[Congressional Record (Bound Edition), Volume 148 (2002), Part 10]
[Senate]
[Pages 13914-13921]
[From the U.S. Government Publishing Office, www.gpo.gov]




                           TEXT OF AMENDMENTS

  SA 4313. Mr. DeWINE submitted an amendment intended to be proposed by 
him to the bill S. 812, to amend the Federal Food, Drug, and Cosmetic 
Act to provide greater access to affordable pharmaceuticals; which was 
ordered to lie on the table; as follows:

       At the appropriate place, insert the following:

               TITLE __--IMMUNOSUPPRESSIVE DRUG COVERAGE

     SEC. __01. SHORT TITLE.

       This title may be cited as the ``Immunosuppressive Drug 
     Coverage Act of 2002''.

     SEC. __02. PROVISION OF APPROPRIATE COVERAGE OF 
                   IMMUNOSUPPRESSIVE DRUGS UNDER THE MEDICARE 
                   PROGRAM.

       (a) Continued Entitlement to Immunosuppressive Drugs for 
     Kidney Transplant Recipients.--
       (1) In general.--Section 226A(b)(2) of the Social Security 
     Act (42 U.S.C. 426-1(b)(2)) is amended by inserting ``(except 
     for coverage of immunosuppressive drugs under section 
     1861(s)(2)(J))'' after ``shall end''.
       (2) Application.--In the case of an individual whose 
     eligibility for benefits under title XVIII of the Social 
     Security Act (42 U.S.C. 1395 et seq.) has ended except for 
     the coverage of immunosuppressive drugs by reason of the 
     amendment made by paragraph (1), the following rules shall 
     apply:
       (A) The individual shall be deemed to be enrolled in part B 
     of the original medicare fee-for-service program under title 
     XVIII of the Social Security Act (42 U.S.C. 1395j et seq.) 
     for purposes of receiving coverage of such drugs.
       (B) The individual shall be responsible for the full part B 
     premium under section 1839 of such Act (42 U.S.C. 1395r) in 
     order to receive such coverage.
       (C) The provision of such drugs shall be subject to the 
     application of--
       (i) the part B deductible under section 1833(b) of such Act 
     (42 U.S.C. 1395l(b)); and
       (ii) the coinsurance amount applicable for such drugs (as 
     determined under such part B).
       (D) If the individual is an inpatient of a hospital or 
     other entity, the individual is entitled to receive coverage 
     of such drugs under such part B.
       (3) Establishment of procedures in order to implement 
     coverage.--The Secretary of Health and Human Services shall 
     establish procedures for--
       (A) identifying beneficiaries that are entitled to coverage 
     of immunosuppressive drugs by reason of the amendment made by 
     paragraph (1); and
       (B) distinguishing such beneficiaries from beneficiaries 
     that are enrolled under part B of title XVIII of the Social 
     Security Act for the complete package of benefits under such 
     part.
       (4) Technical amendment.--Subsection (c) of section 226A 
     (42 U.S.C. 426-1), as added by section 201(a)(3)(D)(ii) of 
     the Social Security Independence and Program Improvements Act 
     of 1994 (Public Law 103-296; 108 Stat. 1497), is redesignated 
     as subsection (d).
       (b) Extension of Secondary Payer Requirements for ESRD 
     Beneficiaries.--Section 1862(b)(1)(C) of the Social Security 
     Act (42 U.S.C. 1395y(b)(1)(C)) is amended by adding at the 
     end the following new sentence: ``With regard to 
     immunosuppressive drugs furnished on or after the date of 
     enactment of the Immunosuppressive Drugs Coverage Act of 
     2002, this subparagraph shall be applied without regard to 
     any time limitation.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to drugs furnished on or after the date of 
     enactment of this Act.

     SEC. __03. PLANS REQUIRED TO MAINTAIN COVERAGE OF 
                   IMMUNOSUPPRESSIVE DRUGS.

       (a) Application to Certain Health Insurance Coverage.--
       (1) In General.--Subpart 2 of part A of title XXVII of the 
     Public Health Service Act (42 U.S.C. 300gg-4 et seq.) is 
     amended by adding at the end the following:

     ``SEC. 2707. COVERAGE OF IMMUNOSUPPRESSIVE DRUGS.

       ``A group health plan (and a health insurance issuer 
     offering health insurance coverage in connection with a group 
     health plan) shall provide coverage of immunosuppressive 
     drugs that is at least as comprehensive as the coverage 
     provided by such plan or issuer on the day before the date of 
     enactment of the Immunosuppressive Drug Coverage Act of 2002, 
     and such requirement shall be deemed to be incorporated into 
     this section.''.
       (2) Conforming amendment.--Section 2721(b)(2)(A) of the 
     Public Health Service Act (42 U.S.C. 300gg-21(b)(2)(A)) is 
     amended by inserting ``(other than section 2707)'' after 
     ``requirements of such subparts''.
       (b) Application to Group Health Plans and Group Health 
     Insurance Coverage Under the Employee Retirement Income 
     Security Act of 1974.--
       (1) In general.--Subpart B of part 7 of subtitle B of title 
     I of the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1185 et seq.) is amended by adding at the end the 
     following new section:

     ``SEC. 714. COVERAGE OF IMMUNOSUPPRESSIVE DRUGS.

       ``A group health plan (and a health insurance issuer 
     offering health insurance coverage in connection with a group 
     health plan) shall provide coverage of immunosuppressive 
     drugs that is at least as comprehensive as the coverage 
     provided by such plan or issuer on the day before the date of 
     enactment of the Immunosuppressive Drug Coverage Act of 2002, 
     and such requirement shall be deemed to be incorporated into 
     this section.''.
       (2) Conforming amendments.--
       (A) Section 732(a) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1185(a)) is amended by 
     striking ``section 711'' and inserting ``sections 711 and 
     714''.
       (B) The table of contents in section 1 of the Employee 
     Retirement Income Security Act of 1974 is amended by 
     inserting after the item relating to section 713 the 
     following new item:

``Sec. 714. Coverage of Immunosuppressive drugs.''.

       (c) Application to Group Health Plans Under the Internal 
     Revenue Code of 1986.--Subchapter B of chapter 100 of the 
     Internal Revenue Code of 1986 is amended--
       (1) in the table of sections, by inserting after the item 
     relating to section 9812 the following new item:

``Sec. 9813. Coverage of immunosuppressive drugs.'';

     and
       (2) by inserting after section 9812 the following:

     ``SEC. 9813. COVERAGE OF IMMUNOSUPPRESSIVE DRUGS.

       ``A group health plan shall provide coverage of 
     immunosuppressive drugs that is at least as comprehensive as 
     the coverage provided by such plan on the day before the date 
     of enactment of the Immunosuppressive Drug Coverage Act of 
     2002, and such requirement shall be deemed to be incorporated 
     into this section.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning on or after January 1, 
     2003.
                                 ______
                                 
  SA 4314. Mr. FEINGOLD submitted an amendment intended to be proposed 
to amendment SA 4309 proposed by Mr. Graham (for himself and Mr. 
Miller, Mr. Kennedy, and Mr. Corzine) to the

[[Page 13915]]

bill (S. 812) to amend the Federal Food, Drug, and Cosmetic Act to 
provide greater access to affordable pharmaceuticals; which was ordered 
to lie on the table; as follows:
       Strike paragraph (2) of section 1860K(c) of the Social 
     Security Act (as proposed to be added by section 202(a) of 
     the amendment) and insert the following:

       ``(2) Budget neutrality.--Notwithstanding any other 
     provision of this Act, this title, and the amendments made by 
     the Medicare Outpatient Prescription Drug Act of 2002, shall 
     take effect on the date of enactment of an Act that raises 
     Federal revenues or reduces Federal spending by an amount 
     sufficient to offset the Federal budgetary cost of 
     implementing this title.''.
                                 ______
                                 
  SA 4315. Mr. HAGEL (for himself, Mr. Ensign, Mr. Lugar, Mr. Gramm, 
Mr. Inhofe, Mr. Santorum, Mr. Gregg, Mr. Frist, and Mr. Nickles) 
proposed an amendment to amendment SA 4299 proposed by Mr. Reid (for 
Mr. Dorgan (for himself, Mr. Wellstone, Mr. Jeffords, Ms. Stabenow, Ms. 
Collins, Mr. Levin, Mr. Johnson, Mr. Miller, Mr. Durbin, Mr. Feingold, 
and Mr. Harkin)) to the bill (S. 812) to amend the Federal Food, Drug, 
and Cosmetic Act to provide greater access to affordable 
pharmaceuticals; as follows:

       Strike the last word, and insert the following:

 TITLE__--VOLUNTARY MEDICARE OUTPATIENT PRESCRIPTION DRUG DISCOUNT AND 
                            SECURITY PROGRAM

     SEC. __00. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This title may be cited as the ``Medicare 
     Rx Drug Discount and Security Act of 2002''.
       (b) Table of Contents.--The table of contents of this title 
     is as follows:

Sec. __00. Short title; table of contents.
Sec. __01. Voluntary Medicare Outpatient Prescription Drug Discount and 
              Security Program.

``Part D--Voluntary Medicare Outpatient Prescription Drug Discount and 
                            Security Program

``Sec. 1860. Definitions.
``Sec. 1860A. Establishment of program.
``Sec. 1860B. Enrollment.
``Sec. 1860C. Providing enrollment and coverage information to 
              beneficiaries.
``Sec. 1860D. Enrollee protections.
``Sec. 1860E. Annual enrollment fee.
``Sec. 1860F. Benefits under the program.
``Sec. 1860G. Requirements for entities to provide prescription drug 
              coverage.
``Sec. 1860H. Payments to eligible entities for administering the 
              catastrophic benefit.
``Sec. 1860I. Determination of income levels.
``Sec. 1860J. Appropriations.
``Sec. 1860K. Medicare Competition and Prescription Drug Advisory 
              Board.''.
Sec. __02. Administration of Voluntary Medicare Outpatient Prescription 
              Drug Discount and Security Program.
Sec. __03. Exclusion of part D costs from determination of part B 
              monthly premium.
Sec. __04. Medigap revisions.

     SEC. __01. VOLUNTARY MEDICARE OUTPATIENT PRESCRIPTION DRUG 
                   DISCOUNT AND SECURITY PROGRAM.

       (a) Establishment of Program.--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--Voluntary Medicare Outpatient Prescription Drug Discount and 
                            Security Program


                             ``definitions

       ``Sec. 1860. In this part:
       ``(1) Covered outpatient drug.--
       ``(A) In general.--Except as provided in this paragraph, 
     the term `covered outpatient drug' means--
       ``(i) a drug that may be dispensed only upon a prescription 
     and that is described in subparagraph (A)(i) or (A)(ii) of 
     section 1927(k)(2); or
       ``(ii) a biological product described in clauses (i) 
     through (iii) of subparagraph (B) of such section or insulin 
     described in subparagraph (C) of such section,

     and such term includes a vaccine licensed under section 351 
     of the Public Health Service Act and any use of a covered 
     outpatient drug for a medically accepted indication (as 
     defined in section 1927(k)(6)).
       ``(B) Exclusions.--
       ``(i) In general.--Such term does not include drugs or 
     classes of drugs, or their medical uses, which may be 
     excluded from coverage or otherwise restricted under section 
     1927(d)(2), other than subparagraph (E) thereof (relating to 
     smoking cessation agents), or under section 1927(d)(3).
       ``(ii) Avoidance of duplicate coverage.--A drug prescribed 
     for an individual that would otherwise be a covered 
     outpatient drug under this part shall not be so considered if 
     payment for such drug is available under part A or B for an 
     individual entitled to benefits under part A and enrolled 
     under part B.
       ``(C) Application of formulary restrictions.--A drug 
     prescribed for an individual that would otherwise be a 
     covered outpatient drug under this part shall not be so 
     considered under a plan if the plan excludes the drug under a 
     formulary and such exclusion is not successfully appealed 
     under section 1860D(a)(4)(B).
       ``(D) Application of general exclusion provisions.--A 
     prescription drug discount card plan or Medicare+Choice plan 
     may exclude from qualified prescription drug coverage any 
     covered outpatient drug--
       ``(i) for which payment would not be made if section 
     1862(a) applied to part D; or
       ``(ii) which are not prescribed in accordance with the plan 
     or this part.
     Such exclusions are determinations subject to reconsideration 
     and appeal pursuant to section 1860D(a)(4).
       ``(2) Eligible beneficiary.--The term `eligible 
     beneficiary' means an individual who is--
       ``(A) eligible for benefits under part A or enrolled under 
     part B; and
       ``(B) not eligible for prescription drug coverage under a 
     State plan under the medicaid program under title XIX.
       ``(3) Eligible entity.--The term `eligible entity' means 
     any--
       ``(A) pharmaceutical benefit management company;
       ``(B) wholesale pharmacy delivery system;
       ``(C) retail pharmacy delivery system;
       ``(D) insurer (including any issuer of a medicare 
     supplemental policy under section 1882);
       ``(E) Medicare+Choice organization;
       ``(F) State (in conjunction with a pharmaceutical benefit 
     management company);
       ``(G) employer-sponsored plan;
       ``(H) other entity that the Secretary determines to be 
     appropriate to provide benefits under this part; or
       ``(I) combination of the entities described in 
     subparagraphs (A) through (H).
       ``(4) Out-of-pocket expenses.--The term `out-of-pocket 
     expenses' means only those expenses for covered outpatient 
     drugs that are incurred by the eligible beneficiary using a 
     card approved by the Secretary under this part that are paid 
     by that beneficiary and for which the beneficiary is not 
     reimbursed (through insurance or otherwise) by another 
     person.
       ``(5) Poverty line.--The term `poverty line' means the 
     income 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.
       ``(6) Secretary.--The term `Secretary' means the Secretary 
     of Health and Human Services, acting through the 
     Administrator of the Centers for Medicare & Medicaid 
     Services.


                       ``establishment of program

       ``Sec. 1860A. (a) Provision of Benefit.--The Secretary 
     shall establish a Medicare Outpatient Prescription Drug 
     Discount and Security Program under which the Secretary 
     endorses prescription drug card plans offered by eligible 
     entities in which eligible beneficiaries may voluntarily 
     enroll and receive benefits under this part.
       ``(b) Endorsement of Prescription Drug Discount Card 
     Plans.--
       ``(1) In general.--The Secretary shall endorse a 
     prescription drug card plan offered by an eligible entity 
     with a contract under this part if the eligible entity meets 
     the requirements of this part with respect to that plan.
       ``(2) National plans.--In addition to other types of plans, 
     the Secretary may endorse national prescription drug plans 
     under paragraph (1).
       ``(c) Voluntary Nature of Program.--Nothing in this part 
     shall be construed as requiring an eligible beneficiary to 
     enroll in the program under this part.
       ``(d) Financing.--The costs of providing benefits under 
     this part shall be payable from the Federal Supplementary 
     Medical Insurance Trust Fund established under section 1841.


                              ``enrollment

       ``Sec. 1860B. (a) Enrollment Under Part D.--
       ``(1) Establishment of process.--
       ``(A) In general.--The Secretary shall establish a process 
     through which an eligible beneficiary (including an eligible 
     beneficiary enrolled in a Medicare+Choice plan offered by a 
     Medicare+Choice organization) may make an election to enroll 
     under this part. Except as otherwise provided in this 
     subsection, such process shall be similar to the process for 
     enrollment under part B under section 1837.
       ``(B) Requirement of enrollment.--An eligible beneficiary 
     must enroll under this part in order to be eligible to 
     receive the benefits under this part.
       ``(2) Enrollment periods.--
       ``(A) In general.--Except as provided in this paragraph, an 
     eligible beneficiary may not enroll in the program under this 
     part

[[Page 13916]]

     during any period after the beneficiary's initial enrollment 
     period under part B (as determined under section 1837).
       ``(B) Special enrollment period.--In the case of eligible 
     beneficiaries that have recently lost eligibility for 
     prescription drug coverage under a State plan under the 
     medicaid program under title XIX, the Secretary shall 
     establish a special enrollment period in which such 
     beneficiaries may enroll under this part.
       ``(C) Open enrollment period in 2003 for current 
     beneficiaries.--The Secretary shall establish a period, which 
     shall begin on the date on which the Secretary first begins 
     to accept elections for enrollment under this part, during 
     which any eligible beneficiary may--
       ``(i) enroll under this part; or
       ``(ii) enroll or reenroll under this part after having 
     previously declined or terminated such enrollment.
       ``(3) Period of coverage.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     an eligible beneficiary's coverage under the program under 
     this part shall be effective for the period provided under 
     section 1838, as if that section applied to the program under 
     this part.
       ``(B) Enrollment during open and special enrollment.--An 
     eligible beneficiary who enrolls under the program under this 
     part under subparagraph (B) or (C) of paragraph (2) shall be 
     entitled to the benefits under this part beginning on the 
     first day of the month following the month in which such 
     enrollment occurs.
       ``(4) Part d coverage terminated by termination of coverage 
     under parts a and b or eligibility for medical assistance.--
       ``(A) In general.--In addition to the causes of termination 
     specified in section 1838, the Secretary shall terminate an 
     individual's coverage under this part if the individual is--
       ``(i) no longer enrolled in part A or B; or
       ``(ii) eligible for prescription drug coverage under a 
     State plan under the medicaid program under title XIX.
       ``(B) Effective date.--The termination described in 
     subparagraph (A) shall be effective on the effective date 
     of--
       ``(i) the termination of coverage under part A or (if 
     later) under part B; or
       ``(ii) the coverage under title XIX.
       ``(b) Enrollment With Eligible Entity.--
       ``(1) Process.--The Secretary shall establish a process 
     through which an eligible beneficiary who is enrolled under 
     this part shall make an annual election to enroll in a 
     prescription drug card plan offered by an eligible entity 
     that has been awarded a contract under this part and serves 
     the geographic area in which the beneficiary resides.
       ``(2) Election periods.--
       ``(A) In general.--Except as provided in this paragraph, 
     the election periods under this subsection shall be the same 
     as the coverage election periods under the Medicare+Choice 
     program under section 1851(e), including--
       ``(i) annual coordinated election periods; and
       ``(ii) special election periods.

     In applying the last sentence of section 1851(e)(4) (relating 
     to discontinuance of a Medicare+Choice election during the 
     first year of eligibility) under this subparagraph, in the 
     case of an election described in such section in which the 
     individual had elected or is provided qualified prescription 
     drug coverage at the time of such first enrollment, the 
     individual shall be permitted to enroll in a prescription 
     drug card plan under this part at the time of the election of 
     coverage under the original fee-for-service plan.
       ``(B) Initial election periods.--
       ``(i) Individuals currently covered.--In the case of an 
     individual who is entitled to benefits under part A or 
     enrolled under part B as of November 1, 2003, there shall be 
     an initial election period of 6 months beginning on that 
     date.
       ``(ii) Individual covered in future.--In the case of an 
     individual who is first entitled to benefits under part A or 
     enrolled under part B after such date, there shall be an 
     initial election period which is the same as the initial 
     enrollment period under section 1837(d).
       ``(C) Additional special election periods.--The 
     Administrator shall establish special election periods--
       ``(i) in cases of individuals who have and involuntarily 
     lose prescription drug coverage described in paragraph (3);
       ``(ii) in cases described in section 1837(h) (relating to 
     errors in enrollment), in the same manner as such section 
     applies to part B; and
       ``(iii) in the case of an individual who meets such 
     exceptional conditions (including conditions provided under 
     section 1851(e)(4)(D)) as the Secretary may provide.
       ``(D) Enrollment with one plan only.--The rules established 
     under subparagraph (B) shall ensure that an eligible 
     beneficiary may only enroll in 1 prescription drug card plan 
     offered by an eligible entity for a year.
       ``(3) Medicare+choice enrollees.--An eligible beneficiary 
     who is enrolled under this part and enrolled in a 
     Medicare+Choice plan offered by a Medicare+Choice 
     organization must enroll in a prescription drug discount card 
     plan offered by an eligible entity in order to receive 
     benefits under this part. The beneficiary may elect to 
     receive such benefits through the Medicare+Choice 
     organization in which the beneficiary is enrolled if the 
     organization has been awarded a contract under this part.
       ``(4) Continuous prescription drug coverage.--An individual 
     is considered for purposes of this part to be maintaining 
     continuous prescription drug coverage on and after the date 
     the individual first qualifies to elect prescription drug 
     coverage under this part if the individual establishes that 
     as of such date the individual is covered under any of the 
     following prescription drug coverage and before the date that 
     is the last day of the 63-day period that begins on the date 
     of termination of the particular prescription drug coverage 
     involved (regardless of whether the individual subsequently 
     obtains any of the following prescription drug coverage):
       ``(A) Coverage under prescription drug card plan or 
     medicare+choice plan.--Prescription drug coverage under a 
     prescription drug card plan under this part or under a 
     Medicare+Choice plan.
       ``(B) Medicaid prescription drug coverage.--Prescription 
     drug coverage under a medicaid plan under title XIX, 
     including through the Program of All-inclusive Care for the 
     Elderly (PACE) under section 1934, through a social health 
     maintenance organization (referred to in section 4104(c) of 
     the Balanced Budget Act of 1997), or through a 
     Medicare+Choice project that demonstrates the application of 
     capitation payment rates for frail elderly medicare 
     beneficiaries through the use of a interdisciplinary team and 
     through the provision of primary care services to such 
     beneficiaries by means of such a team at the nursing facility 
     involved.
       ``(C) Prescription drug coverage under group health plan.--
     Any outpatient prescription drug coverage under a group 
     health plan, including a health benefits plan under the 
     Federal Employees Health Benefit Plan under chapter 89 of 
     title 5, United States Code, and a qualified retiree 
     prescription drug plan (as defined by the Secretary), but 
     only if (subject to subparagraph (E)(ii)) the coverage 
     provides benefits at least equivalent to the benefits under a 
     prescription drug card plan under this part.
       ``(D) Prescription drug coverage under certain medigap 
     policies.--Coverage under a medicare supplemental policy 
     under section 1882 that provides benefits for prescription 
     drugs (whether or not such coverage conforms to the standards 
     for packages of benefits under section 1882(p)(1)) and if 
     (subject to subparagraph (E)(ii)) the coverage provides 
     benefits at least equivalent to the benefits under a 
     prescription drug card plan under this part.
       ``(E) State pharmaceutical assistance program.--Coverage of 
     prescription drugs under a State pharmaceutical assistance 
     program, but only if (subject to subparagraph (E)(ii)) the 
     coverage provides benefits at least equivalent to the 
     benefits under a prescription drug card plan under this part.
       ``(F) Veterans' coverage of prescription drugs.--Coverage 
     of prescription drugs for veterans under chapter 17 of title 
     38, United States Code, but only if (subject to subparagraph 
     (E)(ii)) the coverage provides benefits at least equivalent 
     to the benefits under a prescription drug card plan under 
     this part.

     For purposes of carrying out this paragraph, the 
     certifications of the type described in sections 2701(e) of 
     the Public Health Service Act and in section 9801(e) of the 
     Internal Revenue Code of 1986 shall also include a statement 
     for the period of coverage of whether the individual involved 
     had prescription drug coverage described in this paragraph.
       ``(5) Competition.--Each eligible entity with a contract 
     under this part shall compete for the enrollment of 
     beneficiaries in a prescription drug card plan offered by the 
     entity on the basis of discounts, formularies, pharmacy 
     networks, and other services provided for under the contract.


    ``providing enrollment and coverage information to beneficiaries

       ``Sec. 1860C. (a) Activities.--The Secretary shall provide 
     for activities under this part in the manner described in 
     (and in coordination with) section 1851(d) to broadly 
     disseminate information to eligible beneficiaries (and 
     prospective eligible beneficiaries) regarding enrollment 
     under this part and the prescription drug card plans offered 
     by eligible entities with a contract under this part.
       ``(b) Special Rule for First Enrollment Under the 
     Program.--To the extent practicable, the activities described 
     in subsection (a) shall ensure that eligible beneficiaries 
     are provided with such information at least 60 days prior to 
     the first enrollment period described in section 1860B(c).


                         ``enrollee protections

       ``Sec. 1860D. (a) Requirements for All Eligible Entities.--
     Each eligible entity shall meet the following requirements:
       ``(1) Guaranteed issuance and nondiscrimination.--
       ``(A) Guaranteed issuance.--
       ``(i) In general.--An eligible beneficiary who is eligible 
     to enroll in a prescription drug card plan offered by an 
     eligible entity under section 1860B(b) for prescription drug 
     coverage under this part at a time during which elections are 
     accepted under this part with respect to the coverage shall 
     not be denied enrollment based on any health status-

[[Page 13917]]

     related factor (described in section 2702(a)(1) of the Public 
     Health Service Act) or any other factor.
       ``(ii) Medicare+choice limitations permitted.--The 
     provisions of paragraphs (2) and (3) (other than subparagraph 
     (C)(i), relating to default enrollment) of section 1851(g) 
     (relating to priority and limitation on termination of 
     election) shall apply to eligible entities under this 
     subsection.
       ``(B) Nondiscrimination.--An eligible entity offering 
     prescription drug coverage under this part shall not 
     establish a service area in a manner that would discriminate 
     based on health or economic status of potential enrollees.
       ``(2) Grievance mechanism, coverage determinations, and 
     reconsiderations.--
       ``(A) In general.--With respect to the benefit under this 
     part, each eligible entity offering a prescription drug card 
     plan shall provide meaningful procedures for hearing and 
     resolving grievances between the organization (including any 
     entity or individual through which the eligible entity 
     provides covered benefits) and enrollees with prescription 
     drug card plans of the eligible entity under this part in 
     accordance with section 1852(f).
       ``(B) Application of coverage determination and 
     reconsideration provisions.--Each eligible entity shall meet 
     the requirements of paragraphs (1) through (3) of section 
     1852(g) with respect to covered benefits under the 
     prescription drug card plan it offers under this part in the 
     same manner as such requirements apply to a Medicare+Choice 
     organization with respect to benefits it offers under a 
     Medicare+Choice plan under part C.
       ``(C) Request for review of tiered formulary 
     determinations.--In the case of a prescription drug card plan 
     offered by an eligible entity that provides for tiered cost-
     sharing for drugs included within a formulary and provides 
     lower cost-sharing for preferred drugs included within the 
     formulary, an individual who is enrolled in the plan may 
     request coverage of a nonpreferred drug under the terms 
     applicable for preferred drugs if the prescribing physician 
     determines that the preferred drug for treatment of the same 
     condition is not as effective for the individual or has 
     adverse effects for the individual.
       ``(3) Appeals.--
       ``(A) In general.--Subject to subparagraph (B), each 
     eligible entity offering a prescription drug card plan shall 
     meet the requirements of paragraphs (4) and (5) of section 
     1852(g) with respect to drugs not included on any formulary 
     in the same manner as such requirements apply to a 
     Medicare+Choice organization with respect to benefits it 
     offers under a Medicare+Choice plan under part C.
       ``(B) Formulary determinations.--An individual who is 
     enrolled in a prescription drug card plan offered by an 
     eligible entity may appeal to obtain coverage under this part 
     for a covered outpatient drug that is not on a formulary of 
     the eligible entity if the prescribing physician determines 
     that the formulary drug for treatment of the same condition 
     is not as effective for the individual or has adverse effects 
     for the individual.
       ``(4) Confidentiality and accuracy of enrollee records.--
     Each eligible entity offering a prescription drug discount 
     card plan shall meet the requirements of the Health Insurance 
     Portability and Accountability Act of 1996.
       ``(b) Disclosure of Information.--
       ``(1) Information.--
       ``(A) General information.--Each eligible entity with a 
     contract under this part to provide a prescription drug 
     discount card plan shall disclose, in a clear, accurate, and 
     standardized form to each eligible beneficiary enrolled in a 
     prescription drug discount card program offered by such 
     entity under this part at the time of enrollment and at least 
     annually thereafter, the information described in section 
     1852(c)(1) relating to such prescription drug coverage.
       ``(B) Specific information.--In addition to the information 
     described in subparagraph (A), each eligible entity with a 
     contract under this part shall disclose the following:
       ``(i) How enrollees will have access to covered outpatient 
     drugs, including access to such drugs through pharmacy 
     networks.
       ``(ii) How any formulary used by the eligible entity 
     functions.
       ``(iii) Information on grievance and appeals procedures.
       ``(iv) Information on enrollment fees and prices charged to 
     the enrollee for covered outpatient drugs.
       ``(v) Any other information that the Secretary determines 
     is necessary to promote informed choices by eligible 
     beneficiaries among eligible entities.
       ``(2) Disclosure upon request of general coverage, 
     utilization, and grievance information.--Upon request of an 
     eligible beneficiary, the eligible entity shall provide the 
     information described in paragraph (3) to such beneficiary.
       ``(3) Response to beneficiary questions.--Each eligible 
     entity offering a prescription drug discount card plan under 
     this part shall have a mechanism for providing specific 
     information to enrollees upon request. The entity shall make 
     available, through an Internet website and, upon request, in 
     writing, information on specific changes in its formulary.
       ``(c) Eligible Entities Offering a Discount Card Program.--
     If an eligible entity offers a discount card program under 
     this part, in addition to the requirements under subsection 
     (a), the entity shall meet the following requirements:
       ``(1) Access to covered benefits.--
       ``(A) Assuring pharmacy access.--
       ``(i) In general.--The eligible entity offering the 
     prescription drug discount card plan shall secure the 
     participation in its network of a sufficient number of 
     pharmacies that dispense (other than by mail order) drugs 
     directly to patients to ensure convenient access (as 
     determined by the Secretary and including adequate emergency 
     access) for enrolled beneficiaries, in accordance with 
     standards established under section 1860D(a)(2) that ensure 
     such convenient access.
       ``(ii) Use of point-of-service system.--Each eligible 
     entity offering a prescription drug discount card plan shall 
     establish an optional point-of-service method of operation 
     under which--

       ``(I) the plan provides access to any or all pharmacies 
     that are not participating pharmacies in its network; and
       ``(II) discounts under the plan may not be available.

     The additional costs resulting from the inapplicability of 
     discounts under subclause (II) shall not be counted as out-
     of-pocket expenses for purposes of section 1860F(b).
       ``(B) Use of standardized technology.--
       ``(i) In general.--Each eligible entity offering a 
     prescription drug discount card plan shall issue (and 
     reissue, as appropriate) such a card (or other technology) 
     that may be used by an enrolled beneficiary to assure access 
     to negotiated prices under section 1860F(a) for the purchase 
     of prescription drugs for which coverage is not otherwise 
     provided under the prescription drug discount card plan.
       ``(ii) Standards.--The Secretary shall provide for the 
     development of national standards relating to a standardized 
     format for the card or other technology referred to in clause 
     (i). Such standards shall be compatible with standards 
     established under part C of title XI.
       ``(C) Requirements on development and application of 
     formularies.--If an eligible entity that offers a 
     prescription drug discount card plan uses a formulary, the 
     following requirements must be met:
       ``(i) Pharmacy and therapeutic (p&t) committee.--The 
     eligible entity must establish a pharmacy and therapeutic 
     committee that develops and reviews the formulary. Such 
     committee shall include at least 1 physician and at least 1 
     pharmacist both with expertise in the care of elderly or 
     disabled persons and a majority of its members shall consist 
     of individuals who are a physician or a practicing pharmacist 
     (or both).
       ``(ii) Formulary development.--In developing and reviewing 
     the formulary, the committee shall base clinical decisions on 
     the strength of scientific evidence and standards of 
     practice, including assessing peer-reviewed medical 
     literature, such as randomized clinical trials, 
     pharmacoeconomic studies, outcomes research data, and such 
     other information as the committee determines to be 
     appropriate.
       ``(iii) Inclusion of drugs in all therapeutic categories.--
     The formulary must include drugs within each therapeutic 
     category and class of covered outpatient drugs (although not 
     necessarily for all drugs within such categories and 
     classes).
       ``(iv) Provider education.--The committee shall establish 
     policies and procedures to educate and inform health care 
     providers concerning the formulary.
       ``(v) Notice before removing drugs from formulary.--Any 
     removal of a drug from a formulary shall take effect only 
     after appropriate notice is made available to beneficiaries 
     and physicians.
       ``(vi) Grievances and appeals relating to application of 
     formularies.--For provisions relating to grievances and 
     appeals of coverage, see paragraphs (2) and (3) of section 
     1860D(a).
       ``(D) Fraud, abuse, and waste control.--The committee shall 
     establish a program to control fraud, abuse, and waste.
       ``(2) Cost and utilization management; quality assurance; 
     medication therapy management program.--
       ``(A) In general.--Each eligible entity offering a 
     prescription drug discount card plan may have in place with 
     respect to covered outpatient drugs--
       ``(i) an effective cost and drug utilization management 
     program, including medically appropriate incentives to use 
     generic drugs and therapeutic interchange, when appropriate; 
     and
       ``(ii) quality assurance measures and systems to reduce 
     medical errors and adverse drug interactions, including a 
     medication therapy management program described in 
     subparagraph (B).

     Nothing in this section shall be construed as impairing an 
     eligible entity from applying cost management tools 
     (including differential payments) under all methods of 
     operation.
       ``(B) Medication therapy management program.--

[[Page 13918]]

       ``(i) In general.--A medication therapy management program 
     described in this paragraph is a program of drug therapy 
     management and medication administration that is designed to 
     ensure, with respect to beneficiaries with chronic diseases 
     (such as diabetes, asthma, hypertension, and congestive heart 
     failure) or multiple prescriptions, that covered outpatient 
     drugs under the prescription drug discount card plan 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;
       ``(II) increased beneficiary adherence with prescription 
     medication regimens through medication refill reminders, 
     special packaging, and other appropriate means; and
       ``(III) detection of patterns of overuse and underuse of 
     prescription drugs.

       ``(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.--Each eligible 
     entity offering a prescription drug discount card plan that 
     includes a medication therapy management program shall take 
     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.
       ``(C) Treatment of accreditation.--Section 1852(e)(4) 
     (relating to treatment of accreditation) shall apply to 
     prescription drug discount card plans under this part with 
     respect to the following requirements, in the same manner as 
     they apply to Medicare+Choice plans under part C with respect 
     to the requirements described in a clause of section 
     1852(e)(4)(B):
       ``(i) Paragraph (1) (including quality assurance), 
     including any medication therapy management program under 
     paragraph (2).
       ``(ii) Subsection (c)(1) (relating to access to covered 
     benefits).
       ``(iii) Subsection (g) (relating to confidentiality and 
     accuracy of enrollee records).
       ``(D) Public disclosure of pharmaceutical prices for 
     equivalent drugs.--Each eligible entity offering a 
     prescription drug discount card plan shall provide that each 
     pharmacy or other dispenser that arranges for the dispensing 
     of a covered outpatient drug shall inform the beneficiary at 
     the time of purchase of the drug of any differential between 
     the price of the prescribed drug to the enrollee and the 
     price of the lowest cost generic drug covered under the plan 
     that is therapeutically equivalent and bioequivalent.


                        ``annual enrollment fee

       ``Sec. 1860E. (a) Amount.--
       ``(1) In general.--Except as provided in subsection (c), 
     enrollment under the program under this part is conditioned 
     upon payment of an annual enrollment fee of $25.
       ``(2) Annual percentage increase.--
       ``(A) In general.--In the case of any calendar year 
     beginning after 2004, the dollar amount in paragraph (1) 
     shall be increased by an amount equal to--
       ``(i) such dollar amount; multiplied by
       ``(ii) the inflation adjustment.
       ``(B) Inflation adjustment.--For purposes of subparagraph 
     (A)(ii), the inflation adjustment for any calendar year is 
     the percentage (if any) by which--
       ``(i) the average per capita aggregate expenditures for 
     covered outpatient drugs in the United States for medicare 
     beneficiaries, as determined by the Secretary for the 12-
     month period ending in July of the previous year; exceeds
       ``(ii) such aggregate expenditures for the 12-month period 
     ending with July 2003.
       ``(C) Rounding.--If any increase determined under clause 
     (ii) is not a multiple of $1, such increase shall be rounded 
     to the nearest multiple of $1.
       ``(b) Collection of Annual Enrollment Fee.--
       ``(1) In general.--Unless the eligible beneficiary makes an 
     election under paragraph (2), the annual enrollment fee 
     described in subsection (a) shall be collected and credited 
     to the Federal Supplementary Medical Insurance Trust Fund in 
     the same manner as the monthly premium determined under 
     section 1839 is collected and credited to such Trust Fund 
     under section 1840.
       ``(2) Direct payment.--An eligible beneficiary may elect to 
     pay the annual enrollment fee directly or in any other manner 
     approved by the Secretary. The Secretary shall establish 
     procedures for making such an election.
       ``(c) Waiver.--The Secretary shall waive the enrollment fee 
     described in subsection (a) in the case of an eligible 
     beneficiary whose income is below 200 percent of the poverty 
     line.


                      ``benefits under the program

       ``Sec. 1860F. (a) Access to Negotiated Prices.--
       ``(1) Negotiated prices.--
       ``(A) In general.--Subject to subparagraph (B), each 
     prescription drug card plan offering a discount card program 
     by an eligible entity with a contract under this part shall 
     provide each eligible beneficiary enrolled in such plan with 
     access to negotiated prices (including applicable discounts) 
     for such prescription drugs as the eligible entity determines 
     appropriate. Such discounts may include discounts for 
     nonformulary drugs. If such a beneficiary becomes eligible 
     for the catastrophic benefit under subsection (b), the 
     negotiated prices (including applicable discounts) shall 
     continue to be available to the beneficiary for those 
     prescription drugs for which payment may not be made under 
     section 1860H(b). For purposes of this subparagraph, the term 
     `prescription drugs' is not limited to covered outpatient 
     drugs, but does not include any over-the-counter drug that is 
     not a covered outpatient drug.
       ``(B) Limitations.--
       ``(i) Formulary restrictions.--Insofar as an eligible 
     entity with a contract under this part uses a formulary, the 
     negotiated prices (including applicable discounts) for 
     nonformulary drugs may differ.
       ``(ii) Avoidance of duplicate coverage.--The negotiated 
     prices (including applicable discounts) for prescription 
     drugs shall not be available for any drug prescribed for an 
     eligible beneficiary if payment for the drug is available 
     under part A or B (but such negotiated prices shall be 
     available if payment under part A or B is not available 
     because the beneficiary has not met the deductible or has 
     exhausted benefits under part A or B).
       ``(2) Discount card.--The Secretary shall develop a uniform 
     standard card format to be issued by each eligible entity 
     offering a prescription drug discount card plan that shall be 
     used by an enrolled beneficiary to ensure the access of such 
     beneficiary to negotiated prices under paragraph (1).
       ``(3) Ensuring discounts in all areas.--The Secretary shall 
     develop procedures that ensure that each eligible beneficiary 
     that resides in an area where no prescription drug discount 
     card plans are available is provided with access to 
     negotiated prices for prescription drugs (including 
     applicable discounts).
       ``(b) Catastrophic Benefit.--
       ``(1) In general.--Subject to paragraph (4) (relating to 
     eligibility for the catastrophic benefit) and any formulary 
     used by the prescription drug card program in which the 
     eligible beneficiary is enrolled, the catastrophic benefit 
     shall be administered as follows:
       ``(A) Beneficiaries with annual incomes below 200 percent 
     of the poverty line.--In the case of an eligible beneficiary 
     whose modified adjusted gross income (as defined in paragraph 
     (4)(E)) is below 200 percent of the poverty line, the 
     beneficiary shall not be responsible for making a payment for 
     a covered outpatient drug provided under this part to the 
     beneficiary in a year to the extent that the out-of-pocket 
     expenses of the beneficiary for such drug exceed $1,500, 
     unless the Secretary implements cost-sharing (as authorized 
     under this part).
       ``(B) Beneficiaries with annual incomes between 200 and 400 
     percent of the poverty line.--In the case of an eligible 
     beneficiary whose modified adjusted gross income (as so 
     defined) equals or exceeds 200 percent, but does not exceed 
     400 percent, of the poverty line, the beneficiary shall not 
     be responsible for making a payment for a covered outpatient 
     drug provided under this part to the beneficiary in a year to 
     the extent that the out-of-pocket expenses of the beneficiary 
     for such drug exceed $3,500, unless the Secretary implements 
     cost-sharing (as authorized under this part).
       ``(C) Beneficiaries with annual incomes between 400 and 600 
     percent of the poverty line.--In the case of an eligible 
     beneficiary whose modified adjusted gross income (as so 
     defined) equals or exceeds 400 percent, but does not exceed 
     600 percent, of the poverty line, the beneficiary shall not 
     be responsible for making a payment for a covered outpatient 
     drug provided under this part to the beneficiary in a year to 
     the extent that the out-of-pocket expenses of the beneficiary 
     for such drug exceed $5,500, unless the Secretary implements 
     cost-sharing (as authorized under this part).
       ``(D) Beneficiaries with annual incomes that exceed 600 
     percent of the poverty line.--In the case of an eligible 
     beneficiary whose modified adjusted gross income (as so 
     defined) equals or exceeds 600 percent of the poverty line, 
     the beneficiary shall not be responsible for making a payment 
     for a covered outpatient drug provided under this part to the 
     beneficiary in a year to the extent that the out-of-pocket 
     expenses of the beneficiary for such drug exceeds 20 percent 
     of that beneficiary's income, unless the Secretary implements 
     cost-sharing (as authorized under this part).
       ``(2) Annual percentage increase.--
       ``(A) In general.--In the case of any calendar year after 
     2004, the dollar amounts in paragraph (1) shall be increased 
     by an amount equal to--
       ``(i) such dollar amount; multiplied by
       ``(ii) the inflation adjustment determined under section 
     1860E(a)(2)(B) for such calendar year.
       ``(B) Rounding.--If any increase determined under 
     subparagraph (A) is not a multiple of $1, such increase shall 
     be rounded to the nearest multiple of $1.
       ``(3) Eligible entity not at risk for catastrophic 
     benefit.--
       ``(A) In general.--The Secretary, and not the eligible 
     entity, shall be at risk for the

[[Page 13919]]

     provision of the catastrophic benefit under this subsection.
       ``(B) Provisions relating to payments to eligible 
     entities.--For provisions relating to payments to eligible 
     entities for administering the catastrophic benefit under 
     this subsection, see section 1860H.
       ``(C) Procedures for determining modified adjusted gross 
     income.--
       ``(i) In general.--The Secretary shall establish procedures 
     for determining the modified adjusted gross income of 
     eligible beneficiaries enrolled under this part.
       ``(ii) Consultation.--The Secretary shall consult with the 
     Secretary of the Treasury in making the determinations 
     described in clause (i).
       ``(iii) Disclosure of information.--Notwithstanding section 
     6103(a) of the Internal Revenue Code of 1986, the Secretary 
     of the Treasury may, upon written request from the Secretary, 
     disclose to officers and employees of the Centers for 
     Medicare & Medicaid Services such return information as is 
     necessary to make the determinations described in clause (i). 
     Return information disclosed under the preceding sentence may 
     be used by officers and employees of the Centers for Medicare 
     & Medicaid Services only for the purposes of, and to the 
     extent necessary, in making such determinations.
       ``(D) Definition of modified adjusted gross income.--In 
     this paragraph, the term `modified adjusted gross income' 
     means adjusted gross income (as defined in section 62 of the 
     Internal Revenue Code of 1986)--
       ``(i) determined without regard to sections 135, 911, 931, 
     and 933 of such Code;
       ``(ii) increased by the amount of interest received or 
     accrued by the taxpayer during the taxable year which is 
     exempt from tax under such Code; and
       ``(iii) increased by any amount received under title II or 
     XVI.
       ``(4) Ensuring catastrophic benefit in all areas.--The 
     Secretary shall develop procedures for the provision of the 
     catastrophic benefit under this subsection to each eligible 
     beneficiary that resides in an area where there are no 
     prescription drug discount card plans offered that have been 
     awarded a contract under this part.


   ``requirements for entities to provide prescription drug coverage

       ``Sec. 1860G. (a) Establishment of Bidding Process.--The 
     Secretary shall establish a process under which the Secretary 
     accepts bids from eligible entities and awards contracts to 
     the entities to provide the benefits under this part to 
     eligible beneficiaries in an area.
       ``(b) Submission of Bids.--Each eligible entity desiring to 
     enter into a contract under this part shall submit a bid to 
     the Secretary at such time, in such manner, and accompanied 
     by such information as the Secretary may require.
       ``(c) Administrative Fee Bid.--
       ``(1) Submission.--For the bid described in subsection (b), 
     each entity shall submit to the Secretary information 
     regarding administration of the discount card and 
     catastrophic benefit under this part.
       ``(2) Bid submission requirements.--
       ``(A) Administrative fee bid submission.--In submitting 
     bids, the entities shall include separate costs for 
     administering the discount card component, if applicable, and 
     the catastrophic benefit. The entity shall submit the 
     administrative fee bid in a form and manner specified by the 
     Secretary, and shall include a statement of projected 
     enrollment and a separate statement of the projected 
     administrative costs for at least the following functions:
       ``(i) Enrollment, including income eligibility 
     determination.
       ``(ii) Claims processing.
       ``(iii) Quality assurance, including drug utilization 
     review.
       ``(iv) Beneficiary and pharmacy customer service.
       ``(v) Coordination of benefits.
       ``(vi) Fraud and abuse prevention.
       ``(B) Negotiated administrative fee bid amounts.--The 
     Secretary has the authority to negotiate regarding the bid 
     amounts submitted. The Secretary may reject a bid if the 
     Secretary determines it is not supported by the 
     administrative cost information provided in the bid as 
     specified in subparagraph (A).
       ``(C) Payment to plans based on administrative fee bid 
     amounts.--The Secretary shall use the bid amounts to 
     calculate a benchmark amount consisting of the enrollment-
     weighted average of all bids for each function and each class 
     of entity. The class of entity is either a regional or 
     national entity, or such other classes as the Secretary may 
     determine to be appropriate. The functions are the discount 
     card and catastrophic components. If an eligible entity's 
     combined bid for both functions is above the combined 
     benchmark within the entity's class for the functions, the 
     eligible entity shall collect additional necessary revenue 
     through one or both of the following:
       ``(i) Additional fees charged to the beneficiary, not to 
     exceed $25 annually.
       ``(ii) Use of rebate amounts from drug manufacturers to 
     defray administrative costs.
       ``(d) Contracts With the Secretary.--
       ``(1) In general.--The Secretary shall, consistent with the 
     requirements of this part and the goal of containing medicare 
     program costs, enter into at least 2 contracts in each area, 
     unless only 1 bidding entity meets the terms and conditions 
     specified by the Secretary under paragraph (2).
       ``(2) Terms and conditions.--The Secretary shall not enter 
     into a contract with an eligible entity under this section 
     unless the Secretary finds that the eligible entity is in 
     compliance with such terms and conditions as the Secretary 
     shall specify.
       ``(3) Requirements for eligible entities providing discount 
     card program.--Except as provided in paragraph (4), in 
     determining which of the eligible entities that submitted 
     bids that meet the terms and conditions specified by the 
     Secretary under paragraph (2) to enter into a contract, the 
     Secretary shall consider whether the bid submitted by the 
     entity meets at least the following requirements:
       ``(A) Savings to medicare beneficiaries.--The program 
     passes on to medicare beneficiaries who enroll in the program 
     discounts on prescription drugs, including discounts 
     negotiated with manufacturers.
       ``(B) Prohibition on application only to mail order.--The 
     program applies to drugs that are available other than solely 
     through mail order and provides convenient access to retail 
     pharmacies.
       ``(C) Level of beneficiary services.--The program provides 
     pharmaceutical support services, such as education and 
     services to prevent adverse drug interactions.
       ``(D) Adequacy of information.--The program makes available 
     to medicare beneficiaries through the Internet and otherwise 
     information, including information on enrollment fees, prices 
     charged to beneficiaries, and services offered under the 
     program, that the Secretary identifies as being necessary to 
     provide for informed choice by beneficiaries among endorsed 
     programs.
       ``(E) Extent of demonstrated experience.--The entity 
     operating the program has demonstrated experience and 
     expertise in operating such a program or a similar program.
       ``(F) Extent of quality assurance.--The entity has in place 
     adequate procedures for assuring quality service under the 
     program.
       ``(G) Operation of assistance program.--The entity meets 
     such requirements relating to solvency, compliance with 
     financial reporting requirements, audit compliance, and 
     contractual guarantees as specified by the Secretary.
       ``(H) Privacy compliance.--The entity implements policies 
     and procedures to safeguard the use and disclosure of program 
     beneficiaries' individually identifiable health information 
     in a manner consistent with the Federal regulations 
     (concerning the privacy of individually identifiable health 
     information) promulgated under section 264(c) of the Health 
     Insurance Portability and Accountability Act of 1996.
       ``(I) Additional beneficiary protections.--The program 
     meets such additional requirements as the Secretary 
     identifies to protect and promote the interest of medicare 
     beneficiaries, including requirements that ensure that 
     beneficiaries are not charged more than the lower of the 
     negotiated retail price or the usual and customary price.

     The prices negotiated by a prescription drug discount card 
     program endorsed under this section shall (notwithstanding 
     any other provision of law) not be taken into account for the 
     purposes of establishing the best price under section 
     1927(c)(1)(C).
       ``(4) Requirements for other eligible entities.--If an 
     eligible entity is not offering the discount card plan then 
     the entity must be licensed under State law to provide 
     insurance benefits or shall meet the requirements of the 
     Employee Retirement Income Security Act of 1974 that apply 
     with respect to such plan. Such an entity shall not be 
     required to meet the requirements of subsection (d)(3).
       ``(5) Beneficiary access to savings and rebates.--The 
     Secretary shall require eligible entities offering a discount 
     card program to pass on savings and rebates negotiated with 
     manufacturers to eligible beneficiaries enrolled with the 
     entity.
       ``(6) Negotiated agreements with employer-sponsored 
     plans.--Notwithstanding any other provision of this part, the 
     Secretary may negotiate agreements with employer-sponsored 
     plans under which eligible beneficiaries are provided with a 
     benefit for prescription drug coverage that is more generous 
     than the benefit that would otherwise have been available 
     under this part if such an agreement results in cost savings 
     to the Federal Government.


  ``payments to eligible entities for administering the catastrophic 
                                benefit

       ``Sec. 1860H. (a) In General.--The Secretary may establish 
     procedures for making payments to an eligible entity under a 
     contract entered into under this part for--
       ``(1) no less than 90 percent of the costs of providing 
     covered outpatient prescription drugs to beneficiaries 
     eligible for the benefit under this part in accordance with 
     subsection (b); and
       ``(2) costs incurred by the entity in administering the 
     catastrophic benefit in accordance with section 1860G.
       ``(b) Payment for Covered Outpatient Prescription Drugs.--
       ``(1) In general.--Except as provided in subsection (c) and 
     subject to paragraph (2), the Secretary may only pay an 
     eligible entity for covered outpatient drugs furnished by

[[Page 13920]]

     the eligible entity to an eligible beneficiary enrolled with 
     such entity under this part that is eligible for the 
     catastrophic benefit under section 1860F(b).
       ``(2) Limitations.--
       ``(A) Formulary restrictions.--Insofar as an eligible 
     entity with a contract under this part uses a formulary, the 
     Secretary may not make any payment for a covered outpatient 
     drug that is not included in such formulary, except to the 
     extent provided under section 1860D(a)(4)(B).
       ``(B) Negotiated prices.--The Secretary may not pay an 
     amount for a covered outpatient drug furnished to an eligible 
     beneficiary that exceeds the negotiated price (including 
     applicable discounts) that the beneficiary would have been 
     responsible for under section 1860F(a) or the price 
     negotiated for insurance coverage under the Medicare+Choice 
     program under part C, a medicare supplemental policy, 
     employer-sponsored coverage, or a State plan.
       ``(C) Cost-sharing limitations.--An eligible entity may not 
     charge an individual enrolled with such entity who is 
     eligible for the catastrophic benefit under this part any 
     copayment, tiered copayment, coinsurance, or other cost-
     sharing that exceeds 10 percent of the cost of the drug that 
     is dispensed to the individual.
       ``(3) Payment in competitive areas.--In a geographic area 
     in which 2 or more eligible entities offer a plan under this 
     part, the Secretary may negotiate an agreement with the 
     entity to reimburse the entity for costs incurred in 
     providing the benefit under this part on a capitated basis.
       ``(c) Secondary Payer Provisions.--The provisions of 
     section 1862(b) shall apply to the benefits provided under 
     this part.


                    ``determination of income levels

       ``Sec. 1860I. (a) Determination of Income Levels.--
       ``(1) In general.--The Commissioner of Social Security 
     shall determine income levels of eligible beneficiaries for 
     purposes of this part.
       ``(2) Authorization of appropriations.--There are 
     authorized to be appropriated such sums as may be necessary 
     for the Commissioner of Social Security to make the 
     determinations required by paragraph (1).
       ``(b) Enforcement of Income Determinations.--The Secretary, 
     in consultation with the Secretary of the Treasury, shall--
       ``(1) establish procedures that ensure that eligible 
     beneficiaries comply with sections 1860E(c) and 1860F(b); and
       ``(2) require, if the Secretary determines that payments 
     were made under this part to which an eligible beneficiary 
     was not entitled, the repayment of any excess payments with 
     interest and a penalty.
       ``(c) Quality Control System.--
       ``(1) Establishment.--The Secretary shall establish a 
     quality control system to monitor income determinations made 
     by eligible entities under this section and to produce 
     appropriate and comprehensive measures of error rates.
       ``(2) Periodic audits.--The Inspector General of the 
     Department of Health and Human Services shall conduct 
     periodic audits to ensure that the system established under 
     paragraph (1) is functioning appropriately.


                            ``appropriations

       ``Sec. 1860J. There are authorized to be appropriated from 
     time to time, out of any moneys in the Treasury not otherwise 
     appropriated, to the Federal Supplementary Medical Insurance 
     Trust Fund established under section 1841, an amount equal to 
     the amount by which the benefits and administrative costs of 
     providing the benefits under this part exceed the enrollment 
     fees collected under section 1860E.


      ``medicare competition and prescription drug advisory board

       ``Sec. 1860K. (a) Establishment of Board.--There is 
     established a Medicare Prescription Drug Advisory Board (in 
     this section referred to as the `Board').
       ``(b) Advice on Policies; Reports.--
       ``(1) Advice on policies.--The Board shall advise the 
     Secretary on policies relating to the Medicare Outpatient 
     Prescription Drug Discount and Security Program under this 
     part.
       ``(2) Reports.--
       ``(A) In general.--With respect to matters of the 
     administration of the program under this part, the Board 
     shall submit to Congress and to the Secretary such reports as 
     the Board determines appropriate. Each such report may 
     contain such recommendations as the Board determines 
     appropriate for legislative or administrative changes to 
     improve the administration of the program under this part. 
     Each such report shall be published in the Federal Register.
       ``(B) Maintaining independence of board.--The Board shall 
     directly submit to Congress reports required under 
     subparagraph (A). No officer or agency of the United States 
     may require the Board to submit to any officer or agency of 
     the United States for approval, comments, or review, prior to 
     the submission to Congress of such reports.
       ``(c) Structure and Membership of the Board.--
       ``(1) Membership.--The Board shall be composed of 7 members 
     who shall be appointed as follows:
       ``(A) Presidential appointments.--
       ``(i) In general.--Three members shall be appointed by the 
     President, by and with the advice and consent of the Senate.
       ``(ii) Limitation.--Not more than 2 such members may be 
     from the same political party.
       ``(B) Senatorial appointments.--Two members (each member 
     from a different political party) shall be appointed by the 
     President pro tempore of the Senate with the advice of the 
     Chairman and the Ranking Minority Member of the Committee on 
     Finance of the Senate.
       ``(C) Congressional appointments.--Two members (each member 
     from a different political party) shall be appointed by the 
     Speaker of the House of Representatives, with the advice of 
     the Chairman and the Ranking Minority Member of the Committee 
     on Ways and Means of the House of Representatives.
       ``(2) Qualifications.--The members shall be chosen on the 
     basis of their integrity, impartiality, and good judgment, 
     and shall be individuals who are, by reason of their 
     education, experience, and attainments, exceptionally 
     qualified to perform the duties of members of the Board.
       ``(3) Composition.--Of the members appointed under 
     paragraph (1)--
       ``(A) at least one shall represent the pharmaceutical 
     industry;
       ``(B) at least one shall represent physicians;
       ``(C) at least one shall represent medicare beneficiaries;
       ``(D) at least one shall represent practicing pharmacists; 
     and
       ``(E) at least one shall represent eligible entities.
       ``(d) Terms of Appointment.--
       ``(1) In general.--Subject to paragraph (2), each member of 
     the Board shall serve for a term of 6 years.
       ``(2) Continuance in office and staggered terms.--
       ``(A) Continuance in office.--A member appointed to a term 
     of office after the commencement of such term may serve under 
     such appointment only for the remainder of such term.
       ``(B) Staggered terms.--The terms of service of the members 
     initially appointed under this section shall begin on January 
     1, 2004, and expire as follows:
       ``(i) Presidential appointments.--The terms of service of 
     the members initially appointed by the President shall expire 
     as designated by the President at the time of nomination, 1 
     each at the end of--

       ``(I) 2 years;
       ``(II) 4 years; and
       ``(III) 6 years.

       ``(ii) Senatorial appointments.--The terms of service of 
     members initially appointed by the President pro tempore of 
     the Senate shall expire as designated by the President pro 
     tempore of the Senate at the time of nomination, 1 each at 
     the end of--

       ``(I) 3 years; and
       ``(II) 6 years.

       ``(iii) Congressional appointments.--The terms of service 
     of members initially appointed by the Speaker of the House of 
     Representatives shall expire as designated by the Speaker of 
     the House of Representatives at the time of nomination, 1 
     each at the end of--

       ``(I) 4 years; and
       ``(II) 5 years.

       ``(C) Reappointments.--Any person appointed as a member of 
     the Board may not serve for more than 8 years.
       ``(D) Vacancies.--Any member appointed to fill a vacancy 
     occurring before the expiration of the term for which the 
     member's predecessor was appointed shall be appointed only 
     for the remainder of that term. A member may serve after the 
     expiration of that member's term until a successor has taken 
     office. A vacancy in the Board shall be filled in the manner 
     in which the original appointment was made.
       ``(e) Chairperson.--A member of the Board shall be 
     designated by the President to serve as Chairperson for a 
     term of 4 years, coincident with the term of the President, 
     or until the designation of a successor.
       ``(f) Expenses and Per Diem.--Members of the Board shall 
     serve without compensation, except that, while serving on 
     business of the Board away from their homes or regular places 
     of business, members may be allowed travel expenses, 
     including per diem in lieu of subsistence, as authorized by 
     section 5703 of title 5, United States Code, for persons in 
     the Government employed intermittently.
       ``(g) Meeting.--
       ``(1) In general.--The Board shall meet at the call of the 
     Chairperson (in consultation with the other members of the 
     Board) not less than 4 times each year to consider a specific 
     agenda of issues, as determined by the Chairperson in 
     consultation with the other members of the Board.
       ``(2) Quorum.--Four members of the Board (not more than 3 
     of whom may be of the same political party) shall constitute 
     a quorum for purposes of conducting business.
       ``(h) Federal Advisory Committee Act.--The Board shall be 
     exempt from the provisions of the Federal Advisory Committee 
     Act (5 U.S.C. App.).
       ``(i) Personnel.--
       ``(1) Staff director.--The Board shall, without regard to 
     the provisions of title 5,

[[Page 13921]]

     United States Code, relating to the competitive service, 
     appoint a Staff Director who shall be paid at a rate 
     equivalent to a rate established for the Senior Executive 
     Service under section 5382 of title 5, United States Code.
       ``(2) Staff.--
       ``(A) In general.--The Board may employ, without regard to 
     chapter 31 of title 5, United States Code, such officers and 
     employees as are necessary to administer the activities to be 
     carried out by the Board.
       ``(B) Flexibility with respect to civil service laws.--
       ``(i) In general.--The staff of the Board shall be 
     appointed without regard to the provisions of title 5, United 
     States Code, governing appointments in the competitive 
     service, and, subject to clause (ii), shall be paid without 
     regard to the provisions of chapters 51 and 53 of such title 
     (relating to classification and schedule pay rates).
       ``(ii) Maximum rate.--In no case may the rate of 
     compensation determined under clause (i) exceed the rate of 
     basic pay payable for level IV of the Executive Schedule 
     under section 5315 of title 5, United States Code.
       ``(j) Authorization of Appropriations.--There are 
     authorized to be appropriated, out of the Federal 
     Supplemental Medical Insurance Trust Fund established under 
     section 1841, and the general fund of the Treasury, such sums 
     as are necessary to carry out the purposes of this 
     section.''.
       (b) Conforming References to Previous Part D.--
       (1) In general.--Any reference in law (in effect before the 
     date of enactment of this Act) to part D of title XVIII of 
     the Social Security Act is deemed a reference to part E of 
     such title (as in effect after such date).
       (2) Secretarial submission of legislative proposal.--Not 
     later than 6 months after the date of enactment of this 
     section, the Secretary of Health and Human Services shall 
     submit to the appropriate committees of Congress a 
     legislative proposal providing for such technical and 
     conforming amendments in the law as are required by the 
     provisions of this section.
       (c) Effective Date.--
       (1) In general.--The amendment made by subsection (a) shall 
     take effect on the date of enactment of this Act.
       (2) Implementation.--Notwithstanding any provision of part 
     D of title XVIII of the Social Security Act (as added by 
     subsection (a)), the Secretary of Health and Human Services 
     shall implement the Voluntary Medicare Outpatient 
     Prescription Drug Discount and Security Program established 
     under such part in a manner such that benefits under such 
     part for eligible beneficiaries (as defined in section 1860 
     of such Act, as added by such subsection) are available to 
     such beneficiaries not later than the date that is 1 year 
     after the date of enactment of this Act.

     SEC. __02. ADMINISTRATION OF VOLUNTARY MEDICARE OUTPATIENT 
                   PRESCRIPTION DRUG DISCOUNT AND SECURITY 
                   PROGRAM.

       (a) Establishment of Center for Medicare Prescription 
     Drugs.--There is established, within the Centers for Medicare 
     & Medicaid Services of the Department of Health and Human 
     Services, a Center for Medicare Prescription Drugs. Such 
     Center shall be separate from the Center for Beneficiary 
     Choices, the Center for Medicare Management, and the Center 
     for Medicaid and State Operations.
       (b) Duties.--It shall be the duty of the Center for 
     Medicare Prescription Drugs to administer the Voluntary 
     Medicare Outpatient Prescription Drug Discount and Security 
     Program established under part D of title XVIII of the Social 
     Security Act (as added by section __01).
       (c) Director.--
       (1) Appointment.--There shall be in the Center for Medicare 
     Prescription Drugs a Director of Medicare Prescription Drugs, 
     who shall be appointed by the President, by and with the 
     advice and consent of the Senate.
       (2) Responsibilities.--The Director shall be responsible 
     for the exercise of all powers and the discharge of all 
     duties of the Center for Medicare Prescription Drugs and 
     shall have authority and control over all personnel and 
     activities thereof.
       (d) Personnel.--The Director of the Center for Medicare 
     Prescription Drugs may appoint and terminate such personnel 
     as may be necessary to enable the Center for Medicare 
     Prescription Drugs to perform its duties.

     SEC. __03. EXCLUSION OF PART D COSTS FROM DETERMINATION OF 
                   PART B MONTHLY PREMIUM.

       Section 1839(g) of the Social Security Act (42 U.S.C. 
     1395r(g)) is amended--
       (1) by striking ``attributable to the application of 
     section'' and inserting ``attributable to--
       ``(1) the application of section'';
       (2) by striking the period and inserting ``; and''; and
       (3) by adding at the end the following new paragraph:
       ``(2) the Voluntary Medicare Outpatient Prescription Drug 
     Discount and Security Program under part D.''.

     SEC. __04. MEDIGAP REVISIONS.

       Section 1882 of the Social Security Act (42 U.S.C. 1395ss) 
     is amended by adding at the end the following new subsection:
       ``(v) Modernization of Medicare Supplemental Policies.--
       ``(1) Promulgation of model regulation.--
       ``(A) NAIC model regulation.--If, within 9 months after the 
     date of enactment of the Medicare Rx Drug Discount and 
     Security Act of 2002, the National Association of Insurance 
     Commissioners (in this subsection referred to as the `NAIC') 
     changes the 1991 NAIC Model Regulation (described in 
     subsection (p)) to revise the benefit package classified as 
     `J' under the standards established by subsection (p)(2) 
     (including the benefit package classified as `J' with a high 
     deductible feature, as described in subsection (p)(11)) so 
     that--
       ``(i) the coverage for outpatient prescription drugs 
     available under such benefit package is replaced with 
     coverage for outpatient prescription drugs that complements 
     but does not duplicate the benefits for outpatient 
     prescription drugs that beneficiaries are otherwise entitled 
     to under this title;
       ``(ii) a uniform format is used in the policy with respect 
     to such revised benefits; and
       ``(iii) such revised standards meet any additional 
     requirements imposed by the Medicare Rx Drug Discount and 
     Security Act of 2002;

     subsection (g)(2)(A) shall be applied in each State, 
     effective for policies issued to policy holders on and after 
     January 1, 2004, as if the reference to the Model Regulation 
     adopted on June 6, 1979, were a reference to the 1991 NAIC 
     Model Regulation as changed under this subparagraph (such 
     changed regulation referred to in this section as the `2004 
     NAIC Model Regulation').
       ``(B) Regulation by the secretary.--If the NAIC does not 
     make the changes in the 1991 NAIC Model Regulation within the 
     9-month period specified in subparagraph (A), the Secretary 
     shall promulgate, not later than 9 months after the end of 
     such period, a regulation and subsection (g)(2)(A) shall be 
     applied in each State, effective for policies issued to 
     policy holders on and after January 1, 2004, as if the 
     reference to the Model Regulation adopted on June 6, 1979, 
     were a reference to the 1991 NAIC Model Regulation as changed 
     by the Secretary under this subparagraph (such changed 
     regulation referred to in this section as the `2004 Federal 
     Regulation').
       ``(C) Consultation with working group.--In promulgating 
     standards under this paragraph, the NAIC or Secretary shall 
     consult with a working group similar to the working group 
     described in subsection (p)(1)(D).
       ``(D) Modification of standards if medicare benefits 
     change.--If benefits under part D of this title are changed 
     and the Secretary determines, in consultation with the NAIC, 
     that changes in the 2004 NAIC Model Regulation or 2004 
     Federal Regulation are needed to reflect such changes, the 
     preceding provisions of this paragraph shall apply to the 
     modification of standards previously established in the same 
     manner as they applied to the original establishment of such 
     standards.
       ``(2) Construction of benefits in other medicare 
     supplemental policies.--Nothing in the benefit packages 
     classified as `A' through `I' under the standards established 
     by subsection (p)(2) (including the benefit package 
     classified as `F' with a high deductible feature, as 
     described in subsection (p)(11)) shall be construed as 
     providing coverage for benefits for which payment may be made 
     under part D.
       ``(3) Application of provisions and conforming 
     references.--
       ``(A) Application of provisions.--The provisions of 
     paragraphs (4) through (10) of subsection (p) shall apply 
     under this section, except that--
       ``(i) any reference to the model regulation applicable 
     under that subsection shall be deemed to be a reference to 
     the applicable 2004 NAIC Model Regulation or 2004 Federal 
     Regulation; and
       ``(ii) any reference to a date under such paragraphs of 
     subsection (p) shall be deemed to be a reference to the 
     appropriate date under this subsection.
       ``(B) Other references.--Any reference to a provision of 
     subsection (p) or a date applicable under such subsection 
     shall also be considered to be a reference to the appropriate 
     provision or date under this subsection.''.

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