2) for each individual described in subsection (a) who during 
        the quarter is covered under the plan and was not enrolled in 
        the insurance program under this part.
            ``(2) Amount of payment.--
                    ``(A) In general.--The amount of the payment for a 
                quarter shall approximate, for each such covered 
                individual, \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 average per capita 
                        aggregate expenditures, as estimated under 
                        section 1860D-5(c)(8) for the year involved; 
                        exceeds
                            ``(ii) the monthly premium rate under 
                        section 1860D-5(d) for the month involved.

            ``medicare prescription drug advisory committee

    ``Sec. 1860D-9. (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 required of pharmacy contractors 
                under section 1860D-5(c)(5) for determining if a drug 
                is as effective for an enrollee or has a significant 
                adverse effect on an enrollee under this part;
                    ``(B) standards for--
                            ``(i) defining therapeutic classes;
                            ``(ii) adding new therapeutic classes;
                            ``(iii) assigning to such classes covered 
                        outpatient prescription drugs; and
                            ``(iv) identifying breakthrough drugs;
                    ``(C) procedures to evaluate the bids submitted by 
                pharmacy contractors under this part;
                    ``(D) procedures for negotiations, and standards 
                for entering into contracts, with manufacturers, 
                including identifying drugs or classes of drugs where 
                Secretarial negotiation is most likely to yield savings 
                under this part significantly above those that which 
                could be achieved by a pharmacy contractor; and
                    ``(E) procedures to ensure that pharmacy 
                contractors with a contract under this part are in 
                compliance with the requirements under this part.
For purposes of this part, a drug is a `breakthrough drug' if the 
Secretary, in consultation with the Committee, determines it is a new 
product that will make a significant and major improvement by reducing 
physical or mental illness, reducing mortality, or reducing disability, 
and that no other product is available to beneficiaries that achieves 
similar results for the same condition. The Committee may consider 
cost-effectiveness in establishing standards for defining therapeutic 
classes and assigning drugs to such classes under subparagraph (B).
    ``(c) Structure and Membership of the Committee.--
            ``(1) Structure.--The Committee shall be composed of 19 
        members who shall be appointed by the Secretary.
            ``(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, and attainments, exceptionally qualified to 
                perform the duties of members of the Committee.
                    ``(B) Specific members.--Of the members appointed 
                under paragraph (1)--
                            ``(i) 5 shall be chosen to represent 
                        practicing physicians, 2 of whom shall be 
                        gerontologists;
                            ``(ii) 2 shall be chosen to represent 
                        practicing nurse practitioners;
                            ``(iii) 4 shall be chosen to represent 
                        practicing pharmacists;
                            ``(iv) 1 shall be chosen to represent the 
                        Centers for Medicare & Medicaid Services;
                            ``(v) 4 shall be chosen to represent 
                        actuaries, pharmacoeconomists, researchers, and 
                        other appropriate experts;
                            ``(vi) 1 shall be chosen to represent 
                        emerging medicine technologies;
                            ``(vii) 1 shall be chosen to represent the 
                        Food and Drug Administration; and
                            ``(viii) 1 shall be chosen to represent 
                        individuals enrolled under this part.
    ``(d) Terms of Appointment.--Each member of the Committee shall 
serve for a term determined appropriate by the Secretary. The terms of 
service of the members initially appointed shall begin on January 1, 
2006.
    ``(e) Chairperson.--The Secretary shall designate a member of the 
Committee as Chairperson. The term as Chairperson shall be for a 1-year 
period.
    ``(f) 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.
    ``(g) 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.
    ``(h) Federal Advisory Committee Act.--Section 14 of the Federal 
Advisory Committee Act (5 U.S.C. App.) shall not apply to the 
Committee.
    ``(i) 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.
    ``(j) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary to carry out the purposes of 
this section.''.
    (b) Retention of Certain Provisions.--
            (1) Title i of mpdima.--Except as provided in paragraph 
        (2), the provisions of title I (other than sections 105 and 
        107(c)) of the Medicare Prescription Drug, Improvement, and 
        Modernization Act of 2003 (Public Law 108-173) are repealed and 
        the laws affected by such title shall be in effect as if such 
        title had not been enacted.
            (2) Part d provisions.--The following provisions of part D 
        of title XVIII of the Social Security Act, as inserted by 
        section 101 of the Medicare Prescription Drug, Improvement, and 
        Modernization Act of 2003 (Public Law 108-173), shall remain in 
        effect:
                    (A) Section 1860D-31 (relating to medicare 
                prescription drug discount card and transitional 
                assistance program).
                    (B) Section 1860D-4(e) (relating to electronic 
                prescription program).
    (c) Application of General Exclusions From Coverage.--
            (1) Application to part d.--Section 1862(a) (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 
        appropriately prescribed.--Section 1862(a)(1) (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 prescribed in accordance 
                with such part;''.
    (d) Conforming Amendment.--Section 1171(a)(5)(D) (42 U.S.C. 
1320d(a)(5)(D)) is amended by striking ``or (C)'' and inserting ``(C), 
or (D)''.

SEC. 102. PROVISION OF MEDICARE OUTPATIENT PRESCRIPTION DRUG COVERAGE 
              UNDER THE MEDICAREADVANTAGE PROGRAM.

    (a) Requiring Availability of an Actuarially Equivalent 
Prescription Drug Benefit.--Section 1851 (42 U.S.C. 1395w-21) is 
amended by adding at the end the following new subsection:
    ``(j) Availability of Prescription Drug Benefits.--
            ``(1) In general.--Notwithstanding any other provision of 
        this part, each MA organization that makes available an MA plan 
        described in section 1851(a)(2)(A) shall make available such a 
        plan that offers coverage of covered outpatient prescription 
        drugs that is at least actuarially equivalent to the benefits 
        provided under part D. Information respecting such benefits 
        shall be made available in the same manner as information on 
        other benefits provided under this part is made available. 
        Nothing in this paragraph shall be construed as requiring the 
        offering of such coverage separate from coverage that includes 
        benefits under parts A and B.
            ``(2) Treatment of prescription drug enrollees.--In the 
        case of an MA eligible individual who is enrolled under part D, 
        the benefits described in paragraph (1) shall be treated in the 
        same manner as benefits described in part B for purposes of 
        coverage and payment and any reference in this part to the 
        Federal Supplementary Medical Insurance Trust Fund shall be 
        deemed, with respect to such benefits, to be a reference to the 
        Federal Medicare Prescription Drug Trust Fund.''.
    (b) Application of Quality Standards.--Section 1852(e)(2)(A) (42 
U.S.C. 1395w-22(e)(2)(A)) is amended--
            (1) by striking ``and'' at the end of clause (xi);
            (2) by striking the period at the end of clause (xii) and 
        inserting ``, and''; and
            (3) by adding at the end the following new clause:
                            ``(xiii) comply with the standards, and 
                        apply the programs, under section 1860D-3(b) 
                        for covered outpatient prescription drugs under 
                        the plan.''.
    (c) Payment Separate From Payment for Part a and B Benefits.--
Section 1853 (42 U.S.C. 1395w-23) is amended--
            (1) in subsection (a)(1)(A), by striking ``and (i)'' and 
        inserting ``(i), and (j)''; and
            (2) by adding at the end the following new subsection:
    ``(j) Payment for Prescription Drug Coverage Option.--
            ``(1) In general.--In the case of an MA plan that provides 
        prescription drug benefits described in section 1851(j)(1), the 
        amount of payment otherwise made to the MA organization 
        offering the plan shall be increased by the amount described in 
        paragraph (2). Such payments shall be made in the same manner 
        and time as the amount otherwise paid, but such amount shall be 
        payable from the Federal Medicare Prescription Drug Trust Fund.
            ``(2) Amount.--The amount described in this paragraph is 
        the monthly Government contribution amount computed under 
        section 1860D-8(c)(2)(B), but subject to adjustment under 
        paragraph (3). Such amount shall be uniform geographically and 
        shall not vary based on the MA payment area involved.
            ``(3) Risk adjustment.--The Secretary shall establish a 
        methodology for the adjustment of the payment amount under this 
        subsection in a manner that takes into account the relative 
        risks for use of outpatient prescription drugs by MA enrollees. 
        Such methodology shall be designed in a manner so that the 
        total payments under this title (including part D) are not 
        changed as a result of the application of such methodology.''.
    (d) Separate Application of Adjusted Community Rate (ACR).--Section 
1854 (42 U.S.C. 1395w-24) is amended by adding at the end the 
following:
    ``(i) Application to Prescription Drug Coverage.--The Secretary 
shall apply the previous provisions of this section (as such provisions 
were in effect before the date of the enactment of the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (Public 
Law 108-173), including the computation of the adjusted community rate) 
separately with respect to prescription drug benefits described in 
section 1851(j)(1).''.
    (e) Conforming Amendments.--
            (1) Section 1851 (42 U.S.C. 1395w-21) is amended--
                    (A) in subsection (a)(1)(A), by striking ``parts A 
                and B'' and inserting ``parts A, B, and D''; and
                    (B) in subsection (i) by inserting ``(and, if 
                applicable, part D)'' after ``parts A and B''.
            (2) Section 1852(a)(1)(A) (42 U.S.C. 1395w-22(a)(1)(A)) is 
        amended by inserting ``(and under part D to individuals also 
        enrolled under such part)'' after ``parts A and B''.
            (3) Section 1852(d)(1) (42 U.S.C. 1395w-22(d)(1)) is 
        amended--
                    (A) by striking ``and'' at the end of subparagraph 
                (D);
                    (B) by striking the period at the end of 
                subparagraph (E) and inserting ``; and''; and
                    (C) by adding at the end the following:
                    ``(F) the plan for part D benefits guarantees 
                coverage of any specifically named prescription drug 
                for an enrollee to the extent that it would be required 
                to be covered under part D.
        In carrying out subparagraph (F), an MA organization has the 
        same authority to enter into contracts with respect to coverage 
        of preferred drugs as the Secretary has under part D, but 
        subject to an independent contractor appeal or other appeal 
        process that would be applicable to determinations by such a 
        pharmacy contractor consistent with section 1860D-5(c)(5).''.
    (f) Limitation on Cost-Sharing.--Section 1854(e) (42 U.S.C. 1395w-
24(e)) is amended by adding at the end the following new paragraph:
            ``(5) Limitation on cost-sharing.--In no event may a MA 
        organization include a requirement that an enrollee pay cost-
        sharing in excess of the cost-sharing otherwise permitted under 
        part D.''.

SEC. 103. MEDIGAP REVISIONS.

    (a) Required Coverage of Covered Outpatient Prescription Drugs.--
Section 1882(p)(2)(B) (42 U.S.C. 1395ss(p)(2)(B)) is amended by 
inserting before ``and'' at the end the following: ``including a 
requirement that an appropriate number of policies provide coverage of 
drugs which complements but does not duplicate the drug benefits that 
beneficiaries are otherwise eligible for benefits under part D of this 
title (with the Secretary and the National Association of Insurance 
Commissioners determining the appropriate level of drug benefits that 
each benefit package must provide and ensuring that policies providing 
such coverage are affordable for beneficiaries;''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on January 1, 2006.
    (c) Transition Provisions.--
            (1) In general.--If the Secretary of Health and Human 
        Services identifies a State as requiring a change to its 
        statutes or regulations to conform its regulatory program to 
        the amendments made by this section, the State regulatory 
        program shall not be considered to be out of compliance with 
        the requirements of section 1882 of the Social Security Act due 
        solely to failure to make such change until the date specified 
        in paragraph (4).
            (2) NAIC standards.--If, within 9 months after the date of 
        enactment of this Act, the National Association of Insurance 
        Commissioners (in this subsection referred to as the ``NAIC'') 
        modifies its NAIC Model Regulation relating to section 1882 of 
        the Social Security Act (referred to in such section as the 
        1991 NAIC Model Regulation, as subsequently modified) to 
        conform to the amendments made by this section, such revised 
        regulation incorporating the modifications shall be considered 
        to be the applicable NAIC model regulation (including the 
        revised NAIC model regulation and the 1991 NAIC Model 
        Regulation) for the purposes of such section.
            (3) Secretary standards.--If the NAIC does not make the 
        modifications described in paragraph (2) within the period 
        specified in such paragraph, the Secretary of Health and Human 
        Services shall make the modifications described in such 
        paragraph and such revised regulation incorporating the 
        modifications shall be considered to be the appropriate 
        regulation for the purposes of such section.
            (4) Date specified.--
                    (A) In general.--Subject to subparagraph (B), the 
                date specified in this paragraph for a State is the 
                earlier of--
                            (i) the date the State changes its statutes 
                        or regulations to conform its regulatory 
                        program to the changes made by this section; or
                            (ii) 1 year after the date the NAIC or the 
                        Secretary first makes the modifications under 
                        paragraph (2) or (3), respectively.
                    (B) Additional legislative action required.--In the 
                case of a State which the Secretary identifies as--
                            (i) requiring State legislation (other than 
                        legislation appropriating funds) to conform its 
                        regulatory program to the changes made in this 
                        section; but
                            (ii) having a legislature which is not 
                        scheduled to meet in 2006 in a legislative 
                        session in which such legislation may be 
                        considered;
                the date specified in this paragraph is the first day 
                of the first calendar quarter beginning after the close 
                of the first legislative session of the State 
                legislature that begins on or after January 1, 2006. 
                For purposes of the previous sentence, in the case of a 
                State that has a 2-year legislative session, each year 
                of such session shall be deemed to be a separate 
                regular session of the State legislature.

SEC. 104. ASSISTANCE FOR LOW INCOME BENEFICIARIES.

    (a) QMB Coverage of Cost-Sharing.--Section 1905(p)(3) (42 U.S.C. 
1396d(p)(3)) is amended--
            (1) in subparagraph (A)--
                    (A) by striking ``and'' at the end of clause (i),
                    (B) by adding ``and'' at the end of clause (ii), 
                and
                    (C) by adding at the end the following new clause:
            ``(iii) premiums under section 1860D-5(d).''; and
            (2) in subparagraph (B), by inserting ``(i)'' after ``(B)'' 
        and by adding at the end the following new clause:
                    ``(ii) A reduction in coinsurance under 
                subparagraphs (B) and (C)(i) of section 1860D-5(c)(3) 
                to the amounts specified in section 1860D-5(e)(1).''.
    (b) Reduction in Cost Sharing for Beneficiaries With Income Below 
185 Percent of the Poverty Level.--Section 1902(a)(10)(E) (42 U.S.C. 
1396a(a)(10)(E)) is amended----
            (1) by striking ``and'' at the end of clause (iii);
            (2) by adding ``and'' at the end of clause (iv); and
            (3) by adding at the end the following new clause:
                    ``(v)(I) for making medical assistance available, 
                subject to section 1905(p)(4), for a reduction in 
                medicare cost-sharing described in section 1860D-
                5(e)(1) for individuals (other than qualified medicare 
                beneficiaries) who are enrolled under part D of title 
                XVIII and are described in section 1905(p)(1)(B) or 
                would be so described but for the fact that their 
                income exceeds 100 percent, but does not exceed 135 
                percent, of the official poverty line (referred to in 
                such section) for a family of the size involved;
                    ``(II) for making medical assistance available, 
                subject to section 1905(p)(4), for a reduction in 
                medicare cost-sharing described in section 1860D-
                5(e)(2) for individuals (other than qualified medicare 
                beneficiaries and individuals described in subclause 
                (I)) who are enrolled under part D of title XVIII and 
                are described in section 1905(p)(1)(B) or would be 
                described under such section but for the fact that 
                their income exceeds 135 percent, but does not exceed 
                185 percent, of the official poverty line (referred to 
                in such section) for a family of the size involved; and
                    ``(III) for individuals (other than qualified 
                medicare beneficiaries and individuals described in 
                subclause (I) or (II)) who are enrolled under part D of 
                title XVIII and would be described in section 
                1905(p)(1)(B) but for the fact that their income 
                exceeds 200 percent, but does not exceed 300 percent, 
                of the official poverty line (referred to in such 
                section) for a family of the size involved, for making 
                medical assistance available for medicare cost-sharing 
                described in section 1905(p)(3)(A)(iii);''.
    (c) Federal Financing of Additional Low Income Assistance.--The 
third sentence of section 1905(b) (42 U.S.C. 1396d(b)) is amended by 
inserting before the period at the end the following: ``and with 
respect to amounts expended that are attributable to the amendments 
made by subsection (a) or (b) of section 104 of the Medicare 
Prescription Drug Affordability Act of 2005''.
    (d) Treatment of Territories.--
            (1) In general.--Section 1905(p) (42 U.S.C. 1396d(p)) is 
        amended--
                    (A) by redesignating paragraphs (5) and (6) as 
                paragraphs (6) and (7), respectively; and
                    (B) by inserting after paragraph (4) the following 
                new paragraph:
    ``(5)(A) In the case of a State, other than the 50 States and the 
District of Columbia--
            ``(i) the provisions of paragraph (3) insofar as they 
        relate to section 1860D-5 and the provisions of section 
        1902(a)(10)(E)(v) shall not apply to residents of such State; 
        and
            ``(ii) if the State establishes a plan described in 
        subparagraph (B) (for providing medical assistance with respect 
        to the provision of prescription drugs to medicare 
        beneficiaries), the amount otherwise determined under section 
        1108(f) (as increased under section 1108(g)) for the State 
        shall be increased by the amount specified in subparagraph (C).
    ``(B) The plan described in this subparagraph is a plan that--
            ``(i) provides medical assistance with respect to the 
        provision of covered outpatient drugs (as defined in section 
        1860D-5(b)) to low-income medicare beneficiaries; and
            ``(ii) assures that additional amounts received by the 
        State that are attributable to the operation of this paragraph 
        are used only for such assistance.
    ``(C)(i) The amount specified in this subparagraph for a State for 
a year is equal to the product of--
            ``(I) the aggregate amount specified in clause (ii); and
            ``(II) the amount specified in section 1108(g)(1) for that 
        State, divided by the sum of the amounts specified in such 
        section for all such States.
    ``(ii) The aggregate amount specified in this clause for--
            ``(I) 2006, is equal to $25,000,000; or
            ``(II) a subsequent year, is equal to the aggregate amount 
        specified in this clause for the previous year increased by 
        annual percentage increase specified in section 1860D-
        5(c)(8)(B) for the year involved.
    ``(D) The Secretary shall submit to Congress a report on the 
application of this paragraph and may include in the report such 
recommendations as the Secretary deems appropriate.''.
            (2) Conforming amendment.--Section 1108(f) (42 U.S.C. 
        1308(f)) is amended by inserting ``and section 
        1905(p)(5)(A)(ii)'' after ``Subject to subsection (g)''.
    (e) Application of Cost-Sharing.--Section 1902(n)(2) (42 U.S.C. 
1396a(n)(2)) is amended by adding at the end the following: ``The 
previous sentence shall not apply to medicare cost-sharing relating to 
benefits under part D of title XVIII.''.
    (f) Effective Date.--The amendments made by this section apply to 
medical assistance for premiums and cost-sharing incurred on or after 
January 1, 2006, with regard to whether regulations to implement such 
amendments are promulgated by such date.

SEC. 105. EXPANSION OF MEMBERSHIP AND DUTIES OF MEDICARE PAYMENT 
              ADVISORY COMMISSION (MEDPAC).

    (a) Expansion of Membership.--
            (1) In general.--Section 1805(c) (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, 2006.
    (b) Expansion of Duties.--Section 1805(b)(2) (42 U.S.C. 1395b-
6(b)(2)) is amended by adding at the end the following new 
subparagraph:
                    ``(D) Prescription drug benefit program.--
                Specifically, the Commission shall review, with respect 
                to the prescription drug benefit program under part D, 
                the following:
                            ``(i) The methodologies used for the 
                        management of costs and utilization of 
                        prescription drugs.
                            ``(ii) The prices negotiated and paid, 
                        including trends in such prices and applicable 
                        discounts and comparisons with prices under 
                        section 1860D-6(a)(2)(E).
                            ``(iii) The relationship of pharmacy 
                        acquisition costs to the prices so negotiated 
                        and paid.
                            ``(iv) The methodologies used to ensure 
                        access to covered outpatient prescription drugs 
                        and to ensure quality in the appropriate 
                        dispensing and utilization of such drugs.
                            ``(v) The impact of the program on 
                        promoting the development of breakthrough 
                        drugs.''.

                  TITLE II--AFFORDABLE PHARMACEUTICALS

             Subtitle A--Importation of Prescription Drugs

SEC. 201. SHORT TITLE.

    This subtitle may be cited as the ``Pharmaceutical Market Access 
Act of 2005''.

SEC. 202. FINDINGS.

    The Congress finds as follows:
            (1) Americans unjustly pay up to 1000 percent more to fill 
        their prescriptions than consumers in other countries.
            (2) The United States is the world's largest market for 
        pharmaceuticals yet consumers still pay the world's highest 
        prices.
            (3) An unaffordable drug is neither safe nor effective. 
        Allowing and structuring the importation of prescription drugs 
        ensures access to affordable drugs, thus providing a level of 
        safety to American consumers they do not currently enjoy.
            (4) According to the Congressional Budget Office, American 
        seniors alone will spend $1.8 trillion dollars on 
        pharmaceuticals over the next ten years.
            (5) Allowing open pharmaceutical markets could save 
        American consumers at least $635 billion of their own money 
        each year.

SEC. 203. PURPOSES.

    The purposes of this subtitle are as follows:
            (1)  relief from high drug costs.--To give all Americans 
        immediate relief from the outrageously high cost of 
        pharmaceuticals.
            (2) Correct economics of drug market.--To reverse the 
        perverse economics of the American pharmaceutical markets.
            (3) Limiting importation of drugs to those only approved by 
        the fda.--To allow the importation of drugs only if the drugs 
        and the facilities where they are manufactured are approved by 
        the Food and Drug Administration, and to exclude pharmaceutical 
        narcotics.
            (4) Use of counterfeit-resistant packaging.--To require 
        that imported prescription drugs be packaged and shipped using 
        counterfeit-resistant technologies approved by the Bureau of 
        Engraving and Printing (technologies similar to those used to 
        secure United States currency).

SEC. 204. IMPORTATION OF PRESCRIPTION DRUGS.

    (a) Restoration of Former Text.--The Federal Food, Drug, and 
Cosmetic Act is is amended--
            (1) in section 804 (21 U.S.C. 384), by amending the section 
        to read as if section 1121(a) of the Medicare Prescription 
        Drug, Improvement, and Modernization Act of 2003 (Public Law 
        108-173) had not been enacted;
            (2) in section 301 (21 U.S.C. 331), by amending the section 
        to read as if section 1121(b)(1) of such Act had not been 
        enacted; and
            (3) in section 303 (21 U.S.C. 333), by amending the section 
        to read as if section 1121(b)(2) of such Act had not been 
        enacted.
    (b) Importation of Prescription Drugs.--Section 804 of the Federal 
Food, Drug, and Cosmetic Act, as amended by subsection (a), is 
amended--
            (1) in subsection (a)--
                    (A) by striking ``The Secretary'' and inserting 
                ``Not later than 180 days after the date of the 
                enactment of the Pharmaceutical Market Access Act of 
                2005, the Secretary''; and
                    (B) by striking ``pharmacists and wholesalers'' and 
                inserting ``pharmacists, wholesalers, and qualifying 
                individuals'';
            (2) in subsection (b)--
                    (A) by amending paragraph (1) to read as follows:
            ``(1) require that each covered product imported pursuant 
        to such subsection complies with sections 501, 502, and 505, 
        and other applicable requirements of this Act; and'';
                    (B) in paragraph (2), by striking ``, including 
                subsection (d); and'' and inserting a period; and
                    (C) by striking paragraph (3);
            (3) in subsection (c), by inserting ``by pharmacists and 
        wholesalers (but not qualifying individuals)'' after 
        ``importation of covered products'';
            (4) in subsection (d)--
                    (A) by striking paragraphs (3) and (10);
                    (B) in paragraph (5), by striking ``, including the 
                professional license number of the importer, if any'';
                    (C) in paragraph (6)--
                            (i) in subparagraph (C), by inserting ``(if 
                        required under subsection (e))'' before the 
                        period;
                            (ii) in subparagraph (D), by inserting 
                        ``(if required under subsection (e))'' before 
                        the period; and
                            (iii) in subparagraph (E), by striking 
                        ``labeling'';
                    (D) in paragraph (7)--
                            (i) in subparagraph (A), by inserting ``(if 
                        required under subsection (e))'' before the 
                        period; and
                            (ii) by amending subparagraph (B) to read 
                        as follows:
                    ``(B) Certification from the importer or 
                manufacturer of such product that the product meets all 
                requirements of this Act.''; and
                    (E) by redesignating paragraphs (4) through (9) as 
                paragraphs (3) through (8), respectively;
            (5) by amending subsection (e) to read as follows:
    ``(e) Testing.--
            ``(1) In general.--Subject to paragraph (2), regulations 
        under subsection (a) shall require that testing referred to in 
        paragraphs (5) through (7) of subsection (d) be conducted by 
        the importer of the covered product, unless the covered product 
        is a prescription drug subject to the requirements of section 
        505C for counterfeit-resistant technologies.
            ``(2) Exception.--The testing requirements of paragraphs 
        (5) through (7) of subsection (d) shall not apply to an 
        importer unless the importer is a wholesaler.'';
            (6) in subsection (f), by striking ``or designated by the 
        Secretary, subject to such limitations as the Secretary 
        determines to be appropriate to protect the public health'';
            (7) in subsection (g)--
                    (A) by striking ``counterfeit or''; and
                    (B) by striking ``and the Secretary determines that 
                the public is adequately protected from counterfeit and 
                violative covered products being imported pursuant to 
                subsection (a)'';
            (8) in subsection (i)(1)--
                    (A) by amending subparagraph (A) to read as 
                follows:
                    ``(A) In general.--The Secretary shall conduct, or 
                contract with an entity to conduct, a study on the 
                imports permitted pursuant to subsection (a), including 
                consideration of the information received under 
                subsection (d). In conducting such study, the Secretary 
                or entity shall evaluate the compliance of importers 
                with regulations under subsection (a), and the 
                incidence of shipments pursuant to such subsection, if 
                any, that have been determined to be misbranded or 
                adulterated, and determine how such compliance 
                contrasts with the incidence of shipments of 
                prescription drugs transported within the United States 
                that have been determined to be misbranded or 
                adulterated.''; and
                    (B) in subparagraph (B), by striking ``Not later 
                than 2 years after the effective date of final 
                regulations under subsection (a),'' and inserting ``Not 
                later than 18 months after the date of the enactment of 
                the Pharmaceutical Market Access Act of 2005,'';
            (9) in subsection (k)(2)--
                    (A) by redesignating subparagraphs (D) and (E) as 
                subparagraphs (E) and (F), respectively; and
                    (B) by inserting after subparagraph (C) the 
                following:
                    ``(D) The term `qualifying individual' means an 
                individual who is not a pharmacist or a wholesaler.''; 
                and
            (10) by striking subsections (l) and (m).

SEC. 205. USE OF COUNTERFEIT-RESISTANT TECHNOLOGIES TO PREVENT 
              COUNTERFEITING.

    (a) Misbranding.--Section 502 of the Federal Food, Drug, and 
Cosmetic Act (21 U.S.C. 352; deeming drugs and devices to be 
misbranded) is amended by adding at the end the following:
    ``(x) If it is a drug subject to section 503(b), unless the 
packaging of such drug complies with the requirements of section 505C 
for counterfeit-resistant technologies.''.
    (b) Requirements.--Title V of the Federal Food, Drug, and Cosmetic 
Act (21 U.S.C. 351 et seq.) is amended by inserting after section 505B 
the following:

``SEC. 505C. COUNTERFEIT-RESISTANT TECHNOLOGIES.

    ``(a) Incorporation of Counterfeit-Resistant Technologies Into 
Prescription Drug Packaging.--The Secretary shall require that the 
packaging of any drug subject to section 503(b) incorporate--
            ``(1) overt optically variable counterfeit-resistant 
        technologies that are described in subsection (b) and comply 
        with the standards of subsection (c); or
            ``(2) technologies that have an equivalent function of 
        security, as determined by the Secretary.
    ``(b) Eligible Technologies.--Technologies described in this 
subsection--
            ``(1) shall be visible to the naked eye, providing for 
        visual identification of product authenticity without the need 
        for readers, microscopes, lighting devices, or scanners;
            ``(2) shall be similar to that used by the Bureau of 
        Engraving and Printing to secure United States currency;
            ``(3) shall be manufactured and distributed in a highly 
        secure, tightly controlled environment; and
            ``(4) should incorporate additional layers of non-visible 
        covert security features up to and including forensic 
        capability.
    ``(c) Standards for Packaging.--
            ``(1) Multiple elements.--For the purpose of making it more 
        difficult to counterfeit the packaging of drugs subject to 
        section 503(b), manufacturers of the drugs shall incorporate 
        the technologies described in subsection (b) into multiple 
        elements of the physical packaging of the drugs, including 
        blister packs, shrink wrap, package labels, package seals, 
        bottles, and boxes.
            ``(2) Labeling of shipping container.--Shipments of drugs 
        described in subsection (a) shall include a label on the 
        shipping container that incorporates the technologies described 
        in subsection (b), so that officials inspecting the packages 
        will be able to determine the authenticity of the shipment. 
        Chain of custody procedures shall apply to such labels and 
        shall include procedures applicable to contractual agreements 
        for the use and distribution of the labels, methods to audit 
        the use of the labels, and database access for the relevant 
        governmental agencies for audit or verification of the use and 
        distribution of the labels.''.

Subtitle B--Quality Control and Cost Containment Blue Ribbon Task Force

SEC. 211. TASK FORCE.

    (a) Establishment.--There is established a permanent bipartisan 
advisory committee (appointed by the congressional officials specified 
in subsection (c)), to be known as the Quality Control and Cost 
Containment Blue Ribbon Task Force (in this section referred to as the 
``Task Force'').
    (b) Duties.--The duties of the Task Force shall be the following:
            (1) To study the following:
                    (A) The most cost-effective ways to reduce the 
                costs of prescription drug costs without compromising 
                quality.
                    (B) The use of generic drugs and imported drugs to 
                reduce the costs of prescription drugs under the 
                medicare program.
                    (C) The effect of patents and other intellectual 
                property rights on the costs of prescription drugs, 
                including all possible options to reduce such costs 
                through more innovative and flexible patent laws.
                    (D) The impact of both government and private 
                research and development on the costs of prescription 
                drugs, including all possible options to reduce such 
                costs through more innovative and flexible ways to 
                research and develop new prescription drugs.
            (2) To provide testimony to the Congress on ways to contain 
        prescription drug costs without compromising quality.
            (3) To submit an annual report under subsection (f).
    (c) Membership.--
            (1) Appointment.--The Task Force shall be composed of 20 
        members, as follows:
                    (A) 5 members, appointed by the Chairman of the 
                Committee on Energy and Commerce of the House of 
                Representatives.
                    (B) 5 members, appointed by the ranking member of 
                the Committee on Energy and Commerce of the House of 
                Representatives.
                    (C) 5 members, appointed by the Chairman of the 
                Committee on Commerce, Science, and Transportation of 
                the Senate.
                    (D) 5 members, appointed by the ranking member of 
                the Committee on Commerce, Science, and Transportation 
                of the Senate.
            (2) Qualifications.--The members of the Task Force shall be 
        appointed from among academics, economists, physicians, 
        representatives of nongovernmental organizations, and 
        scientists, who are experts in the fields of business, 
        economics, medicine, and patent law.
            (3) Term.--Each member of the Task Force shall be appointed 
        for a term of not more than 3 years and may be reappointed for 
        1 or more additional terms.
            (4) Vacancies.--Any member appointed to fill a vacancy 
        occurring before the expiration of the term for which the 
        member's predecessor was appointed shall be appointed only for 
        the remainder of that term. A member may serve after the 
        expiration of that member's term until a successor has taken 
        office. A vacancy in the Task Force shall be filled in the 
        manner in which the original appointment was made.
            (5) Basic pay; travel expenses.--Members of the Task Force 
        shall serve without pay, except that each member shall receive 
        travel expenses, including per diem in lieu of subsistence, in 
        accordance with applicable provisions under subchapter I of 
        chapter 57 of title 5, United States Code.
    (d) Staff of Task Force.--
            (1) Appointment.--The Task Force may appoint and fix the 
        pay of not more than 5 staff members.
            (2) Applicability of certain civil service laws.--The staff 
        of the Task Force may be appointed without regard to the 
        provisions of title 5, United States Code, governing 
        appointments in the competitive service, and may be paid (to 
        the extent and in the amounts provided in advance in 
        appropriation Acts) without regard to the provisions of chapter 
        51 and subchapter III of chapter 53 of that title relating to 
        classification and General Schedule pay rates.
    (e) Hearings and Sessions.--The Task Force may, for the purpose of 
carrying out this section, hold hearings, sit and act at times and 
places, take testimony, and receive evidence as the Task Force 
considers appropriate.
    (f) Reports.--
            (1) In general.--The Task Force shall provide an annual 
        report to the President, the Congress, and the Centers for 
        Medicare & Medicaid Services on the results of the studies 
        conducted by the Task Force under subsection (b).
            (2) Dissenting opinions.--The Task Force shall give each 
        Member of the Task Force an opportunity to include a dissenting 
        opinion in each annual report under this subsection.
    (g) Authorization of Appropriations.--To carry out this section, 
there are authorized to be appropriated $400,000 for fiscal year 2006 
and each subsequent fiscal year.

                     TITLE III--DEFENSE OF MEDICARE

SEC. 301. ELIMINATION OF PRIVATIZATION OF MEDICARE.

    (a) Repeal of Comparative Cost Adjustment (Cca) Program.--Subtitle 
E of title II of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003, and the amendments made by such subtitle, 
are repealed.
    (b) Prohibition of Privatization.--No provision of law, including 
the new prescription drug program under part D of title XVIII of the 
Social Security Act, shall be applied in a manner that prevents a 
medicare beneficiary from continuing to obtain benefits under a 
traditional fee-for-service medicare program.

SEC. 302. REPEAL OF MA REGIONAL PLAN STABILIZATION FUND.

    (a) In General.--Section 1858 of the Social Security Act, as added 
by section 221(c) of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003, is amended--
            (1) by striking subsection (e);
            (2) by redesignating subsections (f), (g), and (h) as 
        subsections (e), (f), and (g), respectively; and
            (3) in subsection (e), as so redesignated, by striking 
        ``subject to subsection (e),''.
    (b) Conforming Amendment.--Section 1851(i)(2) of the Social 
Security Act (42 U.S.C. 1395w-21(i)(2)), as amended by section 
221(d)(5) of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003, is amended by striking ``1858(h)'' and 
inserting ``1858(g)''.

SEC. 303. REPEAL OF HEALTH SAVINGS ACCOUNTS.

    Section 1201 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003, and the amendments made by such section, are 
repealed.

SEC. 304. APPLICATION OF RISK ADJUSTMENT REFLECTING CHARACTERISTICS FOR 
              THE ENTIRE MEDICARE POPULATION.

    Effective January 1, 2006, in applying risk adjustment factors to 
payment to organizations under section 1853 of the Social Security Act 
(42 U.S.C. 1395w-23) in a budget neutral manner, the Secretary of 
Health and Human Services shall assure that such factors, in the 
aggregate, take into account the actuarial characteristics of the 
entire medicare population, and not merely the population of 
individuals enrolled under a plan under part C of title XVIII of such 
Act.

SEC. 305. PHASE-IN TO PAYMENT AT 100 PERCENT OF FEE-FOR-SERVICE RATE.

    Notwithstanding any other provision of law, the Secretary of Health 
and Human Services shall provide, in a phased-in manner over a 5-year 
period beginning with 2006, for adjustment of payment rates to 
organizations under section 1853 of the Social Security Act so that, at 
the end of such phase-in period, such payment rates reflect only the 
payment rate described in subsection (c)(1)(D) of such section 
(relating to 100 percent fee-for-service payment).

SEC. 306. REPEAL OF MEDICARE EXPENDITURE CAP.

    Subtitle A of title VIII of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 is repealed.

SEC. 307. CONTINUOUS OPEN ENROLLMENT IN MEDICAREADVANTAGE PLANS.

    Section 1851(e)(2) of the Social Security Act (42 U.S.C. 1395w-
21(e)(2)) is amended to read as follows:
            ``(2) Open enrollment and disenrollment opportunities.--
        Subject to paragraph (5), an MA eligible individual may change 
        the election under subsection (a)(1) at any time and without 
        any penalty or charge.''.

SEC. 308. EFFECTIVE DATE.

    (a) In General.--The amendments made by this title shall take 
effect as if included in the enactment of the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003.
    (b) Application of Laws.--If any amendment to any provision of any 
Act is repealed by this title, such provision shall be restored, 
applied, and administered as if the amendment had never been enacted.
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