[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4697 Introduced in House (IH)]







109th CONGRESS
  2d Session
                                H. R. 4697

To amend title XVIII of the Social Security Act to replace the Medicare 
 prescription drug benefit adopted by the Medicare Prescription Drug, 
     Improvement, and Modernization Act of 2003 with a revised and 
simplified prescription benefit program for all Medicare beneficiaries.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            February 1, 2006

  Mr. Sanders (for himself, Mr. Kucinich, Mr. DeFazio, Mr. Owens, Ms. 
 Lee, Mr. Hinchey, Mr. Payne, Mr. Grijalva, Mr. Olver, Mr. Stark, Ms. 
Woolsey, Mr. Nadler, Mr. McGovern, Ms. Kaptur, Mr. Conyers, Ms. Corrine 
    Brown of Florida, Mrs. Emerson, and Mr. Tierney) introduced the 
   following bill; which was referred to the Committee on Energy and 
  Commerce, and in addition to the Committee on Ways and Means, for a 
 period to be subsequently determined by the Speaker, in each case for 
consideration of such provisions as fall within the jurisdiction of the 
                          committee concerned

_______________________________________________________________________

                                 A BILL


 
To amend title XVIII of the Social Security Act to replace the Medicare 
 prescription drug benefit adopted by the Medicare Prescription Drug, 
     Improvement, and Modernization Act of 2003 with a revised and 
simplified prescription benefit program for all Medicare beneficiaries.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Medicare Drugs for 
Seniors (MEDS) Act of 2006''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents
Sec. 2. Findings
Sec. 3. Repeal and transition
Sec. 4. Prescription medicine benefit program
   ``Part D--Prescription Medicine Benefit for the Aged and Disabled

        ``Sec. 1860. Establishment of prescription medicine benefit 
                            program for the aged and disabled
        ``Sec. 1860A. Scope of benefits
        ``Sec. 1860B. Payment of benefits; benefit limits
        ``Sec. 1860C. Eligibility and enrollment
        ``Sec. 1860D. Premiums
        ``Sec. 1860E. Special eligibility, enrollment, and copayment 
                            rules for low-income individuals
        ``Sec. 1860F. Prescription Medicine Insurance Account
        ``Sec. 1860G. Administration of benefits
        ``Sec. 1860H. Employer Incentive Program for employment-based 
                            retiree medicine coverage
        ``Sec. 1860I. Promotion of pharmaceutical research on break-
                            through medicines while providing program 
                            cost containment
        ``Sec. 1860J. Appropriations to cover Government contributions
        ``Sec. 1860K. Prescription medicine defined
Sec. 5. Substantial reductions in the price of prescription drugs for 
                            medicare beneficiaries
Sec. 6. Importation of certain prescription drugs
        ``Sec. 804. Commercial and personal importation of prescription 
                            drugs
        ``Sec. 805. Disposition of certain drugs denied admission
        ``Sec. 503B. Internet sales of prescription drugs
Sec. 7. Reasonable price agreement for federally funded research
Sec. 8. GAO ongoing studies and reports on program; miscellaneous 
                            reports
Sec. 9. Medigap transition provisions

SEC. 2. FINDINGS.

    Congress makes the following findings:
            (1) The first month of implementation of the Medicare 
        prescription drug benefit enacted by the amendments made by 
        title I of the Medicare Prescription Drug, Improvement, and 
        Modernization Act of 2003 (Public Law 108-173) revealed 
        inherent problems with the structure of the benefit and 
        demonstrated that the benefit is complicated and confusing to 
        individuals eligible for the benefit.
            (2) During such first month, hundreds of thousands of low-
        income Medicare beneficiaries had difficulty obtaining their 
        covered prescription drugs; many were turned away from the 
        pharmacies without their covered prescription drugs and many 
        others were overcharged for their covered prescription drugs.
            (3) Since implementation of such prescription drug benefit 
        26 states needed to intervene to ensure that their low-income 
        Medicare beneficiaries obtained their covered prescription 
        drugs and many States have been forced to declare public health 
        emergencies.
            (4) The amendments made by title I of the Medicare 
        Prescription Drug, Improvement, and Modernization Act of 2003 
        do not ensure the long-term financial viability of the Medicare 
        prescription drug benefit enacted by such title through cost-
        containment measures, and contains a provision that explicitly 
        prohibits Medicare from negotiating for lower prescription drug 
        prices, which is a practice of the Department of Veterans 
        Affairs (VA).
            (5) All Medicare beneficiaries should have access to a 
        voluntary, reliable, affordable, and defined outpatient 
        medicine benefit that is part of the Medicare program and that 
        assists with the high cost of prescription medicines and 
        protects such beneficiaries from excessive out-of-pocket costs.
            (6) Americans unjustly pay up to 5 times more to fill their 
        prescriptions than consumers in other countries.
            (7) The United States is the largest market for 
        pharmaceuticals in the world, yet American consumers pay the 
        highest prices for brand pharmaceuticals in the world.
            (8) A prescription drug is neither safe nor effective to an 
        individual who cannot afford it.
            (9) Allowing and structuring the importation of 
        prescription drugs to ensure access to safe and affordable 
        drugs approved by the Food and Drug Administration will provide 
        a level of safety to American consumers that they do not 
        currently enjoy.
            (10) American seniors will spend $1,800,000,000,000 on 
        pharmaceuticals over the next 10 years.
            (11) Allowing open pharmaceutical markets could save 
        American consumers at least $38,000,000,000 each year.

SEC. 3. REPEAL AND TRANSITION.

    (a) Repeal of Medicare Part D Benefit and Transition to New 
Medicare Prescription Medicine Benefit Program.--The amendments made by 
title I of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (Public Law 108-173) are repealed as of 
December 31, 2006, and the provisions of law amended by such title 
shall read as if such title had not been enacted.
    (b) Transition.--The Secretary of Health and Human Services shall 
provide for an appropriate transition from administering the Social 
Security Act in accordance with the amendments made by title I of the 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
(Public Law 108-173) to administering such Act in accordance with the 
amendments made by section 4 of this Act.

SEC. 4. PRESCRIPTION MEDICINE BENEFIT PROGRAM.

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

   ``Part D--Prescription Medicine Benefit for the Aged and Disabled

 ``establishment of prescription medicine benefit program for the aged 
                              and disabled

    ``Sec. 1860. There is established a voluntary insurance program to 
provide prescription medicine benefits, including pharmacy services, in 
accordance with the provisions of this part for individuals who are 
aged or disabled or have end-stage renal disease and who elect to 
enroll under such program, to be financed from premium payments by 
enrollees together with contributions from funds appropriated by the 
Federal Government.

                          ``scope of benefits

    ``Sec. 1860A. (a) In General.--The benefits provided to an 
individual enrolled in the insurance program under this part shall 
consist of--
            ``(1) payments made, in accordance with the provisions of 
        this part, for covered prescription medicines (as specified in 
        subsection (b)) dispensed by any pharmacy participating in the 
        program under this part (and, in circumstances designated by 
        the Secretary, by a nonparticipating pharmacy), including any 
        specifically named medicine prescribed for the individual by a 
        qualified health care professional regardless of whether the 
        medicine is included in any formulary established under this 
        part if such medicine is certified as medically necessary by 
        such health care professional (except that the Secretary shall 
        encourage to the maximum extent possible the substitution and 
        use of lower-cost generics), up to the benefit limits specified 
        in section 1860B; and
            ``(2) charging by pharmacies of the negotiated price--
                    ``(A) for all covered prescription medicines, 
                without regard to such benefit limit; and
                    ``(B) established with respect to any drugs or 
                classes of drugs described in subparagraphs (A), (B), 
                (D), (E), or (F) of section 1927(d)(2) that are 
                available to individuals receiving benefits under this 
                title.
    ``(b) Covered Prescription Medicines.--
            ``(1) In general.--Covered prescription medicines, for 
        purposes of this part, include all prescription medicines (as 
        defined in section 1860K(1)), including smoking cessation 
        agents, except as otherwise provided in this subsection.
            ``(2) Exclusions from coverage.--Covered prescription 
        medicines shall not include drugs or classes of drugs described 
        in subparagraphs (A) through (D) and (F) through (H) of section 
        1927(d)(2) unless--
                    ``(A) specifically provided otherwise by the 
                Secretary with respect to a drug in any of such 
                classes; or
                    ``(B) a drug in any of such classes is certified to 
                be medically necessary by a health care professional.
            ``(3) Exclusion of prescription medicines to the extent 
        covered under part a or b.--A medicine prescribed for an 
        individual that would otherwise be a covered prescription 
        medicine under this part shall not be so considered to the 
        extent that payment for such medicine is available under part A 
        or B, including all injectable drugs and biologicals for which 
        payment was made or should have been made by a carrier under 
        section 1861(s)(2) (A) or (B) as of the date of enactment of 
        the Medicare Drugs for Seniors (MEDS) Act of 2006. Medicines 
        otherwise covered under part A or B shall be covered under this 
        part to the extent that benefits under part A or B are 
        exhausted.
            ``(4) Study on inclusion of home infusion therapy 
        services.--Not later than one year after the date of the 
        enactment of the Medicare Drugs for Seniors (MEDS) Act of 2006, 
        the Secretary shall submit to Congress a legislative proposal 
        for the delivery of home infusion therapy services under this 
        title and for a system of payment for such a benefit that 
        coordinates items and services furnished under part B and under 
        this part.

                 ``payment of benefits; benefit limits

    ``Sec. 1860B. (a) Payment of Benefits.--
            ``(1) In general.--There shall be paid from the 
        Prescription Medicine Insurance Account within the 
        Supplementary Medical Insurance Trust Fund, in the case of each 
        individual who is enrolled in the insurance program under this 
        part and who purchases covered prescription medicines in a 
        calendar year--
                    ``(A) with respect to costs incurred for covered 
                prescription medicine furnished during a year, before 
                the individual has incurred out-of-pocket expenses 
                under this subsection equal to the catastrophic out-of-
                pocket limit specified in subsection (b), an amount 
                equal to the applicable percentage (specified in 
                paragraph (2)) of the negotiated price for each such 
                covered prescription medicine or such higher percentage 
                as is proposed under section 1860G(b)(7); and
                    ``(B) with respect to costs incurred for covered 
                prescription medicine furnished during a year, after 
                the individual has incurred out-of-pocket expenses 
                under this subsection equal to the catastrophic out-of-
                pocket limit specified in subsection (b), an amount 
                equal to 100 percent of the negotiated price for each 
                such covered prescription medicine.
            ``(2) Applicable percentage.--The applicable percentage 
        specified in this paragraph is 80 percent or such higher 
        percentage as is proposed under section 1860G(b)(7), if the 
        Secretary finds that such higher percentage will not increase 
        aggregate costs to the Prescription Medicine Insurance Account.
    ``(b) Catastrophic Limit on Out-of-pocket Expenses.--
            ``(1) In general.--The catastrophic limit on out-of-pocket 
        expenses specified in this subsection--
                    ``(A) for each of calendar years 2007 and 2008, 
                $2,000; and
                    ``(B) subject to paragraph (2), for calendar year 
                2009 and each subsequent calendar year is equal to the 
                limit for the preceding year under this paragraph 
                adjusted by the sustainable growth rate percentage 
                (determined under section 1860I(b)) for the year 
                involved.
            ``(2) Rounding.--Any amount determined under paragraph 
        (1)(B) that is not a multiple of $10 shall be rounded to the 
        nearest multiple of $10.

                      ``eligibility and enrollment

    ``Sec. 1860C. (a) Eligibility.--Every individual who, during or 
after 2007, is entitled to hospital insurance benefits under part A or 
enrolled in the medical insurance program under part B is eligible to 
enroll, in accordance with the provisions of this section, in the 
insurance program under this part, during an enrollment period under 
this section, in such manner and form specified by the Secretary in 
regulations.
    ``(b) Enrollment.--
            ``(1) In general.--Each individual who satisfies subsection 
        (a) shall be enrolled (or eligible to enroll) in the program 
        under this part in accordance with the provisions of section 
        1837, as if that section applied to this part, except as 
        otherwise explicitly provided in this part.
            ``(2) Single enrollment period.--Except as provided in 
        section 1837(i) (as such section applies to this part), 1860E, 
        or 1860H(e), or as otherwise explicitly provided, no individual 
        shall be entitled to enroll in the program under this part at 
        any time after the initial enrollment period without penalty, 
        and in the case of all other late enrollments, the Secretary 
        shall develop a late enrollment penalty for the individual that 
        fully recovers the additional actuarial risk involved providing 
        coverage for the individual.
            ``(3) Special enrollment period for 2007.--
                    ``(A) In general.--An individual who first 
                satisfies subsection (a) in 2007 may on or after the 
                date on which they first become eligible and at any 
                time on or before December 31, 2007--
                            ``(i) enroll in the program under this 
                        part; and
                            ``(ii) enroll or reenroll in such program 
                        after having previously declined or terminated 
                        enrollment in such program.
                    ``(B) Effective date of coverage.--An individual 
                who enrolls under the program under this part pursuant 
                to subparagraph (A) shall be entitled to benefits under 
                this part beginning on the first day of the month 
                following the month in which such enrollment occurs.
    ``(c) Period of Coverage.--
            ``(1) In general.--Except as otherwise provided in this 
        part, an individual's coverage under the program under this 
        part shall be effective for the period provided in section 
        1838, as if that section applied to the program under this 
        part.
            ``(2) Part d coverage terminated by termination of coverage 
        under parts a and b.--In addition to the causes of termination 
        specified in section 1838, an individual's coverage under this 
        part shall be terminated if the individual retains coverage 
        under neither the program under part A nor the program under 
        part B, effective on the effective date of termination of 
        coverage under part A or (if later) under part B.

                               ``premiums

    ``Sec. 1860D. (a) Annual Establishment of Monthly Premium Rates.--
            ``(1) In general.--The Secretary shall, during September of 
        2006 and of each succeeding year, determine and promulgate a 
        monthly premium rate for the succeeding year in accordance with 
        the provisions of this subsection.
            ``(2) Initial premiums.--For months in 2007, the monthly 
        premium rate under this subsection shall be--
                    ``(A) $25, in the case of premiums paid by an 
                individual enrolled in the program under this part; and
                    ``(B) $32, in the case of premiums paid for such an 
                individual by a former employer (as defined in section 
                1860H(f)(2)).
            ``(3) Subsequent years.--
                    ``(A) In general.--For months in a year after 2007, 
                the monthly premium under this subsection shall be 
                (subject to subparagraph (B)) the monthly premium 
                (computed under this subsection without regard to 
                subparagraph (B)) for the previous year increased by 
                the annual percentage increase in average per capita 
                aggregate expenditures for covered outpatient medicines 
                in the United States for medicare beneficiaries, as 
                estimated and published by the Secretary in September 
                before the year and for the year involved.
                    ``(B) Rounding.--The monthly premium determined 
                under subparagraph (A) shall be rounded to the nearest 
                multiple of 10 cents if it is not a multiple of 10 
                cents.
                    ``(C) Publication of assumptions.--The Secretary 
                shall publish, together with the promulgation of the 
                monthly premium rates under this paragraph, a statement 
                setting forth the actuarial assumptions and bases 
                employed in arriving at the monthly premium under 
                subparagraph (A).
    ``(b) Payment of Premiums.--
            ``(1) Payments by deduction from social security, railroad 
        retirement benefits, or benefits administered by opm.--
                    ``(A) Deduction from benefits.--In the case of an 
                individual who is entitled to or receiving benefits as 
                described in subsection (a), (b), or (d) of section 
                1840, premiums payable under this part shall be 
                collected by deduction from such benefits at the same 
                time and in the same manner as premiums payable under 
                part B are collected pursuant to section 1840.
                    ``(B) Transfers to prescription medicine insurance 
                account.--The Secretary of the Treasury shall, from 
                time to time, but not less often than quarterly, 
                transfer premiums collected pursuant to subparagraph 
                (A) to the Prescription Medicine Insurance Account from 
                the appropriate funds and accounts described in 
                subsections (a)(2), (b)(2), and (d)(2) of section 1840, 
                on the basis of the certifications described in such 
                subsections. The amounts of such transfers shall be 
                appropriately adjusted to the extent that prior 
                transfers were too great or too small.
            ``(2) Direct payments to secretary.--
                    ``(A) Additional payment by enrollee.--An 
                individual to whom paragraph (1) applies (other than an 
                individual receiving benefits as described in section 
                1840(d)) and who estimates that the amount that will be 
                available for deduction under such paragraph for any 
                premium payment period will be less than the amount of 
                the monthly premiums for such period may (under 
                regulations) pay to the Secretary the estimated 
                balance, or such greater portion of the monthly premium 
                as the individual chooses.
                    ``(B) Payments by other enrollees.--An individual 
                enrolled in the insurance program under this part with 
                respect to whom none of the preceding provisions of 
                this subsection applies (or to whom section 1840(c) 
                applies) shall pay premiums to the Secretary at such 
                times and in such manner as the Secretary shall by 
                regulations prescribe.
                    ``(C) Deposit of premiums.--Amounts paid to the 
                Secretary under this paragraph shall be deposited in 
                the Treasury to the credit of the Prescription Medicine 
                Insurance Account in the Supplementary Medical 
                Insurance Trust Fund.
    ``(c) Certain Low-Income Individuals.--For rules concerning 
premiums for certain low-income individuals, see section 1860E.

 ``special eligibility, enrollment, and copayment rules for low-income 
                              individuals

    ``Sec. 1860E. (a) State Agreements for Coverage.--
            ``(1) In general.--The Secretary shall, at the request of a 
        State, enter into an agreement with the State under which all 
        individuals described in paragraph (2) are enrolled in the 
        program under this part, without regard to whether any such 
        individual has previously declined the opportunity to enroll in 
        such program.
            ``(2) Eligibility groups.--The individuals described in 
        this paragraph, for purposes of paragraph (1), are individuals 
        who satisfy section 1860C(a) and who are--
                    ``(A)(i) eligible individuals within the meaning of 
                section 1843; and
                    ``(ii) in a coverage group or groups permitted 
                under section 1843 (as selected by the State and 
                specified in the agreement); or
                    ``(B) qualified medicare medicine beneficiaries (as 
                defined in subsection (e)(1)).
            ``(3) Coverage period.--The period of coverage under this 
        part of an individual enrolled under an agreement under this 
        subsection shall be as follows:
                    ``(A) Individuals eligible (at state option) for 
                part b buy-in.--In the case of an individual described 
                in subsection (a)(2)(A), the coverage period shall be 
                the same period that applies (or would apply) pursuant 
                to section 1843(d).
                    ``(B) Qualified medicare medicine beneficiaries.--
                In the case of an individual described in subsection 
                (a)(2)(B)--
                            ``(i) the coverage period shall begin on 
                        the latest of--
                                    ``(I) January 1, 2007;
                                    ``(II) the first day of the third 
                                month following the month in which the 
                                State agreement is entered into; or
                                    ``(III) the first day of the first 
                                month following the month in which the 
                                individual satisfies section 1860C(a); 
                                and
                            ``(ii) the coverage period shall end on the 
                        last day of the month in which the individual 
                        is determined by the State to have become 
                        ineligible for medicare medicine cost-sharing.
            ``(4) Alternative enrollment methods.--In the process of 
        enrolling low-income individuals under this part, the Secretary 
        shall use the system provided under section 154 of the Social 
        Security Act Amendments of 1994 for newly eligible medicare 
        beneficiaries and shall apply a similar system for other 
        medicare beneficiaries. Such system shall use existing Federal 
        government databases to identify eligibility. Such system shall 
        not require that beneficiaries apply for, or enroll through, 
        State medicaid systems in order to obtain low-income assistance 
        described in this section.
    ``(b) Special Part D Enrollment Opportunity for Individuals Losing 
Medicaid Eligibility.--In the case of an individual who--
            ``(1) satisfies section 1860C(a); and
            ``(2) loses eligibility for benefits under the State plan 
        under title XIX after having been enrolled under such plan or 
        having been determined eligible for such benefits;
the Secretary shall provide an opportunity for enrollment under the 
program under this part during the period that begins on the date that 
such individual loses such eligibility and ends on the date specified 
by the Secretary.
    ``(c) State Option to Buy-in Dually Eligible Individuals.--
            ``(1) Coverage of premiums as medical assistance.--For 
        purposes of applying the second sentence of section 1905(a), 
        any reference to premiums under part B shall be considered to 
        include a reference to premiums under this part.
            ``(2) State commitment to continue participation in part d 
        after benefit limit reached.--As a condition of additional 
        funding to a State under subsection (d), the State, in its 
        State plan under title XIX, shall provide that in the case of 
        any individual whose eligibility for medical assistance under 
        title XIX is not limited to medicare cost-sharing and for whom 
        the State elects to pay premiums under this part pursuant to 
        this section, the State will purchase all prescription 
        medicines for such individual in accordance with the provisions 
        of this part without regard to whether the benefit limit for 
        such individual under section 1860B(b) has been reached.
            ``(3) Medicare cost-sharing required for qualified medicare 
        beneficiaries.--In applying title XIX, the term `medicare cost-
        sharing' (as defined in section 1905(p)(3)) is deemed to 
        include--
                    ``(A) premiums under section 1860D; and
                    ``(B) the difference between the amount that is 
                paid under section 1860B and the amount that would be 
                paid under such section if any reference to `80 
                percent' in subsection (a)(2) of such section were 
                deemed a reference to `100 percent' (or, if the 
                Secretary approves a higher percentage under such 
                section, if such percentage were deemed to be 100 
                percent).
    ``(d) Payment to States for Coverage of Certain Medicare Cost-
Sharing.--
            ``(1) In general.--The Secretary shall provide for payment 
        under this subsection to each State that provides for--
                    ``(A) medicare cost-sharing described in section 
                1905(p)(3)(A)(ii) for individuals who would be 
                qualified medicare beneficiaries described in section 
                1905(p)(1) but for the fact that their income exceeds 
                the income level established by the State under section 
                1905(p)(2) and is at least 120 percent, but less than 
                135 percent, of the official poverty line (referred to 
                in such section) for a family of the size involved and 
                who are not otherwise eligible for medical assistance 
                under the State plan; and
                    ``(B) medicare medicine cost-sharing (as defined in 
                subsection (e)(2)) for qualified medicare medicine 
                beneficiaries described in subsection (e)(1).
            ``(2) Amount of payment.--The amount of payment under 
        paragraph (1) shall equal 100 percent of the cost-sharing 
        described in such paragraph, except that, in the case of an 
        individual whose eligibility for medical assistance under title 
        XIX is not limited to medicare cost-sharing or medicare 
        medicine cost-sharing, the amount of payment under paragraph 
        (1)(B) shall be equal to the Federal medical assistance 
        percentage described in section 1905(b)) of amounts as expended 
        for such cost-sharing.
            ``(3) Method of payment; relation to other payments.--
        Amounts shall be paid to States under this subsection in a 
        manner similar to that provided under section 1903(d). Payments 
        under this subsection shall be made in lieu of any payments 
        that otherwise may be made for medical assistance provided 
        under section 1902(a)(10)(E)(iv).
            ``(4) Treatment of territories.--
                    ``(A) In general.--Subject to subparagraph (B), 
                this subsection shall not apply to States other than 
                the 50 States and the District of Columbia.
                    ``(B) Payments.--In the case of a State (other than 
                the 50 States and the District of Columbia) that 
                develops and implements a plan of assistance for 
                pharmaceuticals provided to low-income medicare 
                beneficiaries, the Secretary shall provide for payment 
                to the State in an amount that is reasonable in 
                relation to the payment levels provided to other States 
                under paragraph (2).
    ``(e) Definitions; Special Rules.--For purposes of this section:
            ``(1) Qualified medicare medicine beneficiary.--The term 
        `qualified medicare medicine beneficiary' means an individual--
                    ``(A) who is entitled to hospital insurance 
                benefits under part A (including an individual entitled 
                to such benefits pursuant to an enrollment under 
                section 1818, but not including an individual entitled 
                to such benefits only pursuant to an enrollment under 
                section 1818A);
                    ``(B) whose income (as determined under section 
                1612 for purposes of the supplemental security income 
                program, except as provided in section 1905(p)(2)(D)) 
                is above 100 percent but below 150 percent of the 
                official poverty line (as defined by the Office of 
                Management and Budget, and revised annually in 
                accordance with section 673(2) of the Omnibus Budget 
                Reconciliation Act of 1981) applicable to a family of 
                the size involved; and
                    ``(C) whose resources (as determined under section 
                1613 for purposes of the supplemental security income 
                program) do not exceed twice the maximum amount of 
                resources that an individual may have and obtain 
                benefits under that program.
            ``(2) Medicare medicine cost-sharing.--The term `medicare 
        medicine cost-sharing' means the following costs incurred with 
        respect to a qualified medicare medicine beneficiary, without 
        regard to whether the costs incurred were for items and 
        services for which medical assistance is otherwise available 
        under a State plan under title XIX:
                    ``(A) In the case of a qualified medicare medicine 
                beneficiary whose income (as determined under paragraph 
                (1)) is less than 135 percent of the official poverty 
                line--
                            ``(i) premiums under section 1860D; and
                            ``(ii) the difference between the amount 
                        that is paid under section 1860B and the amount 
                        that would be paid under such section if any 
                        reference to `50 percent' therein were deemed a 
                        reference to `100 percent' (or, if the 
                        Secretary approves a higher percentage under 
                        such section, if such percentage were deemed to 
                        be 100 percent).
                    ``(B) In the case of a qualified medicare medicine 
                beneficiary whose income (as determined under paragraph 
                (1)) is at least 135 percent but less than 150 percent 
                of the official poverty line, a percentage of premiums 
                under section 1860D, determined on a linear sliding 
                scale ranging from 100 percent for individuals with 
                incomes at 135 percent of such line to 0 percent for 
                individuals with incomes at 150 percent of such line.
            ``(3) State.--The term `State' has the meaning given such 
        term under section 1101(a) for purposes of title XIX.
            ``(4) Treatment of drugs purchased.--The provisions of 
        section 1927 shall not apply to prescription drugs purchased 
        under this part pursuant to an agreement with the Secretary 
        under this section (including any drugs so purchased after the 
        limit under section 1860B(b) has been exceeded).

               ``prescription medicine insurance account

    ``Sec. 1860F. (a) Establishment.--There is created within the 
Federal Supplemental Medical Insurance Trust Fund established by 
section 1841 an account to be known as the `Prescription Medicine 
Insurance Account' (in this section referred to as the `Account').
    ``(b) Amounts in Account.--
            ``(1) In general.--The Account shall consist of--
                    ``(A) such amounts as may be deposited in, or 
                appropriated to, such fund as provided in this part; 
                and
                    ``(B) such gifts and bequests as may be made as 
                provided in section 201(i)(1).
            ``(2) Separation of funds.--Funds provided under this part 
        to the Account shall be kept separate from all other funds 
        within the Federal Supplemental Medical Insurance Trust Fund.
    ``(c) Payments From Account.--The Managing Trustee shall pay from 
time to time from the Account such amounts as the Secretary certifies 
are necessary to make the payments provided for by this part, and the 
payments with respect to administrative expenses in accordance with 
section 201(g).

                      ``administration of benefits

    ``Sec. 1860G. (a) Through CMS.--The Secretary shall provide for 
administration of the benefits under this part through the Centers for 
Medicare & Medicaid Services in accordance with the provisions of this 
section. The Administrator of such Centers may enter into contracts 
with carriers to administer this part in the same manner as the 
Administrator enters into such contracts to administer part B. Any such 
contract shall be separate from any contract under section 1842.
    ``(b) Administration Functions.--In carrying out this part, the 
Administrator (or a carrier under a contract with the Administrator) 
shall (or in the case of the function described in paragraph (9), may) 
perform the following functions:
            ``(1) Participation agreements, prices, and fees.--
                    ``(A) Negotiated prices.--Establish, through 
                negotiations with medicine manufacturers and 
                wholesalers and pharmacies, a schedule of prices for 
                covered prescription medicines.
                    ``(B) Agreements with pharmacies.--Enter into 
                participation agreements under subsection (c) with 
                pharmacies, that include terms that--
                            ``(i) secure the participation of 
                        sufficient numbers of pharmacies to ensure 
                        convenient access (including adequate emergency 
                        access);
                            ``(ii) permit the participation of any 
                        pharmacy in the service area that meets the 
                        participation requirements described in 
                        subsection (c); and
                            ``(iii) allow for reasonable dispensing and 
                        consultation fees for pharmacies.
                    ``(C) Lists of prices and participating 
                pharmacies.--Ensure that the negotiated prices 
                established under subparagraph (A) and the list of 
                pharmacies with agreements under subsection (c) are 
                regularly updated and readily available to health care 
                professionals authorized to prescribe medicines, 
                participating pharmacies, and enrolled individuals.
            ``(2) Tracking of covered enrolled individuals.--Maintain 
        accurate, updated records of all enrolled individuals (other 
        than individuals enrolled in a plan under part C).
            ``(3) Payment and coordination of benefits.--
                    ``(A) Payment.--
                            ``(i) Administer claims for payment of 
                        benefits under this part and encourage, to the 
                        maximum extent possible, use of electronic 
                        means for the submissions of claims.
                            ``(ii) Determine amounts of benefit 
                        payments to be made.
                            ``(iii) Receive, disburse, and account for 
                        funds used in making such payments, including 
                        through the activities specified in the 
                        provisions of this paragraph.
                    ``(B) Coordination.--Coordinate with other private 
                benefit providers, pharmacies, and other relevant 
                entities as necessary to ensure appropriate 
                coordination of benefits with respect to enrolled 
                individuals, including coordination of access to and 
                payment for covered prescription medicines according to 
                an individual's in-service area plan provisions, when 
                such individual is traveling outside the home service 
                area, and under such other circumstances as the 
                Secretary may specify.
                    ``(C) Explanation of benefits.--Furnish to enrolled 
                individuals an explanation of benefits in accordance 
                with section 1806(a), and a notice of the balance of 
                benefits remaining for the current year, whenever 
                prescription medicine benefits are provided under this 
                part (except that such notice need not be provided more 
                often than monthly).
            ``(4) Rules relating to provision of benefits.--
                    ``(A) In general.--In providing benefits under this 
                part, the Secretary (directly or through contracts) 
                shall employ mechanisms to provide benefits 
                economically, including the use of--
                            ``(i) formularies (consistent with 
                        subparagraph (B));
                            ``(ii) automatic generic medicine 
                        substitution (unless the physician specifies 
                        otherwise, in which case a 30-day prescription 
                        may be dispensed pending a consultation with 
                        the physician on whether a generic substitute 
                        can be dispensed in the future);
                            ``(iii) tiered copayments (which may 
                        include copayments at a rate lower than 20 
                        percent) to encourage the use of the lowest 
                        cost, on-formulary product in cases where there 
                        is no restrictive prescription (described in 
                        subparagraph (D)(i)); and
                            ``(iv) therapeutic interchange.
                    ``(B) Requirements with respect to formularies.--If 
                a formulary is used to contain costs under this part--
                            ``(i) use an advisory committee (or a 
                        therapeutics committee) comprised of licensed 
                        practicing physicians, pharmacists, and other 
                        health care practitioners to develop and manage 
                        the formulary;
                            ``(ii) include in the formulary at least 
                        one medicine from each therapeutic class and, 
                        if available, a generic equivalent thereof; and
                            ``(iii) disclose to current and prospective 
                        enrollees and to participating providers and 
                        pharmacies, the nature of the formulary 
                        restrictions, including information regarding 
                        the medicines included in the formulary and any 
                        difference in cost-sharing amounts.
                    ``(C) Construction.--Nothing in this subsection 
                shall be construed to prevent the Secretary (directly 
                or through contracts) from using incentives (including 
                a lower beneficiary coinsurance) to encourage enrollees 
                to select generic or other cost-effective medicines, so 
                long as--
                            ``(i) such incentives are designed not to 
                        result in any increase in the aggregate 
                        expenditures under the Federal Medicare 
                        Prescription Medicine Trust Fund;
                            ``(ii) the average coinsurance charged to 
                        all beneficiaries by the Secretary (directly or 
                        through contractors) shall seek to approximate 
                        (but in no case exceed) 20 percent for on-
                        formulary medicines;
                            ``(iii) a beneficiary's coinsurance shall 
                        be no greater than 20 percent if the 
                        prescription is a restrictive prescription; and
                            ``(iv) the reimbursement for a prescribed 
                        nonformulary medicine without a restrictive 
                        prescription in no case shall be more than the 
                        lowest reimbursement for a formulary medicine 
                        in the therapeutic class of the prescribed 
                        medicine.
                    ``(D) Restrictive prescription.--For purposes of 
                this section:
                            ``(i) Written prescriptions.--In the case 
                        of a written prescription for a medicine, it is 
                        a restrictive prescription only if the 
                        prescription indicates, in the writing of the 
                        physician or other qualified person prescribing 
                        the medicine and with an appropriate phrase 
                        (such as `brand medically necessary') 
                        recognized by the Secretary, that a particular 
                        medicine product must be dispensed based upon a 
                        belief by the physician or person prescribing 
                        the medicine that the particular medicine will 
                        provide even marginally superior therapeutic 
                        benefits to the individual for whom the 
                        medicine is prescribed or would have marginally 
                        fewer adverse reactions with respect to such 
                        individual.
                            ``(ii) Telephone prescriptions.--In the 
                        case of a prescription issued by telephone for 
                        a medicine, it is a restrictive prescription 
                        only if the prescription cannot be longer than 
                        30 days and the physician or other qualified 
                        person prescribing the medicine (through use of 
                        such an appropriate phrase) states that a 
                        particular medicine product must be dispensed, 
                        and the physician or other qualified person 
                        submits to the pharmacy involved, within 30 
                        days after the date of the telephone 
                        prescription, a written confirmation from the 
                        physician or other qualified person prescribing 
                        the medicine and which indicates with such 
                        appropriate phrase that the particular medicine 
                        product was required to have been dispensed 
                        based upon a belief by the physician or person 
                        prescribing the medicine that the particular 
                        medicine will provide even marginally superior 
                        therapeutic benefits to the individual for whom 
                        the medicine is prescribed or would have 
                        marginally fewer adverse reactions with respect 
                        to such individual. Such written confirmation 
                        is required to refill the prescription.
                            ``(iii) Review of restrictive 
                        prescriptions.--The advisory committee 
                        (established under subparagraph (B)(i)) may 
                        decide to review a restrictive prescription 
                        and, if so, it may approve or disapprove such 
                        restrictive prescription. It may not disapprove 
                        such restrictive prescription unless it finds 
                        that there is no literature approved by the 
                        Food and Drug Administration that supports a 
                        determination that the particular medicine 
                        provides even marginally superior therapeutic 
                        benefits to the individual for whom the 
                        medicine is prescribed or would have marginally 
                        fewer adverse reactions with respect to such 
                        individual. If it disapproves, upon request of 
                        the prescribing physician or the enrollee, the 
                        committee must provide for a review by an 
                        independent contractor of such decision within 
                        48 hours of the time of submission of the 
                        prescription, to determine whether the 
                        prescription is an eligible benefit under this 
                        part. The Secretary shall ensure that 
                        independent contractors so used are completely 
                        independent of the contractor or its advisory 
                        committee.
            ``(5) Cost and utilization management; quality assurance.--
        Have in place effective cost and utilization management, drug 
        utilization review, quality assurance measures, and systems to 
        reduce medical errors, including at least the following, 
        together with such additional measures as the Administrator may 
        specify:
                    ``(A) Drug utilization review.--A drug utilization 
                review program conforming to the standards provided in 
                section 1927(g)(2) (with such modifications as the 
                Administrator finds appropriate).
                    ``(B) Fraud and abuse control.--Activities to 
                control fraud, abuse, and waste, including prevention 
                of diversion of pharmaceuticals to the illegal market.
                    ``(C) Medication therapy management.--
                            ``(i) In general.--A program of medicine 
                        therapy management and medication 
                        administration that is designed to assure that 
                        covered outpatient medicines are appropriately 
                        used to achieve therapeutic goals and reduce 
                        the risk of adverse events, including adverse 
                        drug interactions.
                            ``(ii) Elements.--Such program may 
                        include--
                                    ``(I) enhanced beneficiary 
                                understanding of such appropriate use 
                                through beneficiary education, 
                                counseling, and other appropriate 
                                means; and
                                    ``(II) increased beneficiary 
                                adherence with prescription medication 
                                regimens through medication refill 
                                reminders, special packaging, and other 
                                appropriate means.
                            ``(iii) Development of program in 
                        cooperation with licensed pharmacists.--The 
                        program shall be developed in cooperation with 
                        licensed pharmacists and physicians.
                            ``(iv) Considerations in pharmacy fees.--
                        There shall be taken into account, in 
                        establishing fees for pharmacists and others 
                        providing services under the medication therapy 
                        management program, the resources and time used 
                        in implementing the program.
            ``(6) Education and information activities.--Have in place 
        mechanisms for disseminating educational and informational 
        materials to enrolled individuals and health care providers 
        designed to encourage effective and cost-effective use of 
        prescription medicine benefits and to ensure that enrolled 
        individuals understand their rights and obligations under the 
        program.
            ``(7) Beneficiary protections.--
                    ``(A) Confidentiality of health information.--Have 
                in effect systems to safeguard the confidentiality of 
                health care information on enrolled individuals, which 
                comply with section 1106 and with section 552a of title 
                5, United States Code, and meet such additional 
                standards as the Administrator may prescribe.
                    ``(B) Grievance and appeal procedures.--Have in 
                place such procedures as the Administrator may specify 
                for hearing and resolving grievances and appeals, 
                including expedited appeals, brought by enrolled 
                individuals against the Administrator or a pharmacy 
                concerning benefits under this part, which shall 
                include procedures equivalent to those specified in 
                subsections (f) and (g) of section 1852.
            ``(8) Records, reports, and audits.--
                    ``(A) Records and audits.--Maintain adequate 
                records, and afford the Administrator access to such 
                records (including for audit purposes).
                    ``(B) Reports.--Make such reports and submissions 
                of financial and utilization data as the Administrator 
                may require taking into account standard commercial 
                practices.
            ``(9) Proposal for alternative coinsurance amount.--
                    ``(A) Submission.--The Administrator may provide 
                for increased Government cost-sharing for generic 
                prescription medicines, prescription medicines on a 
                formulary, or prescription medicines obtained through 
                mail order pharmacies.
                    ``(B) Contents.--The proposal submitted under 
                subparagraph (A) shall contain evidence that such 
                increased cost-sharing would not result in an increase 
                in aggregate costs to the Account, including an 
                analysis of differences in projected drug utilization 
                patterns by beneficiaries whose cost-sharing would be 
                reduced under the proposal and those making the cost-
                sharing payments that would otherwise apply.
            ``(10) Other requirements.--Meet such other requirements as 
        the Secretary may specify.
The Administrator shall negotiate a schedule of prices under paragraph 
(1)(A), except that nothing in this sentence shall prevent a carrier 
under a contract with the Administrator from negotiating a lower 
schedule of prices for covered prescription medicines.
    ``(c) Pharmacy Participation Agreements.--
            ``(1) In general.--A pharmacy that meets the requirements 
        of this subsection shall be eligible to enter an agreement with 
        the Administrator to furnish covered prescription medicines and 
        pharmacists' services to enrolled individuals.
            ``(2) Terms of agreement.--An agreement under this 
        subsection shall include the following terms and requirements:
                    ``(A) Licensing.--The pharmacy and pharmacists 
                shall meet (and throughout the contract period will 
                continue to meet) all applicable State and local 
                licensing requirements.
                    ``(B) Limitation on charges.--Pharmacies 
                participating under this part shall not charge an 
                enrolled individual more than the negotiated price for 
                an individual medicine as established under subsection 
                (b)(1), regardless of whether such individual has 
                attained the benefit limit under section 1860B(b), and 
                shall not charge an enrolled individual more than the 
                individual's share of the negotiated price as 
                determined under the provisions of this part.
                    ``(C) Performance standards.--The pharmacy and the 
                pharmacist shall comply with performance standards 
                relating to--
                            ``(i) measures for quality assurance, 
                        reduction of medical errors, and participation 
                        in the drug utilization review program 
                        described in subsection (b)(3)(A);
                            ``(ii) systems to ensure compliance with 
                        the confidentiality standards applicable under 
                        subsection (b)(5)(A); and
                            ``(iii) other requirements as the Secretary 
                        may impose to ensure integrity, efficiency, and 
                        the quality of the program.
                    ``(D) Disclosure of price of generic medicine.--A 
                pharmacy participating under this part shall inform an 
                enrollee of the difference in price between generic and 
                non-generic equivalents.
    ``(d) Special Attention to Rural and Hard-to-serve Areas.--
            ``(1) In general.--The Secretary shall ensure that all 
        beneficiaries have 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 (as the Secretary may define by regulation).
            ``(2) Special attention defined.--For purposes of paragraph 
        (1), the term `special attention' may include bonus payments to 
        retail pharmacists in rural areas and any other actions the 
        Secretary determines are necessary to ensure full access to 
        rural and hard-to-serve beneficiaries.
            ``(3) GAO report.--Not later than two years after the 
        implementation of this part the Comptroller General of the 
        United States shall submit to Congress a report on the access 
        of medicare beneficiaries to pharmaceuticals and pharmacists' 
        services in rural and hard-to-serve areas under this part 
        together with any recommendations of the Comptroller General 
        regarding any additional steps the Secretary may need to take 
        to ensure the access of medicare beneficiaries to 
        pharmaceuticals and pharmacists' services in such areas under 
        this part.
    ``(e) Incentives for Cost and Utilization Management and Quality 
Improvement.--The Secretary is authorized to include in a contract 
awarded under subsection (b) with a carrier such incentives for cost 
and utilization management and quality improvement as the Secretary may 
deem appropriate, including--
            ``(1) bonus and penalty incentives to encourage 
        administrative efficiency;
            ``(2) incentives under which carriers share in any benefit 
        savings achieved;
            ``(3) risk-sharing arrangements related to initiatives to 
        encourage savings in benefit payments;
            ``(4) financial incentives under which savings derived from 
        the substitution of generic medicines in lieu of non-generic 
        medicines are made available to carriers, pharmacies, and the 
        Prescription Medicine Insurance Account; and
            ``(5) any other incentive that the Secretary deems 
        appropriate and likely to be effective in managing costs or 
        utilization.

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

    ``Sec. 1860H. (a) Program Authority.--The Secretary shall develop 
and implement a program under this section called the `Employer 
Incentive Program' that encourages employers and other sponsors of 
employment-based health care coverage to provide adequate prescription 
medicine benefits to retired individuals and to maintain such existing 
benefit programs, by subsidizing, in part, the sponsor's cost of 
providing coverage under qualifying plans.
    ``(b) Sponsor Requirements.--In order to be eligible to receive an 
incentive payment under this section with respect to coverage of an 
individual under a qualified retiree prescription medicine plan (as 
defined in subsection (f)(3)), a sponsor shall meet the following 
requirements:
            ``(1) Assurances.--The sponsor shall--
                    ``(A) annually attest, and provide such assurances 
                as the Secretary may require, that the coverage offered 
                by the sponsor is a qualified retiree prescription 
                medicine plan, and will remain such a plan for the 
                duration of the sponsor's participation in the program 
                under this section; and
                    ``(B) guarantee that it will give notice to the 
                Secretary and covered retirees--
                            ``(i) at least 120 days before terminating 
                        its plan; and
                            ``(ii) immediately upon determining that 
                        the actuarial value of the prescription 
                        medicine benefit under the plan falls below the 
                        actuarial value of the insurance benefit under 
                        this part.
            ``(2) Other requirements.--The sponsor shall provide such 
        information, and comply with such requirements, including 
        information requirements to ensure the integrity of the 
        program, as the Secretary may find necessary to administer the 
        program under this section.
    ``(c) Incentive Payment.--
            ``(1) In general.--A sponsor that meets the requirements of 
        subsection (b) with respect to a quarter in a calendar year 
        shall have payment made by the Secretary on a quarterly basis 
        (to the sponsor or, at the sponsor's direction, to the 
        appropriate employment-based health plan) of an incentive 
        payment, in the amount determined as described in paragraph 
        (2), for each retired individual (or spouse) who--
                    ``(A) was covered under the sponsor's qualified 
                retiree prescription medicine plan during such quarter; 
                and
                    ``(B) was eligible for but was not enrolled in the 
                insurance program under this part.
            ``(2) Amount of incentive.--The payment under this section 
        with respect to each individual described in paragraph (1) for 
        a month shall be equal to \2/3\ of the monthly premium amount 
        payable from the Prescription Medicine Insurance Account for an 
        enrolled individual, as set for the calendar year pursuant to 
        section 1860D(a)(2).
            ``(3) Payment date.--The incentive under this section with 
        respect to a calendar quarter shall be payable as of the end of 
        the next succeeding calendar quarter.
    ``(d) Civil Money Penalties.--A sponsor, health plan, or other 
entity that the Secretary determines has, directly or through its 
agent, provided information in connection with a request for an 
incentive payment under this section that the entity knew or should 
have known to be false shall be subject to a civil monetary penalty in 
an amount equal to $2,000 for each false representation plus an amount 
not to exceed three times the total incentive amounts under subsection 
(c) that were paid (or would have been payable) on the basis of such 
information.
    ``(e) Part D Enrollment for Certain Individuals Covered by 
Employment-Based Retiree Health Coverage Plans.--
            ``(1) Eligible individuals.--An individual shall be given 
        the opportunity to enroll in the program under this part during 
        the period specified in paragraph (2) if--
                    ``(A) the individual declined enrollment in the 
                program under this part at the time the individual 
                first satisfied section 1860C(a);
                    ``(B) at that time, the individual was covered 
                under a qualified retiree prescription medicine plan 
                for which an incentive payment was paid under this 
                section; and
                    ``(C)(i) the sponsor subsequently ceased to offer 
                such plan; or
                    ``(ii) the value of prescription medicine coverage 
                under such plan is reduced below the value of the 
                coverage provided at the time the individual first 
                became eligible to participate in the program under 
                this part.
            ``(2) Special enrollment period.--An individual described 
        in paragraph (1) shall be eligible to enroll in the program 
        under this part during the six-month period beginning on the 
        first day of the month in which--
                    ``(A) the individual receives a notice that 
                coverage under such plan has terminated (in the 
                circumstance described in paragraph (1)(C)(i)) or 
                notice that a claim has been denied because of such a 
                termination; or
                    ``(B) the individual received notice of the change 
                in benefits (in the circumstance described in paragraph 
                (1)(C)(ii)).
    ``(f) Definitions.--In this section:
            ``(1) Employment-based retiree health coverage.--The term 
        `employment-based retiree health coverage' means health 
        insurance or other coverage of health care costs for retired 
        individuals (or for such individuals and their spouses and 
        dependents) based on their status as former employees or labor 
        union members.
            ``(2) Employer.--The term `employer' has the meaning given 
        to such term by section 3(5) of the Employee Retirement Income 
        Security Act of 1974 (except that such term shall include only 
        employers of two or more employees).
            ``(3) Qualified retiree prescription medicine plan.--The 
        term `qualified retiree prescription medicine plan' means 
        health insurance coverage included in employment-based retiree 
        health coverage that--
                    ``(A) provides coverage of the cost of prescription 
                medicines whose actuarial value to each retired 
                beneficiary equals or exceeds the actuarial value of 
                the benefits provided to an individual enrolled in the 
                program under this part; and
                    ``(B) does not deny, limit, or condition the 
                coverage or provision of prescription medicine benefits 
                for retired individuals based on age or any health 
                status-related factor described in section 2702(a)(1) 
                of the Public Health Service Act.
            ``(4) Sponsor.--The term `sponsor' has the meaning given 
        the term `plan sponsor' by section 3(16)(B) of the Employee 
        Retirement Income Security Act of 1974.

``promotion of pharmaceutical research on break-through medicines while 
                   providing program cost containment

    ``Sec. 1860I. (a) Monitoring Expenditures.--The Secretary shall 
monitor expenditures under this part. On October 1, 2007, the Secretary 
shall estimate total expenditures under this part for 2007.
    ``(b) Establishment of Sustainable Growth Rate.--
            ``(1) In general.--The Secretary shall establish a 
        sustainable growth rate prescription medicine target system for 
        expenditures under this part for each year after 2007.
            ``(2) Initial computation.--Such target shall equal the 
        amount of total expenditures estimated for 2007 adjusted by the 
        Secretary's estimate of a sustainable growth rate (in this 
        section referred to as an `SGR') percentage between 2007 and 
        2008. Such SGR shall be estimated based on the following:
                    ``(A) Reasonable changes in the cost of production 
                or price of covered pharmaceuticals, but in no event 
                more than the rate of increase in the consumer price 
                index for all urban consumers for the period involved.
                    ``(B) Population enrolled in this part, both in 
                numbers and in average age and severity of chronic and 
                acute illnesses.
                    ``(C) Appropriate changes in utilization of 
                pharmaceuticals, as determined by the Drug Review Board 
                (established under subsection (c)(3)) and based on best 
                estimates of utilization change if there were no 
                direct-to-consumer advertising or promotions to 
                providers.
                    ``(D) Productivity index of manufacturers and 
                distributors.
                    ``(E) Percentage of products with patent and market 
                exclusivity protection versus products without patent 
                protection and changes in the availability of generic 
                substitutes.
                    ``(F) Such other factors as the Secretary may 
                determine are appropriate.
        In no event may the sustainable growth rate exceed 120 percent 
        of the estimated per capita growth in total spending under this 
        title.
            ``(3) Computation for subsequent years.--In October of 2008 
        and each year thereafter, for purposes of setting the SGRs for 
        the succeeding year, the Secretary shall adjust each current 
        year's estimated expenditures by the estimated SGR for the 
        succeeding year, further adjusted for corrections in earlier 
        estimates and the receipt of additional data on previous years 
        spending as follows:
                    ``(A) Error estimates.--An adjustment (up or down) 
                for errors in the estimate of total expenditures under 
                this part for the previous year.
                    ``(B) Costs.--An adjustment (up or down) for 
                corrections in the cost of production of prescriptions 
                covered under this part between the current calendar 
                year and the previous year.
                    ``(C) Target.--An adjustment for any amount (over 
                or under) that expenditures in the current year under 
                this part are estimated to differ from the target 
                amount set for the year. If expenditures in the current 
                year are estimated to be--
                            ``(i) less than the target amount, future 
                        target amounts will be adjusted downward; or
                            ``(ii) more than the target amount, the 
                        Secretary shall notify all pharmaceutical 
                        manufacturers with sales of pharmaceutical 
                        prescription medicine products to medicare 
                        beneficiaries under this part, of a rebate 
                        requirement (except as provided in this 
                        subparagraph) to be deposited in the Federal 
                        Medicare Prescription Medicine Trust Fund.
                    ``(D) Rebate determination.--The amount of the 
                rebate described in subparagraph (C)(ii) may vary among 
                manufacturers and shall be based on the manufacturer's 
                estimated contribution to the expenditure above the 
                target amount, taking into consideration such factors 
                as--
                            ``(i) above average increases in the cost 
                        of the manufacturer's product;
                            ``(ii) increases in utilization due to 
                        promotion activities of the manufacturer, 
                        wholesaler, or retailer;
                            ``(iii) launch prices of new drugs at the 
                        same or higher prices as similar drugs already 
                        in the marketplace (so-called `me too' or 
                        `copy-cat' drugs);
                            ``(iv) the role of the manufacturer in 
                        delaying the entry of generic products into the 
                        market; and
                            ``(v) such other actions by the 
                        manufacturer that the Secretary may determine 
                        has contributed to the failure to meet the SGR 
                        target.
                The rebates shall be established under such 
                subparagraph so that the total amount of the rebates is 
                estimated to ensure that the amount the target for the 
                current year is estimated to be exceeded is recovered 
                in lower spending in the subsequent year; except that, 
                no rebate shall be made in any manufacturer's product 
                which the Food and Drug Administration has determined 
                is a breakthrough medicine (as determined under 
                subsection (c)) or an orphan medicine.
    ``(c) Breakthrough Medicines.--
            ``(1) Determination.--For purposes of this section, a 
        medicine is a `breakthrough medicine' if the Drug Review Board 
        (established under paragraph (3)) determines--
                    ``(A) 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
                    ``(B) that no other product is available to 
                beneficiaries that achieves similar results for the 
                same condition at a lower cost.
            ``(2) Condition.--An exemption from rebates under 
        subsection (b)(3) for a breakthrough medicine shall continue as 
        long as the medicine is certified as a breakthrough medicine 
        but shall be limited to seven calendar years from 2007 or seven 
        calendar years from the date of the initial determination under 
        paragraph (1), whichever is later.
            ``(3) Drug review board.--The Drug Review Board under this 
        paragraph shall consist of the Commissioner of Food and Drugs, 
        the Directors of the National Institutes of Health, the 
        Director of the National Science Foundation, and 10 experts in 
        pharmaceuticals, medical research, and clinical care, selected 
        by the Commissioner of Food and Drugs from the faculty of 
        academic medical centers, except that no person who has (or who 
        has an immediate family member that has) any conflict of 
        interest with any pharmaceutical manufacturer shall serve on 
        the Board.
    ``(d) No Review.--The Secretary's determination of the rebate 
amounts under this section, and the Drug Review Board's determination 
of what is a breakthrough drug, are not subject to administrative or 
judicial review.

           ``appropriations to cover government contributions

    ``Sec. 1860J. (a) In General.--There are authorized to be 
appropriated from time to time, out of any moneys in the Treasury not 
otherwise appropriated, to the Prescription Medicine Insurance Account, 
a Government contribution equal to--
            ``(1) the aggregate premiums payable for a month pursuant 
        to section 1860D(a)(2) by individuals enrolled in the program 
        under this part; plus
            ``(2) one-half the aggregate premiums payable for a month 
        pursuant to such section for such individuals by former 
        employers; plus
            ``(3) the benefits payable by reason of the application of 
        paragraph (2) of section 1860B(a) (relating to catastrophic 
        benefits).
    ``(b) Appropriations to Cover Incentives for Employment-Based 
Retiree Medicine Coverage.--There are authorized to be appropriated to 
the Prescription Medicine Insurance Account from time to time, out of 
any moneys in the Treasury not otherwise appropriated such sums as may 
be necessary for payment of incentive payments under section 1860H(c).

                    ``prescription medicine defined

    ``Sec. 1860K.
As used in this part, the term `prescription medicine' means--
            ``(1) a drug that may be dispensed only upon a 
        prescription, and that is described in subparagraph (A)(i), 
        (A)(ii), or (B) of section 1927(k)(2); and
            ``(2) insulin certified under section 506 of the Federal 
        Food, Drug, and Cosmetic Act, and needles, syringes, and 
        disposable pumps for the administration of such insulin.''.
    (b) Conforming Amendments.--
            (1) Amendments to federal supplementary health insurance 
        trust fund.--Section 1841 of the Social Security Act (42 U.S.C. 
        1395t) is amended--
                    (A) in the last sentence of subsection (a)--
                            (i) by striking ``and'' after ``section 
                        201(i)(1)''; and
                            (ii) by inserting before the period the 
                        following: ``, and such amounts as may be 
                        deposited in, or appropriated to, the 
                        Prescription Medicine Insurance Account 
                        established by section 1860F'';
                    (B) in subsection (g), by inserting after ``by this 
                part,'' the following: ``the payments provided for 
                under part D (in which case the payments shall come 
                from the Prescription Medicine Insurance Account in the 
                Supplementary Medical Insurance Trust Fund),'';
                    (C) in the first sentence of subsection (h), by 
                inserting before the period the following: ``and 
                section 1860D(b)(4) (in which case the payments shall 
                come from the Prescription Medicine Insurance Account 
                in the Supplementary Medical Insurance Trust Fund)''; 
                and
                    (D) in the first sentence of subsection (i)--
                            (i) by striking ``and'' after ``section 
                        1840(b)(1)''; and
                            (ii) by inserting before the period the 
                        following: ``, section 1860D(b)(2) (in which 
                        case the payments shall come from the 
                        Prescription Medicine Insurance Account in the 
                        Supplementary Medical Insurance Trust Fund)''.
            (2) Prescription medicine option under ma plans.--
                    (A) Eligibility, election, and enrollment.--Section 
                1851 of the Social Security Act (42 U.S.C. 1395w-21) is 
                amended--
                            (i) in subsection (a)(1)(A), by striking 
                        ``parts A and B'' and inserting ``parts A, B, 
                        and D''; and
                            (ii) in subsection (i)(1), by striking 
                        ``parts A and B'' and inserting ``parts A, B, 
                        and D''.
                    (B) Voluntary beneficiary enrollment for medicine 
                coverage.--Section 1852(a)(1)(A) of such Act (42 U.S.C. 
                1395w-22(a)(1)(A)) is amended by inserting ``(and under 
                part D to individuals also enrolled under that part)'' 
                after ``parts A and B''.
                    (C) Access to services.--Section 1852(d)(1) of such 
                Act (42 U.S.C. 1395w-22(d)(1)) is amended--
                            (i) in subparagraph (D), by striking 
                        ``and'' at the end;
                            (ii) in subparagraph (E), by striking the 
                        period at the end and inserting ``; and''; and
                            (iii) by adding at the end the following 
                        new subparagraph:
                    ``(F) the plan for prescription medicine benefits 
                under part D guarantees coverage of any specifically 
                named covered prescription medicine for an enrollee, 
                when prescribed by a physician in accordance with the 
                provisions of such part, regardless of whether such 
                medicine would otherwise be covered under an applicable 
                formulary or discount arrangement.''.
                    (D) Payments to organizations.--Section 
                1853(a)(1)(A) of such Act (42 U.S.C. 1395w-23(a)(1)(A)) 
                is amended--
                            (i) by inserting ``determined separately 
                        for benefits under parts A and B and under part 
                        D (for individuals enrolled under that part)'' 
                        after ``as calculated under subsection (c)'';
                            (ii) by striking ``that area, adjusted for 
                        such risk factors'' and inserting ``that area. 
                        In the case of payment for benefits under parts 
                        A and B, such payment shall be adjusted for 
                        such risk factors as''; and
                            (iii) by inserting before the last sentence 
                        the following: ``In the case of the payments 
                        for benefits under part D, such payment shall 
                        initially be adjusted for the risk factors of 
                        each enrollee as the Secretary determines to be 
                        feasible and appropriate. By 2010, the 
                        adjustments would be for the same risk factors 
                        applicable for benefits under parts A and B.''.
                    (E) Calculation of annual ma capitation rates.--
                Section 1853(c) of such Act (42 U.S.C. 1395w-23(c)) is 
                amended--
                            (i) in paragraph (1), in the matter 
                        preceding subparagraph (A), by inserting ``for 
                        benefits under parts A and B'' after 
                        ``capitation rate'';
                            (ii) in paragraph (6)(A), by striking 
                        ``rate of growth in expenditures under this 
                        title'' and inserting ``rate of growth in 
                        expenditures for benefits available under parts 
                        A and B''; and
                            (iii) by adding at the end the following 
                        new paragraph:
            ``(8) Payment for prescription medicines.--The Secretary 
        shall determine a capitation rate for prescription medicines--
                    ``(A) dispensed in 2007, which is based on the 
                projected national per capita costs for prescription 
                medicine benefits under part D and associated claims 
                processing costs for beneficiaries under the original 
                medicare fee-for-service program; and
                    ``(B) dispensed in each subsequent year, which 
                shall be equal to the rate for the previous year 
                updated by the Secretary's estimate of the projected 
                per capita rate of growth in expenditures under this 
                title for an individual enrolled under part D.''.
                    (F) Limitation on enrollee liability.--Section 
                1854(e) of such Act (42 U.S.C. 1395w-24(e)) is amended 
                by adding at the end the following new paragraph:
            ``(5) Special rule for provision of part d benefits.--In no 
        event may a Medicare Advantage organization include as part of 
        a plan for prescription medicine benefits under part D a 
        requirement that an enrollee pay a deductible, or a coinsurance 
        percentage that exceeds 20 percent.''.
                    (G) Requirement for additional benefits.--Section 
                1854(f)(1) of such Act (42 U.S.C. 1395w-24(f)(1)) is 
                amended by adding at the end the following new 
                sentence: ``Such determination shall be made separately 
                for benefits under parts A and B and for prescription 
                medicine benefits under part D.''.
            (3) Exclusions from coverage.--
                    (A) Application to part d.--Section 1862(a) of the 
                Social Security Act (42 U.S.C. 1395y(a)) is amended in 
                the matter preceding paragraph (1) by striking ``part A 
                or part B'' and inserting ``part A, B, or D''.
                    (B) Prescription medicines not excluded from 
                coverage if appropriately prescribed.--Section 
                1862(a)(1) of such Act (42 U.S.C. 1395y(a)(1)) is 
                amended--
                            (i) in subparagraph (H), by striking 
                        ``and'' at the end;
                            (ii) in subparagraph (I), by striking the 
                        semicolon at the end and inserting ``, and''; 
                        and
                            (iii) by adding at the end the following 
                        new subparagraph:
                    ``(J) in the case of prescription medicines covered 
                under part D, which are not prescribed in accordance 
                with such part;''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 2007, and the Secretary of Health and Human 
Services shall administer the Social Security Act in accordance with 
such amendments on and after such date.

SEC. 5. SUBSTANTIAL REDUCTIONS IN THE PRICE OF PRESCRIPTION DRUGS FOR 
              MEDICARE BENEFICIARIES.

    (a) Participating Manufacturers.--
            (1) In general.--Each participating manufacturer of a 
        covered outpatient drug shall make available for purchase by 
        each pharmacy such covered outpatient drug in the amount 
        described in paragraph (2) at the price described in paragraph 
        (3).
            (2) Description of amount of drugs.--The amount of a 
        covered outpatient drug that a participating manufacturer shall 
        make available for purchase by a pharmacy is an amount equal to 
        the aggregate amount of the covered outpatient drug sold or 
        distributed by the pharmacy to medicare beneficiaries.
            (3) Description of price.--The price at which a 
        participating manufacturer shall make a covered outpatient drug 
        available for purchase by a pharmacy is the price equal to the 
        lowest of the following:
                    (A) The lowest price paid for the covered 
                outpatient drug by any agency or department of the 
                United States.
                    (B) The manufacturer's best price for the covered 
                outpatient drug, as defined in section 1927(c)(1)(C) of 
                the Social Security Act (42 U.S.C. 1396r-8(c)(1)(C)).
                    (C) The lowest price at which the drug is available 
                (as determined by the Secretary) through importation 
                consistent with the provisions of section 804 of the 
                Federal Food, Drug, and Cosmetic Act.
    (b) Special Provision With Respect to Hospice Programs.--For 
purposes of determining the amount of a covered outpatient drug that a 
participating manufacturer shall make available for purchase by a 
pharmacy under subsection (a), there shall be included in the 
calculation of such amount the amount of the covered outpatient drug 
sold or distributed by a pharmacy to a hospice program. In calculating 
such amount, only amounts of the covered outpatient drug furnished to a 
medicare beneficiary enrolled in the hospice program shall be included.
    (c) Administration.--The Secretary shall issue such regulations as 
may be necessary to implement this section.
    (d) Reports to Congress Regarding Effectiveness of Section.--
            (1) In general.--Not later than two years after the date of 
        the enactment of this Act, and annually thereafter, the 
        Secretary shall report to Congress regarding the effectiveness 
        of this section in--
                    (A) protecting medicare beneficiaries from 
                discriminatory pricing by drug manufacturers; and
                    (B) making prescription drugs available to medicare 
                beneficiaries at substantially reduced prices.
            (2) Consultation.--In preparing such reports, the Secretary 
        shall consult with public health experts, affected industries, 
        organizations representing consumers and older Americans, and 
        other interested persons.
            (3) Recommendations.--The Secretary shall include in such 
        reports any recommendations they consider appropriate for 
        changes in this section to further reduce the cost of covered 
        outpatient drugs to medicare beneficiaries.
    (f) Definitions.--For purposes of this section:
            (1) Participating manufacturer.--The term ``participating 
        manufacturer'' means any manufacturer of drugs or biologicals 
        that, on or after the date of the enactment of this Act, enters 
        into a contract or agreement with the United States for the 
        sale or distribution of covered outpatient drugs to the United 
        States.
            (2) Covered outpatient drug.--The term ``covered outpatient 
        drug'' has the meaning given that term in section 1927(k)(2) of 
        the Social Security Act (42 U.S.C. 1396r-8(k)(2)).
            (3) Medicare beneficiary.--The term ``medicare 
        beneficiary'' means an individual entitled to benefits under 
        part A of title XVIII of the Social Security Act or enrolled 
        under part B of such title, or both.
            (4) Hospice program.--The term ``hospice program'' has the 
        meaning given that term under section 1861(dd)(2) of the Social 
        Security Act (42 U.S.C. 1395x(dd)(2)).
            (5) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
    (f) Effective Date.--This section shall take effect on January 1, 
2007, and the Secretary shall implement this section in a manner 
consistent with the obligations of the United States.

SEC. 6. IMPORTATION OF CERTAIN PRESCRIPTION DRUGS.

    (a) Repeal of Certain Section Regarding Importation of Prescription 
Drugs.--Chapter VIII of the Federal Food, Drug, and Cosmetic Act (21 
U.S.C. 381 et seq.) is amended by striking section 804.
    (b) Importation of Prescription Drugs; Waiver of Certain Import 
Restrictions.--
            (1) In general.--Chapter VIII of the Federal Food, Drug, 
        and Cosmetic Act (21 U.S.C. 381 et seq.), as amended by section 
        3, is further amended by inserting after section 803 the 
        following:

``SEC. 804. COMMERCIAL AND PERSONAL IMPORTATION OF PRESCRIPTION DRUGS.

    ``(a) Importation of Prescription Drugs.--
            ``(1) In general.--In the case of qualifying drugs imported 
        or offered for import into the United States from registered 
        exporters or by registered importers--
                    ``(A) the limitation on importation that is 
                established in section 801(d)(1) is waived; and
                    ``(B) the standards referred to in section 801(a) 
                regarding admission of the drugs are subject to 
                subsection (g) of this section (including with respect 
                to qualifying drugs to which section 801(d)(1) does not 
                apply).
            ``(2) Importers.--A qualifying drug may not be imported 
        under paragraph (1) unless--
                    ``(A) the drug is imported by a pharmacy, group of 
                pharmacies, or a wholesaler that is a registered 
                importer; or
                    ``(B) the drug is imported by an individual for 
                personal use or for the use of a family member of the 
                individual (not for resale) from a registered exporter.
            ``(3) Rule of construction.--This section shall apply only 
        with respect to a drug that is imported or offered for import 
        into the United States--
                    ``(A) by a registered importer; or
                    ``(B) from a registered exporter to an individual.
            ``(4) Definitions.--
                    ``(A) Registered exporter; registered importer.--
                For purposes of this section:
                            ``(i) The term `registered exporter' means 
                        an exporter for which a registration under 
                        subsection (b) has been approved and is in 
                        effect.
                            ``(ii) The term `registered importer' means 
                        a pharmacy, group of pharmacies, or a 
                        wholesaler for which a registration under 
                        subsection (b) has been approved and is in 
                        effect.
                            ``(iii) The term `registration condition' 
                        means a condition that must exist for a 
                        registration under subsection (b) to be 
                        approved.
                    ``(B) Qualifying drug.--For purposes of this 
                section, the term `qualifying drug' means a drug for 
                which there is a corresponding U.S. label drug.
                    ``(C) U.S. label drug.--For purposes of this 
                section, the term `U.S. label drug' means a 
                prescription drug that--
                            ``(i) with respect to a qualifying drug, 
                        has the same active ingredient or ingredients, 
                        route of administration, dosage form, and 
                        strength as the qualifying drug;
                            ``(ii) with respect to the qualifying drug, 
                        is manufactured by or for the person that 
                        manufactures the qualifying drug;
                            ``(iii) is approved under section 505(c); 
                        and
                            ``(iv) is not--
                                    ``(I) a controlled substance, as 
                                defined in section 102 of the 
                                Controlled Substances Act (21 U.S.C. 
                                802);
                                    ``(II) a biological product, as 
                                defined in section 351 of the Public 
                                Health Service Act (42 U.S.C. 262), 
                                including--
                                            ``(aa) a therapeutic DNA 
                                        plasmid product;
                                            ``(bb) a therapeutic 
                                        synthetic peptide product;
                                            ``(cc) a monoclonal 
                                        antibody product for in vivo 
                                        use; and
                                            ``(dd) a therapeutic 
                                        recombinant DNA-derived 
                                        product;
                                    ``(III) an infused drug, including 
                                a peritoneal dialysis solution;
                                    ``(IV) an injected drug;
                                    ``(V) a drug that is inhaled during 
                                surgery; or
                                    ``(VI) a drug that is the listed 
                                drug referred to in 2 or more 
                                abbreviated new drug applications under 
                                which the drug is commercially 
                                marketed.
                    ``(D) Other definitions.--For purposes of this 
                section:
                            ``(i)(I) The term `exporter' means a person 
                        that is in the business of exporting a drug to 
                        individuals in the United States from Canada or 
                        from a permitted country designated by the 
                        Secretary under subclause (II), or that, 
                        pursuant to submitting a registration under 
                        subsection (b), seeks to be in such business.
                            ``(II) The Secretary shall designate a 
                        permitted country under subparagraph (E) (other 
                        than Canada) as a country from which an 
                        exporter may export a drug to individuals in 
                        the United States if the Secretary determines 
                        that--
                                    ``(aa) the country has statutory or 
                                regulatory standards that are 
                                equivalent to the standards in the 
                                United States and Canada with respect 
                                to--
                                            ``(AA) the training of 
                                        pharmacists;
                                            ``(BB) the practice of 
                                        pharmacy; and
                                            ``(CC) the protection of 
                                        the privacy of personal medical 
                                        information; and
                                    ``(bb) the importation of drugs to 
                                individuals in the United States from 
                                the country will not adversely affect 
                                public health.
                            ``(ii) The term `importer' means a 
                        pharmacy, a group of pharmacies, or a 
                        wholesaler that is in the business of importing 
                        a drug into the United States or that, pursuant 
                        to submitting a registration under subsection 
                        (b), seeks to be in such business.
                            ``(iii) The term `pharmacist' means a 
                        person licensed by a State to practice 
                        pharmacy, including the dispensing and selling 
                        of prescription drugs.
                            ``(iv) The term `pharmacy' means a person 
                        that--
                                    ``(I) is licensed by a State to 
                                engage in the business of selling 
                                prescription drugs at retail; and
                                    ``(II) employs 1 or more 
                                pharmacists.
            ``(v) The term `prescription drug' means a drug that is 
        described in section 503(b)(1).
            ``(vi) The term `wholesaler'--
                    ``(I) means a person licensed as a wholesaler or 
                distributor of prescription drugs in the United States 
                under section 503(e)(2)(A); and
                    ``(II) does not include a person authorized to 
                import drugs under section 801(d)(1).
    ``(E) Permitted Country.--The term `permitted country' means--
            ``(i) Australia;
            ``(ii) Canada;
            ``(iii) a member country of the European Union, but does 
        not include a member country with respect to which--
                    ``(I) the country's Annex to the Treaty of 
                Accession to the European Union 2003 includes a 
                transitional measure for the regulation of human 
                pharmaceutical products that has not expired; or
                    ``(II) the Secretary determines that the 
                requirements described in subclauses (I) and (II) of 
                clause (vii) will not be met by the date on which such 
                transitional measure for the regulation of human 
                pharmaceutial products expires;
            ``(iv) Japan;
            ``(v) New Zealand;
            ``(vi) Switzerland; and
            ``(vii) a country in which the Secretary determines the 
        following requirements are met:
                    ``(I) The country has statutory or regulatory 
                requirements--
                            ``(aa) that require the review of drugs for 
                        safety and effectiveness by an entity of the 
                        government of the country;
                            ``(bb) that authorize the approval of only 
                        those drugs that have been determined to be 
                        safe and effective by experts employed by or 
                        acting on behalf of such entity and qualified 
                        by scientific training and experience to 
                        evaluate the safety and effectiveness of drugs 
                        on the basis of adequate and well-controlled 
                        investigations, including clinical 
                        investigations, conducted by experts qualified 
                        by scientific training and experience to 
                        evaluate the safety and effectiveness of drugs;
                            ``(cc) that require the methods used in, 
                        and the facilities and controls used for the 
                        manufacture, processing, and packing of drugs 
                        in the country to be adequate to preserve their 
                        identity, quality, purity, and strength;
                            ``(dd) for the reporting of adverse 
                        reactions to drugs and procedures to withdraw 
                        approval and remove drugs found not to be safe 
                        or effective; and
                            ``(ee) that require the labeling and 
                        promotion of drugs to be in accordance with the 
                        approval of the drug.
                    ``(II) The valid marketing authorization system in 
                the country is equivalent to the systems in the 
                countries described in clauses (i) through (vi).
                    ``(III) The importation of drugs to the United 
                States from the country will not adversely affect 
                public health.
    ``(b) Registration of Importers and Exporters.--
            ``(1) Registration of importers and exporters.--A 
        registration condition is that the importer or exporter 
        involved (referred to in this subsection as a `registrant') 
        submits to the Secretary a registration containing the 
        following:
                    ``(A)(i) In the case of an exporter, the name of 
                the exporter and an identification of all places of 
                business of the exporter that relate to qualifying 
                drugs, including each warehouse or other facility owned 
                or controlled by, or operated for, the exporter.
                    ``(ii) In the case of an importer, the name of the 
                importer and an identification of the places of 
                business of the importer at which the importer 
                initially receives a qualifying drug after importation 
                (which shall not exceed 3 places of business except by 
                permission of the Secretary).
                    ``(B) Such information as the Secretary determines 
                to be necessary to demonstrate that the registrant is 
                in compliance with registration conditions under--
                            ``(i) in the case of an importer, 
                        subsections (c), (d), (e), (g), and (j) 
                        (relating to the sources of imported qualifying 
                        drugs; the inspection of facilities of the 
                        importer; the payment of fees; compliance with 
                        the standards referred to in section 801(a); 
                        and maintenance of records and samples); or
                            ``(ii) in the case of an exporter, 
                        subsections (c), (d), (f), (g), (h), (i), and 
                        (j) (relating to the sources of exported 
                        qualifying drugs; the inspection of facilities 
                        of the exporter and the marking of compliant 
                        shipments; the payment of fees; and compliance 
                        with the standards referred to in section 
                        801(a); being licensed as a pharmacist; 
                        conditions for individual importation; and 
                        maintenance of records and samples).
                    ``(C) An agreement by the registrant that the 
                registrant will not under subsection (a) import or 
                export any drug that is not a qualifying drug.
                    ``(D) An agreement by the registrant to--
                            ``(i) notify the Secretary of a recall or 
                        withdrawal of a qualifying drug distributed in 
                        a permitted country that the registrant has 
                        exported or imported, or intends to export or 
                        import, to the United States under subsection 
                        (a);
                            ``(ii) provide for the return to the 
                        registrant of such drug; and
                            ``(iii) cease, or not begin, the 
                        exportation or importation of such drug unless 
                        the Secretary has notified the registrant that 
                        exportation or importation of such drug may 
                        proceed.
                    ``(E) An agreement by the registrant to ensure and 
                monitor compliance with each registration condition, to 
                promptly correct any noncompliance with such a 
                condition, and to promptly report to the Secretary any 
                such noncompliance.
                    ``(F) A plan describing the manner in which the 
                registrant will comply with the agreement under 
                subparagraph (E).
                    ``(G) An agreement by the registrant to enforce a 
                contract under subsection (c)(3)(B) against a party in 
                the chain of custody of a qualifying drug with respect 
                to the authority of the Secretary under clauses (ii) 
                and (iii) of that subsection.
                    ``(H) An agreement by the registrant to notify the 
                Secretary not more than 30 days before the registrant 
                intends to make the change, of--
                            ``(i) any change that the registrant 
                        intends to make regarding information provided 
                        under subparagraph (A) or (B); and
                            ``(ii) any change that the registrant 
                        intends to make in the compliance plan under 
                        subparagraph (F).
                    ``(I) In the case of an exporter--
                            ``(i) An agreement by the exporter that a 
                        qualifying drug will not under subsection (a) 
                        be exported to any individual not authorized 
                        pursuant to subsection (a)(2)(B) to be an 
                        importer of such drug.
                            ``(ii) An agreement to post a bond, payable 
                        to the Treasury of the United States that is 
                        equal in value to the lesser of--
                                    ``(I) the value of drugs exported 
                                by the exporter to the United States in 
                                a typical 4-week period over the course 
                                of a year under this section; or
                                    ``(II) $1,000,000;
                            ``(iii) An agreement by the exporter to 
                        comply with applicable provisions of Canadian 
                        law, or the law of the permitted country 
                        designated under subsection (a)(4)(D)(i)(II) in 
                        which the exporter is located, that protect the 
                        privacy of personal information with respect to 
                        each individual importing a prescription drug 
                        from the exporter under subsection (a)(2)(B).
                            ``(iv) An agreement by the exporter to 
                        report to the Secretary--
                                    ``(I) not later than August 1 of 
                                each fiscal year, the total price and 
                                the total volume of drugs exported to 
                                the United States by the exporter 
                                during the 6-month period from January 
                                1 through June 30 of that year; and
                                    ``(II) not later than January 1 of 
                                each fiscal year, the total price and 
                                the total volume of drugs exported to 
                                the United States by the exporter 
                                during the previous fiscal year.
                    ``(J) In the case of an importer, an agreement by 
                the importer to report to the Secretary--
                            ``(i) not later than August 1 of each 
                        fiscal year, the total price and the total 
                        volume of drugs imported to the United States 
                        by the importer during the 6-month period from 
                        January 1 through June 30 of that fiscal year; 
                        and
                            ``(ii) not later than January 1 of each 
                        fiscal year, the total price and the total 
                        volume of drugs imported to the United States 
                        by the importer during the previous fiscal 
                        year.
                    ``(K) Such other provisions as the Secretary may 
                require by regulation to protect the public health 
                while permitting--
                            ``(i) the importation by pharmacies, groups 
                        of pharmacies, and wholesalers as registered 
                        importers of qualifying drugs under subsection 
                        (a); and
                            ``(ii) importation by individuals of 
                        qualifying drugs under subsection (a).
            ``(2) Approval or disapproval of registration.--
                    ``(A) In general.--Not later than 90 days after the 
                date on which a registrant submits to the Secretary a 
                registration under paragraph (1), the Secretary shall 
                notify the registrant whether the registration is 
                approved or is disapproved. The Secretary shall 
                disapprove a registration if there is reason to believe 
                that the registrant is not in compliance with one or 
                more registration conditions, and shall notify the 
                registrant of such reason. In the case of a disapproved 
                registration, the Secretary shall subsequently notify 
                the registrant that the registration is approved if the 
                Secretary determines that the registrant is in 
                compliance with such conditions.
                    ``(B) Changes in registration information.--Not 
                later than 30 days after receiving a notice under 
                paragraph (1)(H) from a registrant, the Secretary shall 
                determine whether the change involved affects the 
                approval of the registration of the registrant under 
                paragraph (1), and shall inform the registrant of the 
                determination.
            ``(3) Publication of contact information for registered 
        exporters.--Through the Internet website of the Food and Drug 
        Administration and a toll-free telephone number, the Secretary 
        shall make readily available to the public a list of registered 
        exporters, including contact information for the exporters. 
        Promptly after the approval of a registration submitted under 
        paragraph (1), the Secretary shall update the Internet website 
        and the information provided through the toll-free telephone 
        number accordingly.
            ``(4) Suspension and termination.--
                    ``(A) Suspension.--With respect to the 
                effectiveness of a registration submitted under 
                paragraph (1):
                            ``(i) Subject to clause (ii), the Secretary 
                        may suspend the registration if the Secretary 
                        determines, after notice and opportunity for a 
                        hearing, that the registrant has failed to 
                        maintain substantial compliance with a 
                        registration condition.
                            ``(ii) If the Secretary determines that, 
                        under color of the registration, the exporter 
                        has exported a drug or the importer has 
                        imported a drug that is not a qualifying drug, 
                        or a drug that does not comply with subsection 
                        (g)(2)(A) or (g)(4), or has exported a 
                        qualifying drug to an individual in violation 
                        of subsection (i)(2)(F), the Secretary shall 
                        immediately suspend the registration. A 
                        suspension under the preceding sentence is not 
                        subject to the provision by the Secretary of 
                        prior notice, and the Secretary shall provide 
                        to the registrant an opportunity for a hearing 
                        not later than 10 days after the date on which 
                        the registration is suspended.
                            ``(iii) The Secretary may reinstate the 
                        registration, whether suspended under clause 
                        (i) or (ii), if the Secretary determines that 
                        the registrant has demonstrated that further 
                        violations of registration conditions will not 
                        occur.
                    ``(B) Termination.--The Secretary, after notice and 
                opportunity for a hearing, may terminate the 
                registration under paragraph (1) of a registrant if the 
                Secretary determines that the registrant has engaged in 
                a pattern or practice of violating 1 or more 
                registration conditions, or if on 1 or more occasions 
                the Secretary has under subparagraph (A)(ii) suspended 
                the registration of the registrant. The Secretary may 
                make the termination permanent, or for a fixed period 
                of not less than 1 year. During the period in which the 
                registration is terminated, any registration submitted 
                under paragraph (1) by the registrant, or a person that 
                is a partner in the export or import enterprise, or a 
                principal officer in such enterprise, and any 
                registration prepared with the assistance of the 
                registrant or such a person, has no legal effect under 
                this section.
            ``(5) Default of bond.--A bond required to be posted by an 
        exporter under paragraph (1)(I)(ii) shall be defaulted and paid 
        to the Treasury of the United States if, after opportunity for 
        an informal hearing, the Secretary determines that the exporter 
        has--
                    ``(A) exported a drug to the United States that is 
                not a qualifying drug or that is not in compliance with 
                subsection (g)(2)(A), (g)(4), or (i); or
                    ``(B) failed to permit the Secretary to conduct an 
                inspection described under subsection (d).
    ``(c) Sources of Qualifying Drugs.--A registration condition is 
that the exporter or importer involved agrees that a qualifying drug 
will under subsection (a) be exported or imported into the United 
States only if there is compliance with the following:
            ``(1) The drug was manufactured in an establishment--
                    ``(A) required to register under subsection (h) or 
                (i) of section 510; and
                    ``(B)(i) inspected by the Secretary; or
                    ``(ii) for which the Secretary has elected to rely 
                on a satisfactory report of a good manufacturing 
                practice inspection of the establishment from a 
                permitted country whose regulatory system the Secretary 
                recognizes as equivalent under a mutual recognition 
                agreement, as provided for under section 510(i)(3), 
                section 803, or part 26 of title 21, Code of Federal 
                Regulations (or any corresponding successor rule or 
                regulation).
            ``(2) The establishment is located in any country, and the 
        establishment manufactured the drug for distribution in the 
        United States or for distribution in 1 or more of the permitted 
        countries (without regard to whether in addition the drug is 
        manufactured for distribution in a foreign country that is not 
        a permitted country).
            ``(3) The exporter or importer obtained the drug--
                    ``(A) directly from the establishment; or
                    ``(B) directly from an entity that, by contract 
                with the exporter or importer--
                            ``(i) provides to the exporter or importer 
                        a statement (in such form and containing such 
                        information as the Secretary may require) that, 
                        for the chain of custody from the 
                        establishment, identifies each prior sale, 
                        purchase, or trade of the drug (including the 
                        date of the transaction and the names and 
                        addresses of all parties to the transaction);
                            ``(ii) agrees to permit the Secretary to 
                        inspect such statements and related records to 
                        determine their accuracy;
                            ``(iii) agrees, with respect to the 
                        qualifying drugs involved, to permit the 
                        Secretary to inspect warehouses and other 
                        facilities, including records, of the entity 
                        for purposes of determining whether the 
                        facilities are in compliance with any standards 
                        under this Act that are applicable to 
                        facilities of that type in the United States; 
                        and
                            ``(iv) has ensured, through such 
                        contractual relationships as may be necessary, 
                        that the Secretary has the same authority 
                        regarding other parties in the chain of custody 
                        from the establishment that the Secretary has 
                        under clauses (ii) and (iii) regarding such 
                        entity.
            ``(4)(A) The foreign country from which the importer will 
        import the drug is a permitted country; or
            ``(B) The foreign country from which the exporter will 
        export the drug is the permitted country in which the exporter 
        is located.
            ``(5) During any period in which the drug was not in the 
        control of the manufacturer of the drug, the drug did not enter 
        any country that is not a permitted country.
            ``(6) The exporter or importer retains a sample of each lot 
        of the drug sufficient for testing by the Secretary.
    ``(d) Inspection of Facilities; Marking of Shipments.--
            ``(1) Inspection of facilities.--A registration condition 
        is that, for the purpose of assisting the Secretary in 
        determining whether the exporter involved is in compliance with 
        all other registration conditions--
                    ``(A) the exporter agrees to permit the Secretary--
                            ``(i) to conduct onsite inspections, 
                        including monitoring on a day-to-day basis, of 
                        places of business of the exporter that relate 
                        to qualifying drugs, including each warehouse 
                        or other facility owned or controlled by, or 
                        operated for, the exporter;
                            ``(ii) to have access, including on a day-
                        to-day basis, to--
                                    ``(I) records of the exporter that 
                                relate to the export of such drugs, 
                                including financial records; and
                                    ``(II) samples of such drugs;
                            ``(iii) to carry out the duties described 
                        in paragraph (3); and
                            ``(iv) to carry out any other functions 
                        determined by the Secretary to be necessary 
                        regarding the compliance of the exporter; and
                    ``(B) the Secretary has assigned 1 or more 
                employees of the Secretary to carry out the functions 
                described in this subsection for the Secretary 
                randomly, but not less than 12 times annually, on the 
                premises of places of businesses referred to in 
                subparagraph (A)(i), and such an assignment remains in 
                effect on a continuous basis.
            ``(2) Marking of compliant shipments.--A registration 
        condition is that the exporter involved agrees to affix to each 
        shipping container of qualifying drugs exported under 
        subsection (a) such markings as the Secretary determines to be 
        necessary to identify the shipment as being in compliance with 
        all registration conditions. Markings under the preceding 
        sentence shall--
                    ``(A) be designed to prevent affixation of the 
                markings to any shipping container that is not 
                authorized to bear the markings; and
                    ``(B) include anticounterfeiting or track-and-trace 
                technologies, taking into account the economic and 
                technical feasibility of those technologies.
            ``(3) Certain duties relating to exporters.--Duties of the 
        Secretary with respect to an exporter include the following:
                    ``(A) Inspecting, randomly, but not less than 12 
                times annually, the places of business of the exporter 
                at which qualifying drugs are stored and from which 
                qualifying drugs are shipped.
                    ``(B) During the inspections under subparagraph 
                (A), verifying the chain of custody of a statistically 
                significant sample of qualifying drugs from the 
                establishment in which the drug was manufactured to the 
                exporter, which shall be accomplished or supplemented 
                by the use of anticounterfeiting or track-and-trace 
                technologies, taking into account the economic and 
                technical feasibility of those technologies, except 
                that a drug that lacks such technologies from the point 
                of manufacture shall not for that reason be excluded 
                from importation by an exporter.
                    ``(C) Randomly reviewing records of exports to 
                individuals for the purpose of determining whether the 
                drugs are being imported by the individuals in 
                accordance with the conditions under subsection (i). 
                Such reviews shall be conducted in a manner that will 
                result in a statistically significant determination of 
                compliance with all such conditions.
                    ``(D) Monitoring the affixing of markings under 
                paragraph (2).
                    ``(E) Inspecting as the Secretary determines is 
                necessary the warehouses and other facilities, 
                including records, of other parties in the chain of 
                custody of qualifying drugs.
                    ``(F) Determining whether the exporter is in 
                compliance with all other registration conditions.
            ``(4) Prior notice of shipments.--A registration condition 
        is that, not less than 8 hours and not more than 5 days in 
        advance of the time of the importation of a shipment of 
        qualifying drugs, the importer involved agrees to submit to the 
        Secretary a notice with respect to the shipment of drugs to be 
        imported or offered for import into the United States under 
        subsection (a). A notice under the preceding sentence shall 
        include--
                    ``(A) the name and complete contact information of 
                the person submitting the notice;
                    ``(B) the name and complete contact information of 
                the importer involved;
                    ``(C) the identity of the drug, including the 
                established name of the drug, the quantity of the drug, 
                and the lot number assigned by the manufacturer;
                    ``(D) the identity of the manufacturer of the drug, 
                including the identity of the establishment at which 
                the drug was manufactured;
                    ``(E) the country from which the drug is shipped;
                    ``(F) the name and complete contact information for 
                the shipper of the drug;
                    ``(G) anticipated arrival information, including 
                the port of arrival and crossing location within that 
                port, and the date and time;
                    ``(H) a summary of the chain of custody of the drug 
                from the establishment in which the drug was 
                manufactured to the importer;
                    ``(I) a declaration as to whether the Secretary has 
                ordered that importation of the drug from the permitted 
                country cease under subsection (g)(2)(C) or (D); and
                    ``(J) such other information as the Secretary may 
                require by regulation.
            ``(5) Marking of compliant shipments.--A registration 
        condition is that the importer involved agrees, before 
        wholesale distribution (as defined in section 503(e)) of a 
        qualifying drug that has been imported under subsection (a), to 
        affix to each container of such drug such markings or other 
        technology as the Secretary determines necessary to identify 
        the shipment as being in compliance with all registration 
        conditions, except that the markings or other technology shall 
        not be required on a drug that bears comparable, compatible 
        markings or technology from the manufacturer of the drug. 
        Markings or other technology under the preceding sentence 
        shall--
                    ``(A) be designed to prevent affixation of the 
                markings or other technology to any container that is 
                not authorized to bear the markings; and
                    ``(B) shall include anticounterfeiting or track-
                and-trace technologies, taking into account the 
                economic and technical feasibility of such 
                technologies.
            ``(6) Certain duties relating to importers.--Duties of the 
        Secretary with respect to an importer include the following:
                    ``(A) Inspecting, randomly, but not less than 12 
                times annually, the places of business of the importer 
                at which a qualifying drug is initially received after 
                importation.
                    ``(B) During the inspections under subparagraph 
                (A), verifying the chain of custody of a statistically 
                significant sample of qualifying drugs from the 
                establishment in which the drug was manufactured to the 
                importer, which shall be accomplished or supplemented 
                by the use of anticounterfeiting or track-and-trace 
                technologies, taking into account the economic and 
                technical feasibility of those technologies, except 
                that a drug that lacks such technologies from the point 
                of manufacture shall not for that reason be excluded 
                from importation by an importer.
                    ``(C) Reviewing notices under paragraph (4).
                    ``(D) Inspecting as the Secretary determines is 
                necessary the warehouses and other facilities, 
                including records of other parties in the chain of 
                custody of qualifying drugs.
                    ``(E) Determining whether the importer is in 
                compliance with all other registration conditions.
    ``(e) Importer Fees.--
            ``(1) Registration fee.--A registration condition is that 
        the importer involved pays to the Secretary a fee of $10,000 
        due on the date on which the importer first submits the 
        registration to the Secretary under subsection (b).
            ``(2) Inspection fee.--A registration condition is that the 
        importer involved pays a fee to the Secretary in accordance 
        with this subsection. Such fee shall be paid not later than 
        October 1 and April 1 of each fiscal year in the amount 
        provided for under paragraph (3).
            ``(3) Amount of inspection fee.--
                    ``(A) Aggregate total of fees.--Not later than 30 
                days before the start of each fiscal year, the 
                Secretary, in consultation with the Secretary of 
                Homeland Security and the Secretary of the Treasury, 
                shall establish an aggregate total of fees to be 
                collected under paragraph (2) for importers for that 
                fiscal year that is sufficient, and not more than 
                necessary, to pay the costs for that fiscal year of 
                administering this section with respect to registered 
                importers, including the costs associated with--
                            ``(i) inspecting the facilities of 
                        registered importers, and of other entities in 
                        the chain of custody of a qualifying drug as 
                        necessary, under subsection (d)(6);
                            ``(ii) developing, implementing, and 
                        operating under such subsection an electronic 
                        system for submission and review of the notices 
                        required under subsection (d)(4) with respect 
                        to shipments of qualifying drugs under 
                        subsection (a) to assess compliance with all 
                        registration conditions when such shipments are 
                        offered for import into the United States; and
                            ``(iii) inspecting such shipments as 
                        necessary, when offered for import into the 
                        United States to determine if such a shipment 
                        should be refused admission under subsection 
                        (g)(5).
                    ``(B) Limitation.--Subject to subparagraph (C), the 
                aggregate total of fees collected under paragraph (2) 
                for a fiscal year shall not exceed 1 percent of the 
                total price of qualifying drugs imported during that 
                fiscal year into the United States by registered 
                importers under subsection (a).
                    ``(C) Total price of drugs.--
                            ``(i) Estimate.--For the purposes of 
                        complying with the limitation described in 
                        subparagraph (B) when establishing under 
                        subparagraph (A) the aggregate total of fees to 
                        be collected under paragraph (2) for a fiscal 
                        year, the Secretary shall estimate the total 
                        price of qualifying drugs imported into the 
                        United States by registered importers during 
                        that fiscal year by adding the total price of 
                        qualifying drugs imported by each registered 
                        importer during the 6-month period from January 
                        1 through June 30 of the previous fiscal year, 
                        as reported to the Secretary by each registered 
                        importer under subsection (b)(1)(J).
                            ``(ii) Calculation.--Not later than March 1 
                        of the fiscal year that follows the fiscal year 
                        for which the estimate under clause (i) is 
                        made, the Secretary shall calculate the total 
                        price of qualifying drugs imported into the 
                        United States by registered importers during 
                        that fiscal year by adding the total price of 
                        qualifying drugs imported by each registered 
                        importer during that fiscal year, as reported 
                        to the Secretary by each registered importer 
                        under subsection (b)(1)(J).
                            ``(iii) Adjustment.--If the total price of 
                        qualifying drugs imported into the United 
                        States by registered importers during a fiscal 
                        year as calculated under clause (ii) is less 
                        than the aggregate total of fees collected 
                        under paragraph (2) for that fiscal year, the 
                        Secretary shall provide for a pro-rata 
                        reduction in the fee due from each registered 
                        importer on April 1 of the subsequent fiscal 
                        year so that the limitation described in 
                        subparagraph (B) is observed.
                    ``(D) Individual importer fee.--Subject to the 
                limitation described in subparagraph (B), the fee under 
                paragraph (2) to be paid on October 1 and April 1 by an 
                importer shall be an amount that is proportional to a 
                reasonable estimate by the Secretary of the semiannual 
                share of the importer of the volume of qualifying drugs 
                imported by importers under subsection (a).
            ``(4) Use of fees.--
                    ``(A) In general.--Subject to appropriations Acts, 
                fees collected by the Secretary under paragraphs (1) 
                and (2) shall be credited to the appropriation account 
                for salaries and expenses of the Food and Drug 
                Administration until expended (without fiscal year 
                limitation), and the Secretary may, in consultation 
                with the Secretary of Homeland Security and the 
                Secretary of the Treasury, transfer some proportion of 
                such fees to the appropriation account for salaries and 
                expenses of the Bureau of Customs and Border Protection 
                until expended (without fiscal year limitation).
                    ``(B) Sole purpose.--Fees collected by the 
                Secretary under paragraphs (1) and (2) are only 
                available to the Secretary and, if transferred, to the 
                Secretary of Homeland Security, and are for the sole 
                purpose of paying the costs referred to in paragraph 
                (3)(A).
            ``(5) Collection of fees.--In any case where the Secretary 
        does not receive payment of a fee assessed under paragraph (1) 
        or (2) within 30 days after it is due, such fee shall be 
        treated as a claim of the United States Government subject to 
        subchapter II of chapter 37 of title 31, United States Code.
    ``(f) Exporter Fees.--
            ``(1) Registration fee.--A registration condition is that 
        the exporter involved pays to the Secretary a fee of $10,000 
        due on the date on which the exporter first submits that 
        registration to the Secretary under subsection (b).
            ``(2) Inspection fee.--A registration condition is that the 
        exporter involved pays a fee to the Secretary in accordance 
        with this subsection. Such fee shall be paid not later than 
        October 1 and April 1 of each fiscal year in the amount 
        provided for under paragraph (3).
            ``(3) Amount of inspection fee.--
                    ``(A) Aggregate total of fees.--Not later than 30 
                days before the start of each fiscal year, the 
                Secretary, in consultation with the Secretary of 
                Homeland Security and the Secretary of the Treasury, 
                shall establish an aggregate total of fees to be 
                collected under paragraph (2) for exporters for that 
                fiscal year that is sufficient, and not more than 
                necessary, to pay the costs for that fiscal year of 
                administering this section with respect to registered 
                exporters, including the costs associated with--
                            ``(i) inspecting the facilities of 
                        registered exporters, and of other entities in 
                        the chain of custody of a qualifying drug as 
                        necessary, under subsection (d)(3);
                            ``(ii) developing, implementing, and 
                        operating under such subsection a system to 
                        screen marks on shipments of qualifying drugs 
                        under subsection (a) that indicate compliance 
                        with all registration conditions, when such 
                        shipments are offered for import into the 
                        United States; and
                            ``(iii) screening such markings, and 
                        inspecting such shipments as necessary, when 
                        offered for import into the United States to 
                        determine if such a shipment should be refused 
                        admission under subsection (g)(5).
                    ``(B) Limitation.--Subject to subparagraph (C), the 
                aggregate total of fees collected under paragraph (2) 
                for a fiscal year shall not exceed 1 percent of the 
                total price of qualifying drugs imported during that 
                fiscal year into the United States by registered 
                exporters under subsection (a).
                    ``(C) Total price of drugs.--
                            ``(i) Estimate.--For the purposes of 
                        complying with the limitation described in 
                        subparagraph (B) when establishing under 
                        subparagraph (A) the aggregate total of fees to 
                        be collected under paragraph (2) for a fiscal 
                        year, the Secretary shall estimate the total 
                        price of qualifying drugs imported into the 
                        United States by registered exporters during 
                        that fiscal year by adding the total price of 
                        qualifying drugs exported by each registered 
                        exporter during the 6-month period from January 
                        1 through June 30 of the previous fiscal year, 
                        as reported to the Secretary by each registered 
                        exporter under subsection (b)(1)(I)(iv).
                            ``(ii) Calculation.--Not later than March 1 
                        of the fiscal year that follows the fiscal year 
                        for which the estimate under clause (i) is 
                        made, the Secretary shall calculate the total 
                        price of qualifying drugs imported into the 
                        United States by registered exporters during 
                        that fiscal year by adding the total price of 
                        qualifying drugs exported by each registered 
                        exporter during that fiscal year, as reported 
                        to the Secretary by each registered exporter 
                        under subsection (b)(1)(I)(iv).
                            ``(iii) Adjustment.--If the total price of 
                        qualifying drugs imported into the United 
                        States by registered exporters during a fiscal 
                        year as calculated under clause (ii) is less 
                        than the aggregate total of fees collected 
                        under paragraph (2) for that fiscal year, the 
                        Secretary shall provide for a pro-rata 
                        reduction in the fee due from each registered 
                        exporter on April 1 of the subsequent fiscal 
                        year so that the limitation described in 
                        subparagraph (B) is observed.
                    ``(D) Individual exporter fee.--Subject to the 
                limitation described in subparagraph (B), the fee under 
                paragraph (2) to be paid on October 1 and April 1 by an 
                exporter shall be an amount that is proportional to a 
                reasonable estimate by the Secretary of the semiannual 
                share of the exporter of the volume of qualifying drugs 
                exported by exporters under subsection (a).
            ``(4) Use of fees.--
                    ``(A) In general.--Subject to appropriations Acts, 
                fees collected by the Secretary under paragraphs (1) 
                and (2) shall be credited to the appropriation account 
                for salaries and expenses of the Food and Drug 
                Administration until expended (without fiscal year 
                limitation), and the Secretary may, in consultation 
                with the Secretary of Homeland Security and the 
                Secretary of the Treasury, transfer some proportion of 
                such fees to the appropriation account for salaries and 
                expenses of the Bureau of Customs and Border Protection 
                until expended (without fiscal year limitation).
                    ``(B) Sole purpose.--Fees collected by the 
                Secretary under paragraphs (1) and (2) are only 
                available to the Secretary and, if transferred, to the 
                Secretary of Homeland Security, and are for the sole 
                purpose of paying the costs referred to in paragraph 
                (3)(A).
            ``(5) Collection of fees.--In any case where the Secretary 
        does not receive payment of a fee assessed under paragraph (1) 
        or (2) within 30 days after it is due, such fee shall be 
        treated as a claim of the United States Government subject to 
        subchapter II of chapter 37 of title 31, United States Code.
    ``(g) Compliance With Section 801(a).--
            ``(1) In general.--A registration condition is that each 
        qualifying drug exported under subsection (a) by the registered 
        exporter involved or imported under subsection (a) by the 
        registered importer involved is in compliance with the 
        standards referred to in section 801(a) regarding admission of 
        the drug into the United States, subject to paragraphs (2), 
        (3), and (4).
            ``(2) Section 505; approval status.--
                    ``(A) In general.--A qualifying drug that is 
                imported or offered for import under subsection (a) 
                shall comply with the conditions established in the 
                approved application under section 505(b) for the U.S. 
                label drug as described under this subsection.
                    ``(B) Notice by manufacturer; general provisions.--
                            ``(i) In general.--The person that 
                        manufactures a qualifying drug that is, or will 
                        be, introduced for commercial distribution in a 
                        permitted country shall in accordance with this 
                        paragraph submit to the Secretary a notice 
                        that--
                                    ``(I) includes each difference in 
                                the qualifying drug from a condition 
                                established in the approved application 
                                for the U.S. label drug beyond--
                                            ``(aa) the variations 
                                        provided for in the 
                                        application; and
                                            ``(bb) any difference in 
                                        labeling (except ingredient 
                                        labeling); or
                                    ``(II) states that there is no 
                                difference in the qualifying drug from 
                                a condition established in the approved 
                                application for the U.S. label drug 
                                beyond--
                                            ``(aa) the variations 
                                        provided for in the 
                                        application; and
                                            ``(bb) any difference in 
                                        labeling (except ingredient 
                                        labeling).
                            ``(ii) Information in notice.--A notice 
                        under clause (i)(I) shall include the 
                        information that the Secretary may require 
                        under section 506A, any additional information 
                        the Secretary may require (which may include 
                        data on bioequivalence if such data are not 
                        required under section 506A), and, with respect 
                        to the permitted country that approved the 
                        qualifying drug for commercial distribution, or 
                        with respect to which such approval is sought, 
                        include the following:
                                    ``(I) The date on which the 
                                qualifying drug with such difference 
                                was, or will be, introduced for 
                                commercial distribution in the 
                                permitted country.
                                    ``(II) Information demonstrating 
                                that the person submitting the notice 
                                has also notified the government of the 
                                permitted country in writing that the 
                                person is submitting to the Secretary a 
                                notice under clause (i)(I), which 
                                notice describes the difference in the 
                                qualifying drug from a condition 
                                established in the approved application 
                                for the U.S. label drug.
                                    ``(III) The information that the 
                                person submitted or will submit to the 
                                government of the permitted country for 
                                purposes of obtaining approval for 
                                commercial distribution of the drug in 
                                the country which, if in a language 
                                other than English, shall be 
                                accompanied by an English translation 
                                verified to be complete and accurate, 
                                with the name, address, and a brief 
                                statement of the qualifications of the 
                                person that made the translation.
                            ``(iii) Certifications.--The chief 
                        executive officer and the chief medical officer 
                        of the manufacturer involved shall each certify 
                        in the notice under clause (i) that--
                                    ``(I) the information provided in 
                                the notice is complete and true; and
                                    ``(II) a copy of the notice has 
                                been provided to the Federal Trade 
                                Commission and to the State attorneys 
                                general.
                            ``(iv) Fee.--If a notice submitted under 
                        clause (i) includes a difference that would, 
                        under section 506A, require the submission of a 
                        supplemental application if made as a change to 
                        the U.S. label drug, the person that submits 
                        the notice shall pay to the Secretary a fee in 
                        the same amount as would apply if the person 
                        were paying a fee pursuant to section 
                        736(a)(1)(A)(ii). Subject to appropriations 
                        Acts, fees collected by the Secretary under the 
                        preceding sentence are available only to the 
                        Secretary and are for the sole purpose of 
                        paying the costs of reviewing notices submitted 
                        under clause (i).
                            ``(v) Timing of submission of notices.--
                                    ``(I) Prior approval notices.--A 
                                notice under clause (i) to which 
                                subparagraph (C) applies shall be 
                                submitted to the Secretary not later 
                                than 120 days before the qualifying 
                                drug with the difference is introduced 
                                for commercial distribution in a 
                                permitted country, unless the country 
                                requires that distribution of the 
                                qualifying drug with the difference 
                                begin less than 120 days after the 
                                country requires the difference.
                                    ``(II) Other approval notices.--A 
                                notice under clause (i) to which 
                                subparagraph (D) applies shall be 
                                submitted to the Secretary not later 
                                than the day on which the qualifying 
                                drug with the difference is introduced 
                                for commercial distribution in a 
                                permitted country.
                                    ``(III) Other notices.--A notice 
                                under clause (i) to which subparagraph 
                                (E) applies shall be submitted to the 
                                Secretary on the date that the 
                                qualifying drug is first introduced for 
                                commercial distribution in a permitted 
                                country and annually thereafter.
                            ``(vi) Review by secretary.--
                                    ``(I) In general.--In this 
                                paragraph, the difference in a 
                                qualifying drug that is submitted in a 
                                notice under clause (i) from the U.S. 
                                label drug shall be treated by the 
                                Secretary as if it were a manufacturing 
                                change to the U.S. label drug under 
                                section 506A.
                                    ``(II) Standard of review.--Except 
                                as provided in subclause (III), the 
                                Secretary shall review and approve or 
                                disapprove the difference in a notice 
                                submitted under clause (i), if required 
                                under section 506A, using the safe and 
                                effective standard for approving or 
                                disapproving a manufacturing change 
                                under section 506A.
                                    ``(III) Bioequivalence.--If the 
                                Secretary would approve the difference 
                                in a notice submitted under clause (i) 
                                using the safe and effective standard 
                                under section 506A and if the Secretary 
                                determines that the qualifying drug is 
                                not bioequivalent to the U.S. label 
                                drug, the Secretary may--
                                            ``(aa) include in the 
                                        labeling provided under 
                                        paragraph (3) a prominent 
                                        advisory that the qualifying 
                                        drug is safe and effective but 
                                        is not bioequivalent to the 
                                        U.S. label drug if the 
                                        Secretary determines that such 
                                        an advisory is necessary for 
                                        health care practitioners and 
                                        patients to use the qualifying 
                                        drug safely and effectively; or
                                            ``(bb) decline to approve 
                                        the difference if the Secretary 
                                        determines that the 
                                        availability of both the 
                                        qualifying drug and the U.S. 
                                        label drug would pose a threat 
                                        to the public health.
                                    ``(IV) Review by the secretary.--
                                The Secretary shall review and approve 
                                or disapprove the difference in a 
                                notice submitted under clause (i), if 
                                required under section 506A, not later 
                                than 120 days after the date on which 
                                the notice is submitted.
                                    ``(V) Establishment inspection.--If 
                                review of such difference would require 
                                an inspection of the establishment in 
                                which the qualifying drug is 
                                manufactured--
                                            ``(aa) such inspection by 
                                        the Secretary shall be 
                                        authorized; and
                                            ``(bb) the Secretary may 
                                        rely on a satisfactory report 
                                        of a good manufacturing 
                                        practice inspection of the 
                                        establishment from a permitted 
                                        country whose regulatory system 
                                        the Secretary recognizes as 
                                        equivalent under a mutual 
                                        recognition agreement, as 
                                        provided under section 
                                        510(i)(3), section 803, or part 
                                        26 of title 21, Code of Federal 
                                        Regulations (or any 
                                        corresponding successor rule or 
                                        regulation).
                            ``(vii) Publication of information on 
                        notices.--
                                    ``(I) In general.--Through the 
                                Internet website of the Food and Drug 
                                Administration and a toll-free 
                                telephone number, the Secretary shall 
                                readily make available to the public a 
                                list of notices submitted under clause 
                                (i).
                                    ``(II) Contents.--The list under 
                                subclause (I) shall include the date on 
                                which a notice is submitted and 
                                whether--
                                            ``(aa) a notice is under 
                                        review;
                                            ``(bb) the Secretary has 
                                        ordered that importation of the 
                                        qualifying drug from a 
                                        permitted country cease; or
                                            ``(cc) the importation of 
                                        the drug is permitted under 
                                        subsection (a).
                                    ``(III) Update.--The Secretary 
                                shall promptly update the Internet 
                                website with any changes to the list.
                    ``(C) Notice; drug difference requiring prior 
                approval.--In the case of a notice under subparagraph 
                (B)(i) that includes a difference that would, under 
                section 506A(c) or (d)(3)(B)(i), require the approval 
                of a supplemental application before the difference 
                could be made to the U.S. label drug the following 
                shall occur:
                            ``(i) Promptly after the notice is 
                        submitted, the Secretary shall notify 
                        registered exporters, registered importers, the 
                        Federal Trade Commission, and the State 
                        attorneys general that the notice has been 
                        submitted with respect to the qualifying drug 
                        involved.
                            ``(ii) If the Secretary has not made a 
                        determination whether such a supplemental 
                        application regarding the U.S. label drug would 
                        be approved or disapproved by the date on which 
                        the qualifying drug involved is to be 
                        introduced for commercial distribution in a 
                        permitted country, the Secretary shall--
                                    ``(I) order that the importation of 
                                the qualifying drug involved from the 
                                permitted country not begin until the 
                                Secretary completes review of the 
                                notice; and
                                    ``(II) promptly notify registered 
                                exporters, registered importers, the 
                                Federal Trade Commission, and the State 
                                attorneys general of the order.
                            ``(iii) If the Secretary determines that 
                        such a supplemental application regarding the 
                        U.S. label drug would not be approved, the 
                        Secretary shall--
                                    ``(I) order that the importation of 
                                the qualifying drug involved from the 
                                permitted country cease, or provide 
                                that an order under clause (ii), if 
                                any, remains in effect;
                                    ``(II) notify the permitted country 
                                that approved the qualifying drug for 
                                commercial distribution of the 
                                determination; and
                                    ``(III) promptly notify registered 
                                exporters, registered importers, the 
                                Federal Trade Commission, and the State 
                                attorneys general of the determination.
                            ``(iv) If the Secretary determines that 
                        such a supplemental application regarding the 
                        U.S. label drug would be approved, the 
                        Secretary shall--
                                    ``(I) vacate the order under clause 
                                (ii), if any;
                                    ``(II) consider the difference to 
                                be a variation provided for in the 
                                approved application for the U.S. label 
                                drug;
                                    ``(III) permit importation of the 
                                qualifying drug under subsection (a); 
                                and
                                    ``(IV) promptly notify registered 
                                exporters, registered importers, the 
                                Federal Trade Commission, and the State 
                                attorneys general of the determination.
                    ``(D) Notice; drug difference not requiring prior 
                approval.--In the case of a notice under subparagraph 
                (B)(i) that includes a difference that would, under 
                section 506A(d)(3)(B)(ii), not require the approval of 
                a supplemental application before the difference could 
                be made to the U.S. label drug the following shall 
                occur:
                            ``(i) During the period in which the notice 
                        is being reviewed by the Secretary, the 
                        authority under this subsection to import the 
                        qualifying drug involved continues in effect.
                            ``(ii) If the Secretary determines that 
                        such a supplemental application regarding the 
                        U.S. label drug would not be approved, the 
                        Secretary shall--
                                    ``(I) order that the importation of 
                                the qualifying drug involved from the 
                                permitted country cease;
                                    ``(II) notify the permitted country 
                                that approved the qualifying drug for 
                                commercial distribution of the 
                                determination; and
                                    ``(III) promptly notify registered 
                                exporters, registered importers, the 
                                Federal Trade Commission, and the State 
                                attorneys general of the determination.
                            ``(iii) If the Secretary determines that 
                        such a supplemental application regarding the 
                        U.S. label drug would be approved, the 
                        difference shall be considered to be a 
                        variation provided for in the approved 
                        application for the U.S. label drug.
                    ``(E) Notice; drug difference not requiring 
                approval; no difference.--In the case of a notice under 
                subparagraph (B)(i) that includes a difference for 
                which, under section 506A(d)(1)(A), a supplemental 
                application would not be required for the difference to 
                be made to the U.S. label drug, or that states that 
                there is no difference, the Secretary--
                            ``(i) shall consider such difference to be 
                        a variation provided for in the approved 
                        application for the U.S. label drug;
                            ``(ii) may not order that the importation 
                        of the qualifying drug involved cease; and
                            ``(iii) shall promptly notify registered 
                        exporters and registered importers.
                    ``(F) Differences in active ingredient, route of 
                administration, dosage form, or strength.--
                            ``(i) In general.--A person who 
                        manufactures a drug approved under section 
                        505(b) shall submit an application under 
                        section 505(b) for approval of another drug 
                        that is manufactured for distribution in a 
                        permitted country by or for the person that 
                        manufactures the drug approved under section 
                        505(b) if--
                                    ``(I) there is no qualifying drug 
                                in commercial distribution in permitted 
                                countries whose combined population 
                                represents at least 50 percent of the 
                                total population of all permitted 
                                countries with the same active 
                                ingredient or ingredients, route of 
                                administration, dosage form, and 
                                strength as the drug approved under 
                                section 505(b); and
                                    ``(II) each active ingredient of 
                                the other drug is related to an active 
                                ingredient of the drug approved under 
                                section 505(b), as defined in clause 
                                (v).
                            ``(ii) Application under section 505(b).--
                        The application under section 505(b) required 
                        under clause (i) shall--
                                    ``(I) request approval of the other 
                                drug for the indication or indications 
                                for which the drug approved under 
                                section 505(b) is labeled;
                                    ``(II) include the information that 
                                the person submitted to the government 
                                of the permitted country for purposes 
                                of obtaining approval for commercial 
                                distribution of the other drug in that 
                                country, which if in a language other 
                                than English, shall be accompanied by 
                                an English translation verified to be 
                                complete and accurate, with the name, 
                                address, and a brief statement of the 
                                qualifications of the person that made 
                                the translation;
                                    ``(III) include a right of 
                                reference to the application for the 
                                drug approved under section 505(b); and
                                    ``(IV) include such additional 
                                information as the Secretary may 
                                require.
                            ``(iii) Timing of submission of 
                        application.--An application under section 
                        505(b) required under clause (i) shall be 
                        submitted to the Secretary not later than the 
                        day on which the information referred to in 
                        clause (ii)(II) is submitted to the government 
                        of the permitted country.
                            ``(iv) Notice of decision on application.--
                        The Secretary shall promptly notify registered 
                        exporters, registered importers, the Federal 
                        Trade Commission, and the State attorneys 
                        general of a determination to approve or to 
                        disapprove an application under section 505(b) 
                        required under clause (i).
                            ``(v) Related active ingredients.--For 
                        purposes of clause (i)(II), 2 active 
                        ingredients are related if they are--
                                    ``(I) the same; or
                                    ``(II) different salts, esters, or 
                                complexes of the same moiety.
            ``(3) Section 502; labeling.--
                    ``(A) Importation by registered importer.--
                            ``(i) In general.--In the case of a 
                        qualifying drug that is imported or offered for 
                        import by a registered importer, such drug 
                        shall be considered to be in compliance with 
                        section 502 and the labeling requirements under 
                        the approved application for the U.S. label 
                        drug if the qualifying drug bears--
                                    ``(I) a copy of the labeling 
                                approved for the U.S. label drug under 
                                section 505, without regard to whether 
                                the copy bears any trademark involved;
                                    ``(II) the name of the manufacturer 
                                and location of the manufacturer;
                                    ``(III) the lot number assigned by 
                                the manufacturer;
                                    ``(IV) the name, location, and 
                                registration number of the importer; 
                                and
                                    ``(V) the National Drug Code number 
                                assigned to the qualifying drug by the 
                                Secretary.
                            ``(ii) Request for copy of the labeling.--
                        The Secretary shall provide such copy to the 
                        registered importer involved, upon request of 
                        the importer.
                            ``(iii) Requested labeling.--The labeling 
                        provided by the Secretary under clause (ii) 
                        shall--
                                    ``(I) include the established name, 
                                as defined in section 502(e)(3), for 
                                each active ingredient in the 
                                qualifying drug;
                                    ``(II) not include the proprietary 
                                name of the U.S. label drug or any 
                                active ingredient thereof;
                                    ``(III) if required under paragraph 
                                (2)(B)(vi)(III), a prominent advisory 
                                that the qualifying drug is safe and 
                                effective but not bioequivalent to the 
                                U.S. label drug; and
                                    ``(IV) if the inactive ingredients 
                                of the qualifying drug are different 
                                from the inactive ingredients for the 
                                U.S. label drug, include--
                                            ``(aa) a prominent notice 
                                        that the ingredients of the 
                                        qualifying drug differ from the 
                                        ingredients of the U.S. label 
                                        drug and that the qualifying 
                                        drug must be dispensed with an 
                                        advisory to people with 
                                        allergies about this difference 
                                        and a list of ingredients; and
                                            ``(bb) a list of the 
                                        ingredients of the qualifying 
                                        drug as would be required under 
                                        section 502(e).
                    ``(B) Importation by individual.--
                            ``(i) In general.--In the case of a 
                        qualifying drug that is imported or offered for 
                        import by a registered exporter to an 
                        individual, such drug shall be considered to be 
                        in compliance with section 502 and the labeling 
                        requirements under the approved application for 
                        the U.S. label drug if the packaging and 
                        labeling of the qualifying drug complies with 
                        all applicable regulations promulgated under 
                        sections 3 and 4 of the Poison Prevention 
                        Packaging Act of 1970 (15 U.S.C. 1471 et seq.) 
                        and the labeling of the qualifying drug 
                        includes--
                                    ``(I) directions for use by the 
                                consumer;
                                    ``(II) the lot number assigned by 
                                the manufacturer;
                                    ``(III) the name and registration 
                                number of the exporter;
                                    ``(IV) if required under paragraph 
                                (2)(B)(vi)(III), a prominent advisory 
                                that the drug is safe and effective but 
                                not bioequivalent to the U.S. label 
                                drug;
                                    ``(V) if the inactive ingredients 
                                of the drug are different from the 
                                inactive ingredients for the U.S. label 
                                drug--
                                            ``(aa) a prominent advisory 
                                        that persons with an allergy 
                                        should check the ingredient 
                                        list of the drug because the 
                                        ingredients of the drug differ 
                                        from the ingredients of the 
                                        U.S. label drug; and
                                            ``(bb) a list of the 
                                        ingredients of the drug as 
                                        would be required under section 
                                        502(e); and
                                    ``(VI) a copy of any special 
                                labeling that would be required by the 
                                Secretary had the U.S. label drug been 
                                dispensed by a pharmacist in the United 
                                States, without regard to whether the 
                                special labeling bears any trademark 
                                involved.
                            ``(ii) Request for copy of special labeling 
                        and ingredient list.--The Secretary shall 
                        provide to the registered exporter involved a 
                        copy of the special labeling, the advisory, and 
                        the ingredient list of the drug, upon request 
                        of the exporter.
                            ``(iii) Requested labeling and ingredient 
                        list.--The labeling and ingredient list 
                        provided by the Secretary under clause (ii) 
                        shall--
                                    ``(I) include the established name, 
                                as defined in section 502(e)(3), for 
                                each active ingredient in the drug; and
                                    ``(II) not include the proprietary 
                                name of the U.S. label drug or any 
                                active ingredient thereof.
            ``(4) Section 501; adulteration.--A qualifying drug that is 
        imported or offered for import under subsection (a) shall be 
        considered to be in compliance with section 501 if the drug is 
        in compliance with subsection (c).
            ``(5) Standards for refusing admission.--A drug exported 
        under subsection (a) from a registered exporter or imported by 
        a registered importer may be refused admission into the United 
        States if 1 or more of the following applies:
                    ``(A) The drug is not a qualifying drug.
                    ``(B) A notice for the drug required under 
                paragraph (2)(B) has not been submitted to the 
                Secretary.
                    ``(C) The Secretary has ordered that importation of 
                the drug from the permitted country cease under 
                paragraph (2) (C) or (D).
                    ``(D) The drug does not comply with paragraph (3) 
                or (4).
                    ``(E) The shipping container appears damaged in a 
                way that may affect the strength, quality, or purity of 
                the drug.
                    ``(F) The Secretary becomes aware that--
                            ``(i) the drug may be counterfeit;
                            ``(ii) the drug may have been prepared, 
                        packed, or held under insanitary conditions; or
                            ``(iii) the methods used in, or the 
                        facilities or controls used for, the 
                        manufacturing, processing, packing, or holding 
                        of the drug do not conform to good 
                        manufacturing practice.
                    ``(G) The Secretary has obtained an injunction 
                under section 302 that prohibits the distribution of 
                the drug in interstate commerce.
                    ``(H) The Secretary has under section 505(e) 
                withdrawn approval of the drug.
                    ``(I) The manufacturer of the drug has instituted a 
                recall of the drug.
                    ``(J) If the drug is imported or offered for import 
                by a registered importer without submission of a notice 
                in accordance with subsection (d)(4).
                    ``(K) If the drug is imported or offered for import 
                from a registered exporter to an individual and 1 or 
                more of the following applies:
                            ``(i) The shipping container for such drug 
                        does not bear the markings required under 
                        subsection (d)(2).
                            ``(ii) The markings on the shipping 
                        container appear to be counterfeit.
                            ``(iii) The shipping container or markings 
                        appear to have been tampered with.
    ``(h) Licensing as Pharmacist.--A registration condition is that 
the exporter involved agrees that a qualifying drug will be exported to 
an individual only if the Secretary has verified that--
            ``(1) the exporter is authorized under the law of the 
        permitted country in which the exporter is located to dispense 
        prescription drugs; and
            ``(2) the exporter employs persons that are licensed under 
        the law of the permitted country in which the exporter is 
        located to dispense prescription drugs in sufficient number to 
        dispense safely the drugs exported by the exporter to 
        individuals, and the exporter assigns to those persons 
        responsibility for dispensing such drugs to individuals.
    ``(i) Individuals; Conditions for Importation.--
            ``(1) In general.--For purposes of subsection (a)(2)(B), 
        the importation of a qualifying drug by an individual is in 
        accordance with this subsection if the following conditions are 
        met:
                    ``(A) The drug is accompanied by a copy of a 
                prescription for the drug, which prescription--
                            ``(i) is valid under applicable Federal and 
                        State laws; and
                            ``(ii) was issued by a practitioner who, 
                        under the law of a State of which the 
                        individual is a resident, or in which the 
                        individual receives care from the practitioner 
                        who issues the prescription, is authorized to 
                        administer prescription drugs.
                    ``(B) The drug is accompanied by a copy of the 
                documentation that was required under the law or 
                regulations of the permitted country in which the 
                exporter is located, as a condition of dispensing the 
                drug to the individual.
                    ``(C) The copies referred to in subparagraphs 
                (A)(i) and (B) are marked in a manner sufficient--
                            ``(i) to indicate that the prescription, 
                        and the equivalent document in the permitted 
                        country in which the exporter is located, have 
                        been filled; and
                            ``(ii) to prevent a duplicative filling by 
                        another pharmacist.
                    ``(D) The individual has provided to the registered 
                exporter a complete list of all drugs used by the 
                individual for review by the individuals who dispense 
                the drug.
                    ``(E) The quantity of the drug does not exceed a 
                90-day supply.
                    ``(F) The drug is not an ineligible subpart H drug. 
                For purposes of this section, a prescription drug is an 
                `ineligible subpart H drug' if the drug was approved by 
                the Secretary under subpart H of part 314 of title 21, 
                Code of Federal Regulations (relating to accelerated 
                approval), with restrictions under section 520 of such 
                part to assure safe use, and the Secretary has 
                published in the Federal Register a notice that the 
                Secretary has determined that good cause exists to 
                prohibit the drug from being imported pursuant to this 
                subsection.
            ``(2) Notice regarding drug refused admission.--If a 
        registered exporter ships a drug to an individual pursuant to 
        subsection (a)(2)(B) and the drug is refused admission to the 
        United States, a written notice shall be sent to the individual 
        and to the exporter that informs the individual and the 
        exporter of such refusal and the reason for the refusal.
    ``(j) Maintenance of Records and Samples.--
            ``(1) In general.--A registration condition is that the 
        importer or exporter involved shall--
                    ``(A) maintain records required under this section 
                for not less than 2 years; and
                    ``(B) maintain samples of each lot of a qualifying 
                drug required under this section for not less than 2 
                years.
            ``(2) Place of record maintenance.--The records described 
        under paragraph (1) shall be maintained--
                    ``(A) in the case of an importer, at the place of 
                business of the importer at which the importer 
                initially receives the qualifying drug after 
                importation; or
                    ``(B) in the case of an exporter, at the facility 
                from which the exporter ships the qualifying drug to 
                the United States.
    ``(k) Drug Recalls.--
            ``(1) Manufacturers.--A person that manufactures a 
        qualifying drug imported from a permitted country under this 
        section shall promptly inform the Secretary--
                    ``(A) if the drug is recalled or withdrawn from the 
                market in a permitted country;
                    ``(B) how the drug may be identified, including lot 
                number; and
                    ``(C) the reason for the recall or withdrawal.
            ``(2) Secretary.--With respect to each permitted country, 
        the Secretary shall--
                    ``(A) enter into an agreement with the government 
                of the country to receive information about recalls and 
                withdrawals of qualifying drugs in the country; or
                    ``(B) monitor recalls and withdrawals of qualifying 
                drugs in the country using any information that is 
                available to the public in any media.
            ``(3) Notice.--The Secretary may notify, as appropriate, 
        registered exporters, registered importers, wholesalers, 
        pharmacies, or the public of a recall or withdrawal of a 
        qualifying drug in a permitted country.
    ``(l) Drug Labeling.--When a qualifying drug that is imported into 
the United States by an importer under subsection (a) is dispensed by a 
pharmacist to an individual, the pharmacist shall provide that the 
packaging and labeling of the drug complies with all applicable 
regulations promulgated under sections 3 and 4 of the Poison Prevention 
Packaging Act of 1970 (15 U.S.C. 1471 et seq.) and include with any 
other labeling provided to the individual the following:
            ``(1) The lot number assigned by the manufacturer.
            ``(2) The name and registration number of the importer.
            ``(3) If the inactive ingredients of the drug are different 
        from the inactive ingredients for the U.S. label drug--
                    ``(A) a prominent advisory that persons with 
                allergies should check the ingredient list of the drug 
                because the ingredients of the drug differ from the 
                ingredients of the U.S. label drug; and
                    ``(B) a list of the ingredients of the drug as 
                would be required under section 502(e).
            ``(4) If required under paragraph (2)(B)(vi)(III) of 
        subsection (g), a prominent advisory that the drug is safe and 
        effective but not bioequivalent to the U.S. label drug.
    ``(m) Charitable Contributions.--Notwithstanding any other 
provision of this section, this section does not authorize the 
importation into the United States of a qualifying drug donated or 
otherwise supplied for free or at nominal cost by the manufacturer of 
the drug to a charitable or humanitarian organization, including the 
United Nations and affiliates, or to a government of a foreign country.
    ``(n) Unfair and Discriminatory Acts and Practices.--
            ``(1) In general.--It is unlawful for a manufacturer, 
        directly or indirectly (including by being a party to a 
        licensing agreement or other agreement), to--
                    ``(A) discriminate by charging a higher price for a 
                prescription drug sold to a registered exporter or 
                other person in a permitted country that exports a 
                qualifying drug to the United States under this section 
                than the price that is charged, inclusive of rebates or 
                other incentives to the permitted country or other 
                person, to another person that is in the same country 
                and that does not export a qualifying drug into the 
                United States under this section;
                    ``(B) discriminate by charging a higher price for a 
                prescription drug sold to a registered importer or 
                other person that distributes, sells, or uses a 
                qualifying drug imported into the United States under 
                this section than the price that is charged to another 
                person in the United States that does not import a 
                qualifying drug under this section, or that does not 
                distribute, sell, or use such a drug;
                    ``(C) discriminate by denying, restricting, or 
                delaying supplies of a prescription drug to a 
                registered exporter or other person in a permitted 
                country that exports a qualifying drug to the United 
                States under this section or to a registered importer 
                or other person that distributes, sells, or uses a 
                qualifying drug imported into the United States under 
                this section;
                    ``(D) discriminate by publicly, privately, or 
                otherwise refusing to do business with a registered 
                exporter or other person in a permitted country that 
                exports a qualifying drug to the United States under 
                this section or with a registered importer or other 
                person that distributes, sells, or uses a qualifying 
                drug imported into the United States under this 
                section;
                    ``(E) knowingly fail to submit a notice under 
                subsection (g)(2)(B)(i), knowingly fail to submit such 
                a notice on or before the date specified in subsection 
                (g)(2)(B)(v) or as otherwise required under subsection 
                (e) (3), (4), and (5) of section 4 of the 
                Pharmaceutical Market Access and Drug Safety Act of 
                2005, knowingly submit such a notice that makes a 
                materially false, fictitious, or fraudulent statement, 
                or knowingly fail to provide promptly any information 
                requested by the Secretary to review such a notice;
                    ``(F) knowingly fail to submit an application 
                required under subsection (g)(2)(F), knowingly fail to 
                submit such an application on or before the date 
                specified in subsection (g)(2)(F)(ii), knowingly submit 
                such an application that makes a materially false, 
                fictitious, or fraudulent statement, or knowingly fail 
                to provide promptly any information requested by the 
                Secretary to review such an application;
                    ``(G) cause there to be a difference (including a 
                difference in active ingredient, route of 
                administration, dosage form, strength, formulation, 
                manufacturing establishment, manufacturing process, or 
                person that manufactures the drug) between a 
                prescription drug for distribution in the United States 
                and the drug for distribution in a permitted country;
                    ``(H) refuse to allow an inspection authorized 
                under this section of an establishment that 
                manufactures a qualifying drug that is, or will be, 
                introduced for commercial distribution in a permitted 
                country;
                    ``(I) fail to conform to the methods used in, or 
                the facilities used for, the manufacturing, processing, 
                packing, or holding of a qualifying drug that is, or 
                will be, introduced for commercial distribution in a 
                permitted country to good manufacturing practice under 
                this Act;
                    ``(J) become a party to a licensing agreement or 
                other agreement related to a qualifying drug that fails 
                to provide for compliance with all requirements of this 
                section with respect to such drug;
                    ``(K) enter into a contract that restricts, 
                prohibits, or delays the importation of a qualifying 
                drug under this section;
                    ``(L) engage in any other action to restrict, 
                prohibit, or delay the importation of a qualifying drug 
                under this section; or
                    ``(M) engage in any other action that the Federal 
                Trade Commission determines to discriminate against a 
                person that engages or attempts to engage in the 
                importation of a qualifying drug under this section.
            ``(2) Affirmative defense.--
                    ``(A) Discrimination.--It shall be an affirmative 
                defense to a charge that a manufacturer has 
                discriminated under subparagraph (A), (B), (C), (D), or 
                (M) of paragraph (1) that the higher price charged for 
                a prescription drug sold to a person, the denial, 
                restriction, or delay of supplies of a prescription 
                drug to a person, the refusal to do business with a 
                person, or other discriminatory activity against a 
                person, is not based, in whole or in part, on--
                            ``(i) the person exporting or importing a 
                        qualifying drug into the United States under 
                        this section; or
                            ``(ii) the person distributing, selling, or 
                        using a qualifying drug imported into the 
                        United States under this section.
                    ``(B) Drug differences.--It shall be an affirmative 
                defense to a charge that a manufacturer has caused 
                there to be a difference described in subparagraph (G) 
                of paragraph (1) that--
                            ``(i) the difference was required by the 
                        country in which the drug is distributed;
                            ``(ii) the Secretary has determined that 
                        the difference was necessary to improve the 
                        safety or effectiveness of the drug;
                            ``(iii) the person manufacturing the drug 
                        for distribution in the United States has given 
                        notice to the Secretary under subsection 
                        (g)(2)(B)(i) that the drug for distribution in 
                        the United States is not different from a drug 
                        for distribution in permitted countries whose 
                        combined population represents at least 50 
                        percent of the total population of all 
                        permitted countries; or
                            ``(iv) the difference was not caused, in 
                        whole or in part, for the purpose of 
                        restricting importation of the drug into the 
                        United States under this section.
            ``(3) Effect of subsection.--
                    ``(A) Sales in other countries.--This subsection 
                applies only to the sale or distribution of a 
                prescription drug in a country if the manufacturer of 
                the drug chooses to sell or distribute the drug in the 
                country. Nothing in this subsection shall be construed 
                to compel the manufacturer of a drug to distribute or 
                sell the drug in a country.
                    ``(B) Discounts to insurers, health plans, pharmacy 
                benefit managers, and covered entities.--Nothing in 
                this subsection shall be construed to--
                            ``(i) prevent or restrict a manufacturer of 
                        a prescription drug from providing discounts to 
                        an insurer, health plan, pharmacy benefit 
                        manager in the United States, or covered entity 
                        in the drug discount program under section 340B 
                        of the Public Health Service Act (42 U.S.C. 
                        256b) in return for inclusion of the drug on a 
                        formulary;
                            ``(ii) require that such discounts be made 
                        available to other purchasers of the 
                        prescription drug; or
                            ``(iii) prevent or restrict any other 
                        measures taken by an insurer, health plan, or 
                        pharmacy benefit manager to encourage 
                        consumption of such prescription drug.
                    ``(C) Charitable contributions.--Nothing in this 
                subsection shall be construed to--
                            ``(i) prevent a manufacturer from donating 
                        a prescription drug, or supplying a 
                        prescription drug at nominal cost, to a 
                        charitable or humanitarian organization, 
                        including the United Nations and affiliates, or 
                        to a government of a foreign country; or
                            ``(ii) apply to such donations or supplying 
                        of a prescription drug.
            ``(4) Enforcement.--
                    ``(A) Unfair or deceptive act or practice.--A 
                violation of this subsection shall be treated as a 
                violation of a rule defining an unfair or deceptive act 
                or practice prescribed under section 18(a)(1)(B) of the 
                Federal Trade Commission Act (15 U.S.C. 57a(a)(1)(B)).
                    ``(B) Actions by the commission.--The Federal Trade 
                Commission--
                            ``(i) shall enforce this subsection in the 
                        same manner, by the same means, and with the 
                        same jurisdiction, powers, and duties as though 
                        all applicable terms and provisions of the 
                        Federal Trade Commission Act (15 U.S.C. 41 et 
                        seq.) were incorporated into and made a part of 
                        this section; and
                            ``(ii) may seek monetary relief threefold 
                        the damages sustained, in addition to any other 
                        remedy available to the Federal Trade 
                        Commission under the Federal Trade Commission 
                        Act (15 U.S.C. 41 et seq.).
            ``(5) Actions by states.--
                    ``(A) In general.--
                            ``(i) Civil actions.--In any case in which 
                        the attorney general of a State has reason to 
                        believe that an interest of the residents of 
                        that State have been adversely affected by any 
                        manufacturer that violates paragraph (1), the 
                        attorney general of a State may bring a civil 
                        action on behalf of the residents of the State, 
                        and persons doing business in the State, in a 
                        district court of the United States of 
                        appropriate jurisdiction to--
                                    ``(I) enjoin that practice;
                                    ``(II) enforce compliance with this 
                                subsection;
                                    ``(III) obtain damages, 
                                restitution, or other compensation on 
                                behalf of residents of the State and 
                                persons doing business in the State, 
                                including threefold the damages; or
                                    ``(IV) obtain such other relief as 
                                the court may consider to be 
                                appropriate.
                            ``(ii) Notice.--
                                    ``(I) In general.--Before filing an 
                                action under clause (i), the attorney 
                                general of the State involved shall 
                                provide to the Federal Trade 
                                Commission--
                                            ``(aa) written notice of 
                                        that action; and
                                            ``(bb) a copy of the 
                                        complaint for that action.
                                    ``(II) Exemption.--Subclause (I) 
                                shall not apply with respect to the 
                                filing of an action by an attorney 
                                general of a State under this 
                                paragraph, if the attorney general 
                                determines that it is not feasible to 
                                provide the notice described in that 
                                subclause before filing of the action. 
                                In such case, the attorney general of a 
                                State shall provide notice and a copy 
                                of the complaint to the Federal Trade 
                                Commission at the same time as the 
                                attorney general files the action.
                    ``(B) Intervention.--
                            ``(i) In general.--On receiving notice 
                        under subparagraph (A)(ii), the Federal Trade 
                        Commission shall have the right to intervene in 
                        the action that is the subject of the notice.
                            ``(ii) Effect of intervention.--If the 
                        Federal Trade Commission intervenes in an 
                        action under subparagraph (A), it shall have 
                        the right--
                                    ``(I) to be heard with respect to 
                                any matter that arises in that action; 
                                and
                                    ``(II) to file a petition for 
                                appeal.
                    ``(C) Construction.--For purposes of bringing any 
                civil action under subparagraph (A), nothing in this 
                subsection shall be construed to prevent an attorney 
                general of a State from exercising the powers conferred 
                on the attorney general by the laws of that State to--
                            ``(i) conduct investigations;
                            ``(ii) administer oaths or affirmations; or
                            ``(iii) compel the attendance of witnesses 
                        or the production of documentary and other 
                        evidence.
                    ``(D) Actions by the commission.--In any case in 
                which an action is instituted by or on behalf of the 
                Federal Trade Commission for a violation of paragraph 
                (1), a State may not, during the pendency of that 
                action, institute an action under subparagraph (A) for 
                the same violation against any defendant named in the 
                complaint in that action.
                    ``(E) Venue.--Any action brought under subparagraph 
                (A) may be brought in the district court of the United 
                States that meets applicable requirements relating to 
                venue under section 1391 of title 28, United States 
                Code.
                    ``(F) Service of process.--In an action brought 
                under subparagraph (A), process may be served in any 
                district in which the defendant--
                            ``(i) is an inhabitant; or
                            ``(ii) may be found.
                    ``(G) Measurement of damages.--In any action under 
                this paragraph to enforce a cause of action under this 
                subsection in which there has been a determination that 
                a defendant has violated a provision of this 
                subsection, damages may be proved and assessed in the 
                aggregate by statistical or sampling methods, by the 
                computation of illegal overcharges or by such other 
                reasonable system of estimating aggregate damages as 
                the court in its discretion may permit without the 
                necessity of separately proving the individual claim 
                of, or amount of damage to, persons on whose behalf the 
                suit was brought.
                    ``(H) Exclusion on duplicative relief.--The 
                district court shall exclude from the amount of 
                monetary relief awarded in an action under this 
                paragraph brought by the attorney general of a State 
                any amount of monetary relief which duplicates amounts 
                which have been awarded for the same injury.
            ``(6) Effect on antitrust laws.--Nothing in this subsection 
        shall be construed to modify, impair, or supersede the 
        operation of the antitrust laws. For the purpose of this 
        subsection, the term `antitrust laws' has the meaning given it 
        in the first section of the Clayton Act, except that it 
        includes section 5 of the Federal Trade Commission Act to the 
        extent that such section 5 applies to unfair methods of 
        competition.
            ``(7) Manufacturer.--In this subsection, the term 
        `manufacturer' means any entity, including any affiliate or 
        licensee of that entity, that is engaged in--
                    ``(A) the production, preparation, propagation, 
                compounding, conversion, or processing of a 
                prescription drug, either directly or indirectly by 
                extraction from substances of natural origin, or 
                independently by means of chemical synthesis, or by a 
                combination of extraction and chemical synthesis; or
                    ``(B) the packaging, repackaging, labeling, 
                relabeling, or distribution of a prescription drug.''.
            (2) Prohibited acts.--The Federal Food, Drug, and Cosmetic 
        Act is amended--
                    (A) in section 301 (21 U.S.C. 331), by striking 
                paragraph (aa) and inserting the following:
    ``(aa)(1) The sale or trade by a pharmacist, or by a business 
organization of which the pharmacist is a part, of a qualifying drug 
that under section 804(a)(2)(A) was imported by the pharmacist, other 
than--
            ``(A) a sale at retail made pursuant to dispensing the drug 
        to a customer of the pharmacist or organization; or
            ``(B) a sale or trade of the drug to a pharmacy or a 
        wholesaler registered to import drugs under section 804.
    ``(2) The sale or trade by an individual of a qualifying drug that 
under section 804(a)(2)(B) was imported by the individual.
    ``(3) The making of a materially false, fictitious, or fraudulent 
statement or representation, or a material omission, in a notice under 
clause (i) of section 804(g)(2)(B) or in an application required under 
section 804(g)(2)(F), or the failure to submit such a notice or 
application.
    ``(4) The importation of a drug in violation of a registration 
condition or other requirement under section 804, the falsification of 
any record required to be maintained, or provided to the Secretary, 
under such section, or the violation of any registration condition or 
other requirement under such section.''; and
                    (B) in section 303(a) (21 U.S.C. 333(a)), by 
                striking paragraph (6) and inserting the following:
    ``(6) Notwithstanding subsection (a), any person that knowingly 
violates section 301(i) (2) or (3) or section 301(aa)(4) shall be 
imprisoned not more than 10 years, or fined in accordance with title 
18, United States Code, or both.''.
            (3) Amendment of certain provisions.--
                    (A) In general.--Section 801 of the Federal Food, 
                Drug, and Cosmetic Act (21 U.S.C. 381) is amended by 
                striking subsection (g) and inserting the following:
    ``(g) With respect to a prescription drug that is imported or 
offered for import into the United States by an individual who is not 
in the business of such importation, that is not shipped by a 
registered exporter under section 804, and that is refused admission 
under subsection (a), the Secretary shall notify the individual that--
            ``(1) the drug has been refused admission because the drug 
        was not a lawful import under section 804;
            ``(2) the drug is not otherwise subject to a waiver of the 
        requirements of subsection (a);
            ``(3) the individual may under section 804 lawfully import 
        certain prescription drugs from exporters registered with the 
        Secretary under section 804; and
            ``(4) the individual can find information about such 
        importation, including a list of registered exporters, on the 
        Internet website of the Food and Drug Administration or through 
        a toll-free telephone number required under section 804.''.
                    (B) Establishment registration.--Section 510(i) of 
                the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 
                360(i)) is amended in paragraph (1) by inserting after 
                ``import into the United States'' the following: ``, 
                including a drug that is, or may be, imported or 
                offered for import into the United States under section 
                804,''.
                    (C) Effective date.--The amendments made by this 
                subsection shall take effect on the date that is 90 
                days after the date of enactment of this Act.
            (4) Exhaustion.--
                    (A) In general.--Section 271 of title 35, United 
                States Code, is amended--
                            (i) by redesignating subsections (h) and 
                        (i) as (i) and (j), respectively; and
                            (ii) by inserting after subsection (g) the 
                        following:
    ``(h) It shall not be an act of infringement to use, offer to sell, 
or sell within the United States or to import into the United States 
any patented invention under section 804 of the Federal Food, Drug, and 
Cosmetic Act that was first sold abroad by or under authority of the 
owner or licensee of such patent.''.
                    (B) Rule of construction.--Nothing in the amendment 
                made by paragraph (1) shall be construed to affect the 
                ability of a patent owner or licensee to enforce their 
                patent, subject to such amendment.
            (5) Effect of section 804.--
                    (A) In general.--Section 804 of the Federal Food, 
                Drug, and Cosmetic Act, as added by subsection (a), 
                shall permit the importation of qualifying drugs (as 
                defined in such section 804) into the United States 
                without regard to the status of the issuance of 
                implementing regulations--
                            (i) from exporters registered under such 
                        section 804 on the date that is 90 days after 
                        the date of enactment of this Act; and
                            (ii) from permitted countries, as defined 
                        in such section 804, by importers registered 
                        under such section 804 on the date that is 1 
                        year after the date of enactment of this Act.
                    (B) Review of registration by certain exporters.--
                            (i) Review priority.--In the review of 
                        registrations submitted under subsection (b) of 
                        such section 804, registrations submitted by 
                        entities in Canada that are significant 
                        exporters of prescription drugs to individuals 
                        in the United States as of the date of 
                        enactment of this Act will have priority during 
                        the 90 day period that begins on such date of 
                        enactment.
                            (ii) Period for review.--During such 90-day 
                        period, the reference in subsection (b)(2)(A) 
                        of such section 804 to 90 days (relating to 
                        approval or disapproval of registrations) is, 
                        as applied to such entities, deemed to be 30 
                        days.
                            (iii) Limitation.--That an exporter in 
                        Canada exports, or has exported, prescription 
                        drugs to individuals in the United States on or 
                        before the date that is 90 days after the date 
                        of enactment of this Act shall not serve as a 
                        basis, in whole or in part, for disapproving a 
                        registration under such section 804 from the 
                        exporter.
                            (iv) First year limit on number of 
                        exporters.--During the 1-year period beginning 
                        on the date of enactment of this Act, the 
                        Secretary of Health and Human Services 
                        (referred to in this section as the 
                        ``Secretary'') may limit the number of 
                        registered exporters under such section 804 to 
                        not less than 50, so long as the Secretary 
                        gives priority to those exporters with 
                        demonstrated ability to process a high volume 
                        of shipments of drugs to individuals in the 
                        United States.
                            (v) Second year limit on number of 
                        exporters.--During the 1-year period beginning 
                        on the date that is 1 year after the date of 
                        enactment of this Act, the Secretary may limit 
                        the number of registered exporters under such 
                        section 804 to not less than 100, so long as 
                        the Secretary gives priority to those exporters 
                        with demonstrated ability to process a high 
                        volume of shipments of drugs to individuals in 
                        the United States.
                            (vi) Further limit on number of 
                        exporters.--The Secretary shall report to 
                        Congress to request the authority to impose a 
                        limitation on the number of registered 
                        exporters under such section 804 during any 
                        period beginning on a date that is not less 
                        than 2 years after the date of enactment of 
                        this Act if the Secretary determines that--
                                    (I) a limitation on the number of 
                                registered exporters is necessary for 
                                the effective and efficient enforcement 
                                of the requirements of such section 804 
                                with respect to such exporters; and
                                    (II) such limitation will not 
                                restrict the ability of individuals to 
                                import prescription drugs for personal 
                                use from registered exporters under 
                                such section 804.
                    (C) Limits on number of importers.--
                            (i) First year limit on number of 
                        importers.--During the 1-year period beginning 
                        on the date that is 1 year after the date of 
                        enactment of this Act, the Secretary may limit 
                        the number of registered importers under such 
                        section 804 to not less than 100 (of which at 
                        least a significant number shall be groups of 
                        pharmacies, to the extent feasible given the 
                        applications submitted by such groups), so long 
                        as the Secretary gives priority to those 
                        importers with demonstrated ability to process 
                        a high volume of shipments of drugs imported 
                        into the United States.
                            (ii) Second year limit on number of 
                        importers.--During the 1-year period beginning 
                        on the date that is 2 years after the date of 
                        enactment of this Act, the Secretary may limit 
                        the number of registered importers under such 
                        section 804 to not less than 200 (of which at 
                        least a significant number shall be groups of 
                        pharmacies, to the extent feasible given the 
                        applications submitted by such groups), so long 
                        as the Secretary gives priority to those 
                        importers with demonstrated ability to process 
                        a high volume of shipments of drugs to 
                        individuals in the United States.
                            (iii) Further limit on number of 
                        importers.--The Secretary shall report to 
                        Congress to request the authority to impose a 
                        limitation on the number of registered 
                        importers under such section 804 during any 
                        period beginning on a date that is not less 
                        than 3 years after the date of enactment of 
                        this Act if the Secretary determines that--
                                    (I) a limitation on the number of 
                                registered importers is necessary for 
                                the effective and efficient enforcement 
                                of the requirements of such section 804 
                                with respect to such importers; and
                                    (II) such limitation will not 
                                restrict the ability of individuals to 
                                purchase qualifying drugs imported 
                                under such section 804 or savings 
                                available to individuals by purchasing 
                                such qualifying drugs.
                    (D) Notices for drugs for import from canada.--The 
                notice with respect to a qualifying drug introduced for 
                commercial distribution in Canada as of the date of 
                enactment of this Act that is required under subsection 
                (g)(2)(B)(i) of such section 804 shall be submitted to 
                the Secretary not later than 30 days after the date of 
                enactment of this Act if--
                            (i) the U.S. label drug (as defined in such 
                        section 804) for the qualifying drug is 1 of 
                        the 100 prescription drugs with the highest 
                        dollar volume of sales in the United States 
                        based on the 12 calendar month period most 
                        recently completed before the date of enactment 
                        of this Act; or
                            (ii) the notice is a notice under 
                        subsection (g)(2)(B)(i)(II) of such section 
                        804.
                    (E) Notice for drugs for import from other 
                countries.--The notice with respect to a qualifying 
                drug introduced for commercial distribution in a 
                permitted country other than Canada as of the date of 
                enactment of this Act that is required under subsection 
                (g)(2)(B)(i) of such section 804 shall be submitted to 
                the Secretary not later than 180 days after the date of 
                enactment of this Act if--
                            (i) the U.S. label drug for the qualifying 
                        drug is 1 of the 100 prescription drugs with 
                        the highest dollar volume of sales in the 
                        United States based on the 12 calendar month 
                        period that is first completed on the date that 
                        is 120 days after the date of enactment of this 
                        Act; or
                            (ii) the notice is a notice under 
                        subsection (g)(2)(B)(i)(II) of such section 
                        804.
                    (F) Notice for other drugs for import.--
                            (i) Guidance on submission dates.--The 
                        Secretary shall by guidance establish a series 
                        of submission dates for the notices under 
                        subsection (g)(2)(B)(i) of such section 804 
                        with respect to qualifying drugs introduced for 
                        commercial distribution as of the date of 
                        enactment of this Act and that are not required 
                        to be submitted under subparagraph (D) or (E).
                            (ii) Consistent and efficient use of 
                        resources.--The Secretary shall establish the 
                        dates described under clause (i) so that such 
                        notices described under such clause are 
                        submitted and reviewed at a rate that allows 
                        consistent and efficient use of the resources 
                        and staff available to the Secretary for such 
                        reviews. Review of all such notices shall be 
                        completed not later than 5 years after the date 
                        of enactment of this Act.
                            (iii) Priority for drugs with higher 
                        sales.--The Secretary shall establish the dates 
                        described under clause (i) so that the 
                        Secretary reviews the notices described under 
                        such clause with respect to qualifying drugs 
                        with higher dollar volume of sales in the 
                        United States before the notices with respect 
                        to drugs with lower sales in the United States.
                    (G) Notices for drugs approved after effective 
                date.--The notice required under subsection 
                (g)(2)(B)(i) of such section 804 for a qualifying drug 
                first introduced for commercial distribution in a 
                permitted country (as defined in such section 804) 
                after the date of enactment of this Act shall be 
                submitted to and reviewed by the Secretary as provided 
                under subsection (g)(2)(B) of such section 804, without 
                regard to subparagraph (D), (E), or (F).
                    (H) Report.--Beginning with fiscal year 2007, not 
                later than 90 days after the end of each fiscal year 
                during which the Secretary reviews a notice referred to 
                in subparagraph (D), (E), or (F), the Secretary shall 
                submit a report to Congress concerning the progress of 
                the Food and Drug Administration in reviewing the 
                notices referred to in subparagraphs (D), (E), and (F).
                    (I) User fees.--
                            (i) Exporters.--When establishing an 
                        aggregate total of fees to be collected from 
                        exporters under subsection (f)(2) of such 
                        section 804, the Secretary shall, under 
                        subsection (f)(3)(C)(i) of such section 804, 
                        estimate the total price of drugs imported 
                        under subsection (a) of such section 804 into 
                        the United States by registered exporters 
                        during fiscal year 2007 to be $1,000,000,000.
                            (ii) Importers.--When establishing an 
                        aggregate total of fees to be collected from 
                        importers under subsection (e)(2) of such 
                        section 804, the Secretary shall, under 
                        subsection (e)(3)(C)(i) of such section 804, 
                        estimate the total price of drugs imported 
                        under subsection (a) of such section 804 into 
                        the United States by registered importers 
                        during--
                                    (I) fiscal year 2007 to be 
                                $1,000,000,000; and
                                    (II) fiscal year 2008 to be 
                                $10,000,000,000.
                            (iii) Fiscal year 2008 adjustment.--
                                    (I) Reports.--Not later than 
                                February 20, 2008, registered importers 
                                shall report to the Secretary the total 
                                price and the total volume of drugs 
                                imported to the United States by the 
                                importer during the 4-month period from 
                                October 1, 2007, through January 31, 
                                2008.
                                    (II) Reestimate.--Notwithstanding 
                                subsection (e)(3)(C)(ii) of such 
                                section 804 or clause (ii), the 
                                Secretary shall reestimate the total 
                                price of qualifying drugs imported 
                                under subsection (a) of such section 
                                804 into the United States by 
                                registered importers during fiscal year 
                                2008. Such reestimate shall be equal 
                                to--
                                            (aa) the total price of 
                                        qualifying drugs imported by 
                                        each importer as reported under 
                                        subclause (I); multiplied by
                                            (bb) 3.
                                    (III) Adjustment.--The Secretary 
                                shall adjust the fee due on April 1, 
                                2008, from each importer so that the 
                                aggregate total of fees collected under 
                                paragraph (5)(B) for fiscal year 2008 
                                does not exceed the total price of 
                                qualifying drugs imported under 
                                subsection (a) of such section 804 into 
                                the United States by registered 
                                importers during fiscal year 2008 as 
                                reestimated under subclause (II).
                            (iv) Annual report.--
                                    (I) Food and drug administration.--
                                Beginning with fiscal year 2007, not 
                                later than 180 days after the end of 
                                each fiscal year during which fees are 
                                collected under subsection (e), (f), or 
                                (g)(2)(B)(iv) of such section 804, the 
                                Secretary shall prepare and submit to 
                                the House of Representatives and the 
                                Senate a report on the implementation 
                                of the authority for such fees during 
                                such fiscal year and the use, by the 
                                Food and Drug Administration, of the 
                                fees collected for the fiscal year for 
                                which the report is made and credited 
                                to the Food and Drug Administration.
                                    (II) Customs and border control.--
                                Beginning with fiscal year 2007, not 
                                later than 180 days after the end of 
                                each fiscal year during which fees are 
                                collected under subsection (e) or (f) 
                                of such section 804, the Secretary of 
                                Homeland Security, in consultation with 
                                the Secretary of the Treasury, shall 
                                prepare and submit to the House of 
                                Representatives and the Senate a report 
                                on the use, by the Bureau of Customs 
                                and Border Protection, of the fees, if 
                                any, transferred by the Secretary to 
                                the Bureau of Customs and Border 
                                Protection for the fiscal year for 
                                which the report is made.
            (6) Implementation of section 804.--
                    (A) Interim rule.--The Secretary may promulgate an 
                interim rule for implementing section 804 of the 
                Federal Food, Drug, and Cosmetic Act, as added by 
                subsection (a) of this section.
                    (B) No notice of proposed rulemaking.--The interim 
                rule described under subparagraph (A) may be developed 
                and promulgated by the Secretary without providing 
                general notice of proposed rulemaking.
                    (C) Final rule.--Not later than 1 year after the 
                date on which the Secretary promulgates an interim rule 
                under subparagraph (A), the Secretary shall, in 
                accordance with procedures under section 553 of title 
                5, United States Code, promulgate a final rule for 
                implementing such section 804, which may incorporate by 
                reference provisions of the interim rule provided for 
                under subparagraph (A), to the extent that such 
                provisions are not modified.
            (7) Consumer education.--The Secretary shall carry out 
        activities that educate consumers--
                    (A) with regard to the availability of qualifying 
                drugs for import for personal use from an exporter 
                registered with and approved by the Food and Drug 
                Administration under section 804 of the Federal Food, 
                Drug, and Cosmetic Act, as added by this section, 
                including information on how to verify whether an 
                exporter is registered and approved by use of the 
                Internet website of the Food and Drug Administration 
                and the toll-free telephone number required by this 
                Act;
                    (B) that drugs that consumers attempt to import 
                from an exporter that is not registered with and 
                approved by the Food and Drug Administration can be 
                seized by the United States Customs Service and 
                destroyed, and that such drugs may be counterfeit, 
                unapproved, unsafe, or ineffective; and
                    (C) with regard to the availability at domestic 
                retail pharmacies of qualifying drugs imported under 
                such section 804 by domestic wholesalers and pharmacies 
                registered with and approved by the Food and Drug 
                Administration.
            (8) Effect on administration practices.--Notwithstanding 
        any provision of this Act (and the amendments made by this 
        Act), nothing in this Act (or the amendments made by this Act) 
        shall be construed to change, limit, or restrict the practices 
        of the Food and Drug Administration or the Bureau of Customs 
        and Border Protection in effect on January 1, 2004, with 
        respect to the importation of prescription drugs into the 
        United States by an individual, on the person of such 
        individual, for personal use.
    (c) Disposition of Certain Drugs Denied Admission Into United 
States.--
            (1) In general.--Chapter VIII of the Federal Food, Drug, 
        and Cosmetic Act (21 U.S.C. 381 et seq.), as amended by this 
        section, is further amended by adding at the end the following 
        section:

``SEC. 805. DISPOSITION OF CERTAIN DRUGS DENIED ADMISSION.

    ``(a) In General.--The Secretary of Homeland Security shall deliver 
to the Secretary a shipment of drugs that is imported or offered for 
import into the United States if--
            ``(1) the shipment has a declared value of less than 
        $10,000; and
            ``(2)(A) the shipping container for such drugs does not 
        bear the markings required under section 804(d)(2); or
            ``(B) the Secretary has requested delivery of such shipment 
        of drugs.
    ``(b) No Bond or Export.--Section 801(b) does not authorize the 
delivery to the owner or consignee of drugs delivered to the Secretary 
under subsection (a) pursuant to the execution of a bond, and such 
drugs may not be exported.
    ``(c) Destruction of Violative Shipment.--The Secretary shall 
destroy a shipment of drugs delivered by the Secretary of Homeland 
Security to the Secretary under subsection (a) if--
            ``(1) in the case of drugs that are imported or offered for 
        import from a registered exporter under section 804, the drugs 
        are in violation of any standard described in section 
        804(g)(5); or
            ``(2) in the case of drugs that are not imported or offered 
        for import from a registered exporter under section 804, the 
        drugs are in violation of a standard referred to in section 
        801(a) or 801(d)(1).
    ``(d) Certain Procedures.--
            ``(1) In general.--The delivery and destruction of drugs 
        under this section may be carried out without notice to the 
        importer, owner, or consignee of the drugs except as required 
        by section 801(g) or section 804(i)(2). The issuance of 
        receipts for the drugs, and recordkeeping activities regarding 
        the drugs, may be carried out on a summary basis.
            ``(2) Objective of procedures.--Procedures promulgated 
        under paragraph (1) shall be designed toward the objective of 
        ensuring that, with respect to efficiently utilizing Federal 
        resources available for carrying out this section, a 
        substantial majority of shipments of drugs subject to described 
        in subsection (c) are identified and destroyed.
    ``(e) Evidence Exception.--Drugs may not be destroyed under 
subsection (c) to the extent that the Attorney General of the United 
States determines that the drugs should be preserved as evidence or 
potential evidence with respect to an offense against the United 
States.
    ``(f) Rule of Construction.--This section may not be construed as 
having any legal effect on applicable law with respect to a shipment of 
drugs that is imported or offered for import into the United States and 
has a declared value equal to or greater than $10,000.''.
            (2) Procedures.--Procedures for carrying out section 805 of 
        the Federal Food, Drug, and Cosmetic Act, as added by this 
        subsection, shall be established not later than 90 days after 
        the date of the enactment of this Act.
            (3) Effective date.--The amendments made by this subsection 
        shall take effect on the date that is 90 days after the date of 
        enactment of this Act.
    (d) Civil Actions Regarding Property.--
            (1) In general.--Section 303 of the Federal Food, Drug, and 
        Cosmetic Act (21 U.S.C. 333) is amended by adding at the end 
        the following subsection:
    ``(g)(1) If a person is alienating or disposing of property, or 
intends to alienate or dispose of property, that is obtained as a 
result of or is traceable to a drug imported in violation of section 
801(a) or 801(d), the Attorney General may commence a civil action in 
any Federal court--
            ``(A) to enjoin such alienation or disposition of property; 
        or
            ``(B) for a restraining order to--
                    ``(i) prohibit any person from withdrawing, 
                transferring, removing, dissipating, or disposing of 
                any such property or property of equivalent value; and
                    ``(ii) appoint a temporary receiver to administer 
                such restraining order.
    ``(2) Proceedings under paragraph (1) shall be carried out in the 
same manner as applies under section 1345 of title 18, United States 
Code.''.
            (2) Effective date.--The amendment made by this subsection 
        shall take effect on the day that is 90 days after the date of 
        enactment of this Act.
    (e) Wholesale Distribution of Drugs; Statements Regarding Prior 
Sale, Purchase, or Trade.--
            (1) Striking of exemptions; applicability to registered 
        exporters.--Section 503(e) of the Federal Food, Drug, and 
        Cosmetic Act (21 U.S.C. 353(e)) is amended--
                    (A) in paragraph (1)--
                            (i) by striking ``and who is not the 
                        manufacturer or an authorized distributor of 
                        record of such drug'';
                            (ii) by striking ``to an authorized 
                        distributor of record or''; and
                            (iii) by striking subparagraph (B) and 
                        inserting the following:
    ``(B) The fact that a drug subject to subsection (b) is exported 
from the United States does not with respect to such drug exempt any 
person that is engaged in the business of the wholesale distribution of 
the drug from providing the statement described in subparagraph (A) to 
the person that receives the drug pursuant to the export of the drug.
    ``(C)(i) The Secretary shall by regulation establish requirements 
that supersede subparagraph (A) (referred to in this subparagraph as 
`alternative requirements') to identify the chain of custody of a drug 
subject to subsection (b) from the manufacturer of the drug throughout 
the wholesale distribution of the drug to a pharmacist who intends to 
sell the drug at retail if the Secretary determines that the 
alternative requirements, which may include standardized anti-
counterfeiting or track-and-trace technologies, will identify such 
chain of custody or the identity of the discrete package of the drug 
from which the drug is dispensed with equal or greater certainty to the 
requirements of subparagraph (A), and that the alternative requirements 
are economically and technically feasible.
    ``(ii) When the Secretary promulgates a final rule to establish 
such alternative requirements, the final rule in addition shall, with 
respect to the registration condition established in clause (i) of 
section 804(c)(3)(B), establish a condition equivalent to the 
alternative requirements, and such equivalent condition may be met in 
lieu of the registration condition established in such clause (i).'';
                    (B) in paragraph (2)(A), by adding at the end the 
                following: ``The preceding sentence may not be 
                construed as having any applicability with respect to a 
                registered exporter under section 804.''; and
                    (C) in paragraph (3), by striking ``and subsection 
                (d)--'' in the matter preceding subparagraph (A) and 
                all that follows through ``the term `wholesale 
                distribution' means'' in subparagraph (B) and inserting 
                the following: ``and subsection (d), the term 
                `wholesale distribution' means''.
            (2) Conforming amendment.--Section 503(d) of the Federal 
        Food, Drug, and Cosmetic Act (21 U.S.C. 353(d)) is amended by 
        adding at the end the following:
    ``(4) Each manufacturer of a drug subject to subsection (b) shall 
maintain at its corporate offices a current list of the authorized 
distributors of record of such drug.
    ``(5) For purposes of this subsection, the term `authorized 
distributors of record' means those distributors with whom a 
manufacturer has established an ongoing relationship to distribute such 
manufacturer's products.''.
            (3) Effective date.--
                    (A) In general.--The amendments made by 
                subparagraphs (A) and (C) of paragraph (1) and by 
                paragraph (2) shall take effect on January 1, 2011.
                    (B) Drugs imported by registered importers under 
                section 804.--Notwithstanding subparagraph (A), the 
                amendments made by subparagraphs (A) and (C) of 
                paragraph (1) and by paragraph (2) shall take effect on 
                the date that is 90 days after the date of enactment of 
                this Act with respect to qualifying drugs imported 
                under section 804 of the Federal Food, Drug, and 
                Cosmetic Act, as added by this section.
                    (C) High-risk drugs.--
                            (i) In general.--Notwithstanding 
                        subparagraph (A), the Secretary of Health and 
                        Human Services (referred to in this section as 
                        the ``Secretary'') may apply the amendments 
                        made by subparagraphs (A) and (C) of paragraph 
                        (1) and by paragraph (2) before January 1, 
                        2011, with respect to a prescription drug if 
                        the Secretary--
                                    (I) determines that the drug is at 
                                high risk for being counterfeited; and
                                    (II) publishes the determination 
                                and the basis for the determination in 
                                the Federal Register.
                            (ii) Pedigree not required.--
                        Notwithstanding a determination under clause 
                        (i) with respect to a prescription drug, the 
                        amendments described in such clause shall not 
                        apply with respect to a wholesale distribution 
                        of such drug if the drug is distributed by the 
                        manufacturer of the drug to a person that 
                        distributes the drug to a retail pharmacy for 
                        distribution to the consumer or patient, with 
                        no other intervening transactions.
                            (iii) Limitation.--The Secretary may make 
                        the determination under clause (i) with respect 
                        to not more than 50 drugs before January 1, 
                        2011.
                    (D) Effect with respect to registered exporters.--
                The amendment made by paragraph (1)(B) shall take 
                effect on the date that is 90 days after the date of 
                enactment of this Act.
                    (E) Alternative requirements.--The Secretary shall 
                issue regulations to establish the alternative 
                requirements, referred to in the amendment made by 
                paragraph (1)(A), that take effect not later than--
                            (i) January 1, 2009, with respect to a 
                        prescription drug determined under subparagraph 
                        (C)(i) to be at high risk for being 
                        counterfeited; and
                            (ii) January 1, 2011, with respect to all 
                        other prescription drugs.
                    (F) Intermediate requirements.--With respect to the 
                prescription drugs described under subparagraph 
                (E)(ii), the Secretary shall by regulation require the 
                use of standardized anti-counterfeiting or track-and-
                trace technologies on such prescription drugs at the 
                case and pallet level effective not later than January 
                1, 2010.
    (f) Internet Sales of Prescription Drugs.--
            (1) In general.--Chapter V of the Federal Food, Drug, and 
        Cosmetic Act (21 U.S.C. 351 et seq.) is amended by inserting 
        after section 503A the following:

``SEC. 503B. INTERNET SALES OF PRESCRIPTION DRUGS.

    ``(a) Requirements Regarding Information on Internet Site.--
            ``(1) In general.--A person may not dispense a prescription 
        drug pursuant to a sale of the drug by such person if--
                    ``(A) the purchaser of the drug submitted the 
                purchase order for the drug, or conducted any other 
                part of the sales transaction for the drug, through an 
                Internet site;
                    ``(B) the person dispenses the drug to the 
                purchaser by mailing or shipping the drug to the 
                purchaser; and
                    ``(C) such site, or any other Internet site used by 
                such person for purposes of sales of a prescription 
                drug, fails to meet each of the requirements specified 
                in paragraph (2), other than a site or pages on a site 
                that--
                            ``(i) are not intended to be accessed by 
                        purchasers or prospective purchasers; or
                            ``(ii) provide an Internet information 
                        location tool within the meaning of section 
                        231(e)(5) of the Communications Act of 1934 (47 
                        U.S.C. 231(e)(5)).
            ``(2) Requirements.--With respect to an Internet site, the 
        requirements referred to in subparagraph (C) of paragraph (1) 
        for a person to whom such paragraph applies are as follows:
                    ``(A) Each page of the site shall include either 
                the following information or a link to a page that 
                provides the following information:
                            ``(i) The name of such person.
                            ``(ii) Each State in which the person is 
                        authorized by law to dispense prescription 
                        drugs.
                            ``(iii) The address and telephone number of 
                        each place of business of the person with 
                        respect to sales of prescription drugs through 
                        the Internet, other than a place of business 
                        that does not mail or ship prescription drugs 
                        to purchasers.
                            ``(iv) The name of each individual who 
                        serves as a pharmacist for prescription drugs 
                        that are mailed or shipped pursuant to the 
                        site, and each State in which the individual is 
                        authorized by law to dispense prescription 
                        drugs.
                            ``(v) If the person provides for medical 
                        consultations through the site for purposes of 
                        providing prescriptions, the name of each 
                        individual who provides such consultations; 
                        each State in which the individual is licensed 
                        or otherwise authorized by law to provide such 
                        consultations or practice medicine; and the 
                        type or types of health professions for which 
                        the individual holds such licenses or other 
                        authorizations.
                    ``(B) A link to which paragraph (1) applies shall 
                be displayed in a clear and prominent place and manner, 
                and shall include in the caption for the link the words 
                `licensing and contact information'.
    ``(b) Internet Sales Without Appropriate Medical Relationships.--
            ``(1) In general.--Except as provided in paragraph (2), a 
        person may not dispense a prescription drug, or sell such a 
        drug, if--
                    ``(A) for purposes of such dispensing or sale, the 
                purchaser communicated with the person through the 
                Internet;
                    ``(B) the patient for whom the drug was dispensed 
                or purchased did not, when such communications began, 
                have a prescription for the drug that is valid in the 
                United States;
                    ``(C) pursuant to such communications, the person 
                provided for the involvement of a practitioner, or an 
                individual represented by the person as a practitioner, 
                and the practitioner or such individual issued a 
                prescription for the drug that was purchased;
                    ``(D) the person knew, or had reason to know, that 
                the practitioner or the individual referred to in 
                subparagraph (C) did not, when issuing the 
                prescription, have a qualifying medical relationship 
                with the patient; and
                    ``(E) the person received payment for the 
                dispensing or sale of the drug.
        For purposes of subparagraph (E), payment is received if money 
        or other other valuable consideration is received.
            ``(2) Exceptions.--Paragraph (1) does not apply to--
                    ``(A) the dispensing or selling of a prescription 
                drug pursuant to telemedicine practices sponsored by--
                            ``(i) a hospital that has in effect a 
                        provider agreement under title XVIII of the 
                        Social Security Act (relating to the Medicare 
                        program); or
                            ``(ii) a group practice that has not fewer 
                        than 100 physicians who have in effect provider 
                        agreements under such title; or
                    ``(B) the dispensing or selling of a prescription 
                drug pursuant to practices that promote the public 
                health, as determined by the Secretary by regulation.
            ``(3) Qualifying medical relationship.--
                    ``(A) In general.--With respect to issuing a 
                prescription for a drug for a patient, a practitioner 
                has a qualifying medical relationship with the patient 
                for purposes of this section if--
                            ``(i) at least one in-person medical 
                        evaluation of the patient has been conducted by 
                        the practitioner; or
                            ``(ii) the practitioner conducts a medical 
                        evaluation of the patient as a covering 
                        practitioner.
                    ``(B) In-person medical evaluation.--A medical 
                evaluation by a practitioner is an in-person medical 
                evaluation for purposes of this section if the 
                practitioner is in the physical presence of the patient 
                as part of conducting the evaluation, without regard to 
                whether portions of the evaluation are conducted by 
                other health professionals.
                    ``(C) Covering practitioner.--With respect to a 
                patient, a practitioner is a covering practitioner for 
                purposes of this section if the practitioner conducts a 
                medical evaluation of the patient at the request of a 
                practitioner who has conducted at least one in-person 
                medical evaluation of the patient and is temporarily 
                unavailable to conduct the evaluation of the patient. A 
                practitioner is a covering practitioner without regard 
                to whether the practitioner has conducted any in-person 
                medical evaluation of the patient involved.
            ``(4) Rules of construction.--
                    ``(A) Individuals represented as practitioners.--A 
                person who is not a practitioner (as defined in 
                subsection (e)(1)) lacks legal capacity under this 
                section to have a qualifying medical relationship with 
                any patient.
                    ``(B) Standard practice of pharmacy.--Paragraph (1) 
                may not be construed as prohibiting any conduct that is 
                a standard practice in the practice of pharmacy.
                    ``(C) Applicability of requirements.--Paragraph (3) 
                may not be construed as having any applicability beyond 
                this section, and does not affect any State law, or 
                interpretation of State law, concerning the practice of 
                medicine.
    ``(c) Actions by States.--
            ``(1) In general.--Whenever an attorney general of any 
        State has reason to believe that the interests of the residents 
        of that State have been or are being threatened or adversely 
        affected because any person has engaged or is engaging in a 
        pattern or practice that violates section 301(l), the State may 
        bring a civil action on behalf of its residents in an 
        appropriate district court of the United States to enjoin such 
        practice, to enforce compliance with such section (including a 
        nationwide injunction), to obtain damages, restitution, or 
        other compensation on behalf of residents of such State, to 
        obtain reasonable attorneys fees and costs if the State 
        prevails in the civil action, or to obtain such further and 
        other relief as the court may deem appropriate.
            ``(2) Notice.--The State shall serve prior written notice 
        of any civil action under paragraph (1) or (5)(B) upon the 
        Secretary and provide the Secretary with a copy of its 
        complaint, except that if it is not feasible for the State to 
        provide such prior notice, the State shall serve such notice 
        immediately upon instituting such action. Upon receiving a 
        notice respecting a civil action, the Secretary shall have the 
        right--
                    ``(A) to intervene in such action;
                    ``(B) upon so intervening, to be heard on all 
                matters arising therein; and
                    ``(C) to file petitions for appeal.
            ``(3) Construction.--For purposes of bringing any civil 
        action under paragraph (1), nothing in this chapter shall 
        prevent an attorney general of a State from exercising the 
        powers conferred on the attorney general by the laws of such 
        State to conduct investigations or to administer oaths or 
        affirmations or to compel the attendance of witnesses or the 
        production of documentary and other evidence.
            ``(4) Venue; service of process.--Any civil action brought 
        under paragraph (1) in a district court of the United States 
        may be brought in the district in which the defendant is found, 
        is an inhabitant, or transacts business or wherever venue is 
        proper under section 1391 of title 28, United States Code. 
        Process in such an action may be served in any district in 
        which the defendant is an inhabitant or in which the defendant 
        may be found.
            ``(5) Actions by other state officials.--
                    ``(A) Nothing contained in this section shall 
                prohibit an authorized State official from proceeding 
                in State court on the basis of an alleged violation of 
                any civil or criminal statute of such State.
                    ``(B) In addition to actions brought by an attorney 
                general of a State under paragraph (1), such an action 
                may be brought by officers of such State who are 
                authorized by the State to bring actions in such State 
                on behalf of its residents.
    ``(d) Effect of Section.--This section shall not apply to a person 
that is a registered exporter under section 804.
    ``(e) General Definitions.--For purposes of this section:
            ``(1) The term `practitioner' means a practitioner referred 
        to in section 503(b)(1) with respect to issuing a written or 
        oral prescription.
            ``(2) The term `prescription drug' means a drug that is 
        described in section 503(b)(1).
            ``(3) The term `qualifying medical relationship', with 
        respect to a practitioner and a patient, has the meaning 
        indicated for such term in subsection (b).
    ``(f) Internet-Related Definitions.--
            ``(1) In general.--For purposes of this section:
                    ``(A) The term `Internet' means collectively the 
                myriad of computer and telecommunications facilities, 
                including equipment and operating software, which 
                comprise the interconnected world-wide network of 
                networks that employ the transmission control protocol/
                internet protocol, or any predecessor or successor 
                protocols to such protocol, to communicate information 
                of all kinds by wire or radio.
                    ``(B) The term `link', with respect to the 
                Internet, means one or more letters, words, numbers, 
                symbols, or graphic items that appear on a page of an 
                Internet site for the purpose of serving, when 
                activated, as a method for executing an electronic 
                command--
                            ``(i) to move from viewing one portion of a 
                        page on such site to another portion of the 
                        page;
                            ``(ii) to move from viewing one page on 
                        such site to another page on such site; or
                            ``(iii) to move from viewing a page on one 
                        Internet site to a page on another Internet 
                        site.
                    ``(C) The term `page', with respect to the 
                Internet, means a document or other file accessed at an 
                Internet site.
                    ``(D)(i) The terms `site' and `address', with 
                respect to the Internet, mean a specific location on 
                the Internet that is determined by Internet Protocol 
                numbers. Such term includes the domain name, if any.
                    ``(ii) The term `domain name' means a method of 
                representing an Internet address without direct 
                reference to the Internet Protocol numbers for the 
                address, including methods that use designations such 
                as `.com', `.edu', `.gov', `.net', or `.org'.
                    ``(iii) The term `Internet Protocol numbers' 
                includes any successor protocol for determining a 
                specific location on the Internet.
            ``(2) Authority of secretary.--The Secretary may by 
        regulation modify any definition under paragraph (1) to take 
        into account changes in technology.
    ``(g) Interactive Computer Service; Advertising.--No provider of an 
interactive computer service, as defined in section 230(f)(2) of the 
Communications Act of 1934 (47 U.S.C. 230(f)(2)), or of advertising 
services shall be liable under this section for dispensing or selling 
prescription drugs in violation of this section on account of another 
person's selling or dispensing such drugs, provided that the provider 
of the interactive computer service or of advertising services does not 
own or exercise corporate control over such person.''.
            (2) Inclusion as prohibited act.--Section 301 of the 
        Federal Food, Drug, and Cosmetic Act (21 U.S.C. 331) is amended 
        by inserting after subsection (k) the following:
    ``(l) The dispensing or selling of a prescription drug in violation 
of section 503B.''.
            (3) Internet sales of prescription drugs; consideration by 
        secretary of practices and procedures for certification of 
        legitimate businesses.--In carrying out section 503B of the 
        Federal Food, Drug, and Cosmetic Act (as added by this 
        section), the Secretary of Health and Human Services shall take 
        into consideration the practices and procedures of public or 
        private entities that certify that businesses selling 
        prescription drugs through Internet sites are legitimate 
        businesses, including practices and procedures regarding 
        disclosure formats and verification programs.
            (4) Reports regarding internet-related violations of 
        federal and state laws on dispensing of drugs.--
                    (A) In general.--The Secretary of Health and Human 
                Services (referred to in this paragraph as the 
                ``Secretary'') shall, pursuant to the submission of an 
                application meeting the criteria of the Secretary, make 
                an award of a grant or contract to the National 
                Clearinghouse on Internet Prescribing (operated by the 
                Federation of State Medical Boards) for the purpose 
                of--
                            (i) identifying Internet sites that appear 
                        to be in violation of Federal or State laws 
                        concerning the dispensing of drugs;
                            (ii) reporting such sites to State medical 
                        licensing boards and State pharmacy licensing 
                        boards, and to the Attorney General and the 
                        Secretary, for further investigation; and
                            (iii) submitting, for each fiscal year for 
                        which the award under this subsection is made, 
                        a report to the Secretary describing 
                        investigations undertaken with respect to 
                        violations described in clause (i).
                    (B) Authorization of appropriations.--For the 
                purpose of carrying out subparagraph (A), there is 
                authorized to be appropriated $100,000 for each of the 
                fiscal years 2006 through 2008.
            (5) Effective date.--The amendments made by paragraphs (1) 
        and (2) take effect 90 days after the date of enactment of this 
        Act, without regard to whether a final rule to implement such 
        amendments has been promulgated by the Secretary of Health and 
        Human Services under section 701(a) of the Federal Food, Drug, 
        and Cosmetic Act. The preceding sentence may not be construed 
        as affecting the authority of such Secretary to promulgate such 
        a final rule.
    (g) Importation Exemption Under Controlled Substances Import and 
Export Act.--Section 1006(a)(2) of the Controlled Substances Import and 
Export Act (21 U.S.C. 956(a)(2)) is amended by striking ``not import 
the controlled substance into the United States in an amount that 
exceeds 50 dosage units of the controlled substance.'' and inserting 
``import into the United States not more than 10 dosage units combined 
of all such controlled substances.''.

SEC. 7. REASONABLE PRICE AGREEMENT FOR FEDERALLY FUNDED RESEARCH.

    (a) In General.--If any Federal agency or any non-profit entity 
undertakes federally funded health care research and development and is 
to convey or provide a patent or other exclusive right to use such 
research and development for a drug or other health care technology, 
such agency or entity shall not make such conveyance or provide such 
patent or other right until the person who will receive such conveyance 
or patent or other right first agrees to a reasonable pricing agreement 
with the Secretary of Health and Human Services or the Secretary makes 
a determination that the public interest is served by a waiver of the 
reasonable pricing agreement provided in accordance with subsection 
(c).
    (b) Consideration of Competitive Bidding.--In cases where the 
Federal Government conveys or licenses exclusive rights to federally 
funded research under subsection (a), consideration shall be given to 
mechanisms for determining reasonable prices which are based upon a 
competitive bidding process. When appropriate, the mechanisms should be 
considered where--
            (1) qualified bidders compete on the basis of the lowest 
        prices that will be charged to consumers;
            (2) qualified bidders compete on the basis of the least 
        sales revenues before prices are adjusted in accordance with a 
        cost based reasonable pricing formula;
            (3) qualified bidders compete on the basis of the least 
        period of time before prices are adjusted in accordance with a 
        cost based reasonable pricing formula;
            (4) qualified bidders compete on the basis of the shortest 
        period of exclusivity; or
            (5) qualified bidders compete under other competitive 
        bidding systems.
Such competitive bidding process may incorporate requirements for 
minimum levels of expenditures on research, marketing, maximum price, 
or other factors.
    (c) Waiver.--No waiver shall take effect under subsection (a) 
before the public is given notice of the proposed waiver and provided a 
reasonable opportunity to comment on the proposed waiver. A decision to 
grant a waiver shall set out the Secretary's finding that such a waiver 
is in the public interest.

SEC. 8. GAO ONGOING STUDIES AND REPORTS ON PROGRAM; MISCELLANEOUS 
              REPORTS.

    (a) Ongoing Study.--The Comptroller General of the United States 
shall conduct an ongoing study and analysis of the prescription 
medicine benefit program under part D of the medicare program under 
title XVIII of the Social Security Act (as added by section 4 of this 
Act), including an analysis of each of the following:
            (1) The extent to which the administering entities have 
        achieved volume-based discounts similar to the favored price 
        paid by other large purchasers.
            (2) Whether access to the benefits under such program are 
        in fact available to all beneficiaries, with special attention 
        given to access for beneficiaries living in rural and hard-to-
        serve areas.
            (3) The success of such program in reducing medication 
        error and adverse medicine reactions and improving quality of 
        care, and whether it is probable that the program has resulted 
        in savings through reduced hospitalizations and morbidity due 
        to medication errors and adverse medicine reactions.
            (4) Whether patient medical record confidentiality is being 
        maintained and safe-guarded.
            (5) Such other issues as the Comptroller General may 
        consider.
    (b) Reports.--The Comptroller General shall issue such reports on 
the results of the ongoing study described in (a) as the Comptroller 
General shall deem appropriate and shall notify Congress on a timely 
basis of significant problems in the operation of the part D 
prescription medicine program and the need for legislative adjustments 
and improvements.
    (c) Miscellaneous Studies and Reports.--
            (1) Study on methods to encourage additional research on 
        breakthrough pharmaceuticals.--
                    (A) In general.--The Secretary of Health and Human 
                Services shall seek the advice of the Secretary of the 
                Treasury on possible tax and trade law changes to 
                encourage increased original research on new 
                pharmaceutical breakthrough products designed to 
                address disease and illness.
                    (B) Report.--Not later than January 1, 2007, the 
                Secretary shall submit to Congress a report on such 
                study. The report shall include recommended methods to 
                encourage the pharmaceutical industry to devote more 
                resources to research and development of new covered 
                products than it devotes to overhead expenses.
            (2) Study on pharmaceutical sales practices and impact on 
        costs and quality of care.--
                    (A) In general.--The Secretary of Health and Human 
                Services shall conduct a study on the methods used by 
                the pharmaceutical industry to advertise and sell to 
                consumers and educate and sell to providers.
                    (B) Report.--Not later than January 1, 2007, the 
                Secretary shall submit to Congress a report on such 
                study. The report shall include the estimated direct 
                and indirect costs of the sales methods used, the 
                quality of the information conveyed, and whether such 
                sales efforts leads (or could lead) to inappropriate 
                prescribing. Such report may include legislative and 
                regulatory recommendations to encourage more 
                appropriate education and prescribing practices.
            (3) Study on cost of pharmaceutical research.--
                    (A) In general.--The Secretary of Health and Human 
                Services shall conduct a study on the costs of, and 
                needs for, the pharmaceutical research and the role 
                that the taxpayer provides in encouraging such 
                research.
                    (B) Report.--Not later than January 1, 2007, the 
                Secretary shall submit to Congress a report on such 
                study. The report shall include a description of the 
                full-range of taxpayer-assisted programs impacting 
                pharmaceutical research, including tax, trade, 
                government research, and regulatory assistance. The 
                report may also include legislative and regulatory 
                recommendations that are designed to ensure that the 
                taxpayer's investment in pharmaceutical research 
                results in the availability of pharmaceuticals at 
                reasonable prices.
            (4) Report on pharmaceutical prices in major foreign 
        nations.--Not later than January 1, 2007, the Secretary of 
        Health and Human Services shall submit to Congress a report on 
        the retail price of major pharmaceutical products in various 
        developed nations, compared to prices for the same or similar 
        products in the United States. The report shall include a 
        description of the principal reasons for any price differences 
        that may exist.

SEC. 9. MEDIGAP TRANSITION PROVISIONS.

    (a) In General.--Notwithstanding any other provision of law, no new 
medicare supplemental policy that provides coverage of expenses for 
prescription drugs may be issued under section 1882 of the Social 
Security Act on or after January 1, 2007, to an individual unless it 
replaces a medicare supplemental policy that was issued to that 
individual and that provided some coverage of expenses for prescription 
drugs.
    (b) Issuance of Substitute Policies If Obtain Prescription Drug 
Coverage Through Medicare.--
            (1) In general.--The issuer of a medicare supplemental 
        policy--
                    (A) may not deny or condition the issuance or 
                effectiveness of a medicare supplemental policy that 
                has a benefit package classified as ``A'', ``B'', 
                ``C'', ``D'', ``E'', ``F'', or ``G'' (under the 
                standards established under subsection (p)(2) of 
                section 1882 of the Social Security Act, 42 U.S.C. 
                1395ss) and that is offered and is available for 
                issuance to new enrollees by such issuer;
                    (B) may not discriminate in the pricing of such 
                policy, because of health status, claims experience, 
                receipt of health care, or medical condition; and
                    (C) may not impose an exclusion of benefits based 
                on a pre-existing condition under such policy,
        in the case of an individual described in paragraph (2) who 
        seeks to enroll under the policy not later than 63 days after 
        the date of the termination of enrollment described in such 
        paragraph and who submits evidence of the date of termination 
        or disenrollment along with the application for such medicare 
        supplemental policy.
            (2) Individual covered.--An individual described in this 
        paragraph is an individual who--
                    (A) enrolls in a prescription drug plan under part 
                D of title XVIII of the Social Security Act; and
                    (B) at the time of such enrollment was enrolled and 
                terminates enrollment in a medicare supplemental policy 
                which has a benefit package classified as ``H'', ``I'', 
                or ``J'' under the standards referred to in paragraph 
                (1)(A) or terminates enrollment in a policy to which 
                such standards do not apply but which provides benefits 
                for prescription drugs.
            (3) Enforcement.--The provisions of paragraph (1) shall be 
        enforced as though they were included in section 1882(s) of the 
        Social Security Act (42 U.S.C. 1395ss(s)) on and after January 
        1, 2007.
            (4) Definitions.--For purposes of this subsection, the term 
        ``medicare supplemental policy'' has the meaning given such 
        term in section 1882(g) of the Social Security Act (42 U.S.C. 
        1395ss(g)).
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