[Congressional Record (Bound Edition), Volume 148 (2002), Part 8]
[Senate]
[Pages 10409-10439]
[From the U.S. Government Publishing Office, www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. GRAHAM (for himself, Mr. Miller, Mr. Kennedy, Mr. 
        Rockefeller, Mr. Daschle, Mr. Cleland, Mr. Inouye, Mr. Reid, 
        Ms. Mikulski, Mr. Johnson, Mr. Leahy, Mrs. Clinton, Mr. Nelson 
        of Florida, Mr. Sarbanes, Mr. Bingaman, Ms. Stabenow, Mr. 
        Wellstone, Mr. Hollings, Mrs. Murray, Mr. Schumer, Mr. Akaka, 
        Mrs. Boxer, Mr. Reed, Mr. Dodd, Mr. Levin, Mrs. Carnahan, Ms. 
        Cantwell, Mr. Durbin, and Mr. Dayton):
  S. 2625. A bill to amend title XVIII of the Social Security Act to 
provide coverage of outpatient prescription drugs under the Medicare 
Program; to the Committee on Finance.
  Mr. GRAHAM. Madam President, along with my colleagues, Senators, 
Miller and Kennedy, I am very pleased to announce the introduction of 
the Medicare Outpatient Prescription Drug Act of 2002.
  A prescription drug benefit is the most fundamental shift we can make 
in the health care of older Americans. Adding a prescription drug 
benefit to Medicare will represent a 180 degree turn, a change in the 
focus of how we deliver health care to our Nation's seniors.
  Quite simply, including prescription drugs will transform Medicare 
from a sickness program to a wellness program. Failure to provide a 
prescription drug benefit will continue to confine millions of elderly 
Americans to a system that is antiquated, one that only looks backward, 
not forward.
  The sponsors of this legislation do not buy the conventional wisdom 
that nothing significant can be enacted in an election year. We are 
committed to meeting our goal this year: passage of a universal, 
comprehensive, and affordable prescription drug benefit.
  To be sure, there are questions in this debate which still remain. 
But, the most important question, ``will our drug benefit meet seniors' 
needs?'', can be answered with a resounding ``YES.''
  The voluntary benefit we are offering to all seniors is very simple, 
no gimmicks, gotchas or ``gaps'' to fall into. With our benefit, ``what 
you see is what you get.'' Seniors will know exactly what they will 
pay, and exactly what they will get: the monthly premium is $25, no 
matter where a person lives; all beneficiaries get assistance from the 
very first prescription of the year.
  For the first two years, seniors will pay $10 for each generic 
prescription, and no more than $40 for all medically-necessary brand-
name medicines. All other drugs would cost no more than $60. After two 
years, the co-pay will be indexed to the increase in prescription drug 
prices.
  Seniors who either pay $4,000 out of their own pocket or have a third 
party contribute towards this $4,000 spending level would pay no more.
  Seniors with very low incomes, below 135 percent of poverty, would 
pay no premiums. Seniors with incomes between 135 and 150 percent of 
the poverty level would pay reduced premiums.
  And no senior will be faced with a burdensome ``asset test'' that 
could deny them the very drugs they need.
  This kind of certainty, and this kind of help, is what beneficiaries 
need. Take, for example a 68-year-old man with two conditions very 
common among the elderly, congestive heart failure and diabetes, and no 
drug coverage. He would have to spend over $5,100 annually for a 
typical medication regimen. Under our plan, this gentleman would get 
the medicines he needs to stay healthy, and would save nearly $3,300.
  In addition to being affordable, comprehensive, and universally 
available to all of America's seniors, we need a drug benefit that will 
be attractive to beneficiaries. Why? Because voluntary participation of 
all seniors will ensure that we will have a program that is sustainable 
for the long run. A program that attracts only the sickest 
beneficiaries is doomed to fail.
  The Congressional Budget Office has evaluated our plan and has stated 
that it does not leave a single Medicare beneficiary without access to 
drug coverage.
  How does this bill achieve this goal? By following the principle that 
the drug benefit should track the prescription drug benefits that 
seniors have been accustomed to in their working years. We have an 
attractive benefit with an affordable premium and a catastrophic 
provision that is an insurance policy for all elderly, in particular, 
for those seniors who are healthy right now, but who may face health 
problems later in life. We have modeled our bill after what works for 
most Americans right now. Our benefit includes tiered copayments, and 
we use as our delivery system the private sector model in place today 
in every part of the country.

[[Page 10410]]

  Addition of a prescription drug benefit will be the largest expansion 
of the Medicare program since it was initiated in 1965. This fact 
challenges Congress to be sure that we get it right. In light of the 
scope of the changes we are making, we are suggesting that, after seven 
years, Congress should examine how well the benefit is working and to 
make whatever modifications are necessary and appropriate. Not only 
will we learn about how our delivery system has worked, but we can 
discover that access to prescription drugs will save Medicare money. 
How? By doctors prescribing medications instead of performing costly 
medical procedures. A physician on my staff recently told me that his 
students had never seen an ulcer operation. Why? Because prescription 
drugs have ended the need for this surgery.
  Improving Medicare by including a prescription drug benefit is a 
serious and critical undertaking, and deserves our most serious 
efforts. We all know that our seniors cannot afford to wait out another 
election cycle.
  I am pleased to announce that the American Association of Retired 
Persons, America Federation of State and County Municipal Employees, 
the National Council on the Aging, Families USA, the AFL-CIO, the 
Alliance for Retired Americans, the National Committee to Preserve 
Social Security and Medicare, and the Generic Pharmaceutical 
Association support our legislation. I ask unanimous consent that their 
letters of support be printed in the Record. With their help, we can 
get this done this year.
  There being no objection, the letters were ordered to be printed in 
the Record, as follows:

                                                         AARP,

                                    Washington, DC, June 12, 2002.
     Hon. Bob Graham and Hon. Zell Miller,
     U.S. Senate,
     Washington, DC.
       Dear Senators: We are pleased to restate our position on 
     your revised Medicare prescription drug proposal. Action on a 
     bipartisan prescription drug benefit is a top priority for 
     AARP, our members and the nation.
       Medicare beneficiaries have waited long enough for access 
     to meaningful, affordable prescription drug coverage. We know 
     from our membership that in order for a Medicare prescription 
     drug benefit to provide comprehensive coverage it must 
     include:
       An affordable premium and coinsurance;
       Meaningful catastrophic stop-loss that limits out-of-pocket 
     costs;
       A benefit that does not expose beneficiaries to a gap in 
     insurance coverage;
       Additional assistance for low-income beneficiaries; and
       Quality and safety features to curb unnecessary costs and 
     prevent dangerous drug interactions.
       AARP supports your initiative in incorporate these goals. 
     We commend you for including key elements in your proposal 
     that Medicare beneficiaries and our members have indicated 
     they find valuable. For instance, your proposal includes a 
     premium that many Medicare beneficiaries view as affordable 
     and a benefit design that does not include a gap in insurance 
     coverage. Your proposal also now includes co-payments 
     specified as dollar amounts, an approach that our research 
     shows our members prefer to coinsurance. In our view, this 
     plan could provide real value to beneficiaries in protecting 
     them against the high costs of prescription drugs.
       It is important that any prescription drug benefit be made 
     a permanent and stable part of Medicare, and we want to work 
     with you to achieve this before enactment.
       Thank you for your leadership on this issue. We look 
     forward to working with you and your colleagues as the 
     legislation moves forward. AARP will continue to urge 
     Congress to work in a bipartisan manner to enact affordable, 
     meaningful Medicare prescription drug coverage.
           Sincerely,
                                               William D. Novelli,
     Executive Director and CEO.
                                  ____



                            The National Council on the Aging,

                                    Washington, DC, June 11, 2002.
     Hon. Bob Graham,
     Hart Senate Office Building,
     Washington, DC.
       Dear Senator Graham: On behalf of the National Council on 
     the Aging (NCOA)--the nation's first organization formed to 
     represent America's seniors and those who serve them--I write 
     to commend and thank you for your proposal to provide 
     meaningful Medicare prescription drug coverage to America's 
     seniors. The Medicare Outpatient Prescription Drug Act of 
     2002 is consistent with the principles supported by the vast 
     majority of organizations representing Medicare 
     beneficiaries. It provides the foundation for a vehicle that 
     we hope can achieve bipartisan consensus on this issue this 
     year.
       NCOA is particularly pleased that your legislation would 
     provide prescription drug coverage that is universal, 
     voluntary, reliable, and continuous. Other proposals being 
     offered include significant coverage gaps and would fail to 
     solve the problem. Under such bills, a significant number of 
     beneficiaries would not want to participate in the program, 
     and many of those who do participate would continue to be 
     forced to choose between buying food and essential medicines.
       We commend many of the modifications you have made to your 
     Medicare bill from last year. These improvements include a 
     significantly lower premium, the option to provide a flat 
     copayment, an earlier effective date, and assistance with the 
     very first prescription. We believe these changes will make 
     the coverage affordable and attractive to the vast majority 
     of beneficiaries, which is so critical to making a voluntary 
     prescription drug program work. While we have concerns about 
     the need to reauthorize the program after 2010, we understand 
     the budget trade-offs needed to provide meaningful and 
     attractive coverage, and fully expect that the Congress would 
     reauthorize the program.
       NCOA is also pleased that your proposal does not include 
     price controls and that the program would promote stability 
     and efficiency through administration by multiple, competing 
     Pharmacy Benefit Managers (PBMs), using management tools 
     available in the private sector in which PBMs would be at 
     risk of their performance, including effective cost 
     containment.
       NCOA deeply appreciates your efforts to move this critical 
     debate in a direction that guarantees access to meaningful 
     coverage--even in rural and frontier areas of the country--
     and responds in a constructive manner to many of the specific 
     concerns that have been raised regarding other Medicare 
     prescription drug proposals.
       It is impossible to have real health security without 
     coverage for prescription drugs. Prescription drug coverage 
     is the number one legislative priority for America's seniors. 
     Virtually every member of Congress has made campaign promises 
     to try to pass a good prescription drug bill. The time has 
     come to get serious and to work together to achieve consensus 
     on the issues in controversy. Your proposal provides us with 
     an excellent starting point.
       NCOA looks forward to working on a bipartisan basis with 
     you and other members of Congress to pass legislation this 
     year that provides meaningful, continuous, affordable 
     prescription drug coverage to all Medicare beneficiaries.
           Sincerely,
                                                     James Firman,
     President and CEO.
                                  ____

                                    National Committee to Preserve


                                 Social Security and Medicare,

                                    Washington, DC, June 12, 2002.
     Sen. Bob Graham,
     Senate Hart Office Building,
     Washington, DC.
       Dear Senator Graham: On behalf of the millions of members 
     and supporters of the National Committee to Preserve Social 
     Security and Medicare, I write in support of your Medicare 
     prescription drug legislation that will provide much needed 
     relief to seniors. Your bill contains all of the elements 
     that seniors need in a comprehensive drug benefit under 
     Medicare, such as universal, voluntary, affordable, not means 
     tested and most importantly, with a defined benefit, so that 
     seniors can plan accordingly. Prescription drug prices are 
     increasing over 17% per year (faster than inflation) and 
     seniors are spending more on out-of-pocket drug expenditures 
     than ever. The time is now to enact a drug benefit that will 
     provide the Medicare beneficiary with some assistance.
       We are pleased that your plan would be available for 
     seniors, no matter where they live. Our members have 
     expressed to us that a prescription drug benefit must be 
     affordable. We believe that a plan such as yours, with no 
     annual deductible and a $4,000 cap on out of pocket 
     expenditures, is reasonable and one that most seniors would 
     be able to afford.
       We applaud you for your leadership in this area. Please let 
     me know how we can further support your efforts.
           Sincerely,
                                                 Barbara Kennelly,
     President.
                                  ____



                                                 Families USA,

                                    Washington, DC, June 13, 2002.
     Sen. Bob Graham,
     Hart Senate Office Building,
     Washington, DC.
       Dear Senator Graham: We congratulate you and Senators 
     Miller, Kennedy and Rockefeller on the introduction of your 
     bill, ``The Medicare Outpatient Prescription Drug Act,'' 
     which provides a prescription drug benefit for Medicare 
     beneficiaries.
       This is an issue of utmost importance to all Americans who 
     need prescription drugs, especially to seniors and people 
     with disabilities. As you well know, seniors' ability to 
     afford prescription drugs is a particularly difficult problem 
     today. In our 2001 report entitled, ``Enough to Make You 
     Sick: Prescription Drug Prices for the Elderly,'' we 
     concluded that the 50 top drugs used by seniors rose 2.3 
     times the rate of inflation between 2000 and 2001. We are in 
     the process of

[[Page 10411]]

     updating this report for last year, and our preliminary data 
     shows that this devastating rate of price increases 
     continues. Millions of seniors have limited income and no, or 
     limited, drug coverage and will find themselves deciding 
     whether to buy drugs or to pay for other essentials.
       Your bill addresses many important design issues that we 
     care about in a Medicare prescription drug benefit. The 
     benefit is universal, comprehensive, and is delivered through 
     the Medicare program, ensuring that seniors know it will be 
     available to them when it is needed. Low-income people get 
     extra assistance. Also, there are provisions to assure that 
     costs will be contained and quality maintained.
       Please let us know how we can assist you to move this bill 
     toward enactment so that all Medicare beneficiaries can have 
     access to the prescription drugs they need.
           Sincerely,
                                                Ronald F. Pollack,
     Executive Director.
                                  ____

         American Federation of State, County and Municipal 
           Employees, AFL-CIO,
                                    Washington, DC, June 12, 2002.
     Senators Edward Kennedy, Bob Graham, and Zell Miller,
     U.S. Senate,
     Washington, DC.
       Dear Senators: On behalf of the 1.3 million members of the 
     American Federation of State, County and Municipal Employees 
     (AFSCME), I am writing to express our support for the 
     Medicare prescription drug benefit proposal you unveiled 
     today.
       AFSCME has long supported the creation of a Medicare 
     prescription drug benefit that is comprehensive in coverage, 
     affordable and voluntary for all Medicare beneficiaries. We 
     believe that your proposal is a solid step forward in meeting 
     these standards.
       In particular, we applaud your proposal's provisions for 
     continuous coverage. We believe that it is one of the most 
     critical components of a meaningful prescription drug 
     benefit. Beneficiaries must have coverage they can count on, 
     with no gaps in coverage. Doing anything less would force our 
     seniors to pay all prescription costs out of their own pocket 
     when they will need the coverage the most.
       Since Medicare was started over 35 years ago, many 
     illnesses that were once only treatable in a hospital can now 
     be effectively treated with prescription drugs. Adding a drug 
     benefit to the program is the most urgently needed Medicare 
     reform. We applaud you for not holding the prescription drug 
     benefit hostage to force radical privatization proposals that 
     would cut benefits and increase costs for retirees.
       We look forward to working with you and the other sponsors 
     of this important legislation. A Medicare prescription drug 
     benefit is long overdue, and our nation's seniors deserve no 
     less.
           Sincerely,
                                              Charles M. Loveless,
     Director of Legislation.
                                  ____

         American Federation of Labor and Congress of Industrial 
           Organizations,
                                    Washington, DC, June 12, 2002.
     Hon. Bob Graham,
     U.S. Senate, Hart Senate Office Building, Washington, DC.
       Dear Senator Graham: On behalf of the 13 million members of 
     the AFL-CIO, I am writing to commend you for your efforts to 
     provide much-needed relief to Medicare beneficiaries. Your 
     proposal to create a voluntary drug benefit within the 
     Medicare program represents an encouraging and solid step 
     toward enacting the one reform most urgently needed for 
     Medicare.
       Seniors need a real benefit that provides comprehensive, 
     continuous and certain coverage. The Graham-Miller-Kennedy 
     bill provides that benefit, giving seniors coverage they can 
     count on. A Medicare drug benefit must also be affordable for 
     beneficiaries. The $25 monthly premium and zero deductible in 
     your proposal means seniors need only pay an affordable 
     premium to begin getting coverage immediately. And no senior 
     will have to pay more than $40 for the drugs they need and 
     often will pay less.
       In addition, your proposal would not put at risk those 
     retirees who currently have some prescription drug coverage 
     through an employer. Retiree health care is the primary 
     source of prescription drug coverage for seniors, and your 
     proposal rightly provides some relief for employers that 
     choose to continue that coverage.
       A proposal widely reported under consideration by House 
     Republican leaders offers only unreliable, expensive and 
     unworkable coverage through private plans, with an enormous 
     gap in coverage that leaves seniors without any coverage at 
     all for drug costs between $2000 and $4500. And the only 
     relief for employers is if they drop the coverage they now 
     offer. Such a proposal will not move us any closer to a real 
     benefit.
       As this debate moves forward, we want to work with you and 
     your co-sponsors to enact the best possible Medicare drug 
     benefit. We appreciate your role in advancing that process.
           Sincerely,
                                                   William Samuel,
     Director of Legislation.
                                  ____



                               Alliance for Retired Americans,

                                    Washington, DC, June 12, 2002.
     Sen. Edward M. Kennedy,
     U.S. Senate,
     Washington, DC.
       Dear Senator Kennedy: On behalf of the over 2.7 million 
     members of the Alliance for Retired Americans, I want to 
     thank you for your tireless work on behalf of older and 
     disabled Americans to create a Medicare prescription drug 
     benefit program. I also want to express our views on the 
     Medicare prescription drug legislation proposed by you and 
     Senators Graham and Miller. The Alliance supports this 
     proposal as a positive step forward in the effort to create a 
     Medicare prescription drug benefit program.
       The Alliance for Retired Americans believes that all older 
     and disabled Americans need an affordable, comprehensive, and 
     voluntary Medicare prescription drug benefit now. Such a 
     benefit program should have low monthly premiums, annual 
     deductibles, and be administered as part of the Medicare 
     program. Your proposed legislation meets these Alliance 
     principles. Unlike other proposals that would begin in 2005, 
     your plan would start in 2004, which gives beneficiaries the 
     coverage they need a full year earlier.
       The Alliance will work to enact your legislation. During 
     legislative deliberations, the Alliance will seek to improve 
     benefits because we believe that an 80/20 co-insurance 
     payment system, like the rest of Medicare, will provide the 
     best benefits for older and disabled Americans. The Alliance 
     also supports a $2,000 annual catastrophic cap. We will 
     continue to work to improve any legislation that moves 
     through Congress in order to reach these goals.
       Older Americans will spend $1.8 trillion on prescription 
     drugs during the next decade. The inflation rate for 
     prescription drugs will continue at an annual double digit 
     pace as well. Our members and indeed all Americans simply 
     cannot afford these costs. We look forward to working with 
     you and Senators Graham and Miller to enact a comprehensive 
     Medicare prescription drug benefit as soon as possible.
           Sincerely yours,
                                                  Edward F. Coyle,
     Executive Director.
                                  ____



                           Generic Pharmaceutical Association,

                                    Washington, DC, June 12, 2002.
     Hon. Bob Graham,
     Hart Senate Office Building,
     Washington, DC.
       Dear Senator Graham: On behalf of the Generic 
     Pharmaceutical Association (GPhA), we would like to commend 
     you and Senators Miller and Kennedy for your leadership 
     introducing legislation to create a Medicare prescription 
     drug benefit for our nation's seniors. We agree with you that 
     the passage and enactment of a voluntary Medicare 
     prescription drug benefit is long overdue. We are strongly 
     supportive of your innovative tiered co-pay structure, as 
     well as the other provisions advocated by you and your 
     colleagues, that are designed to increase the utilization of 
     high-quality, affordable generic medicines.
       Generic pharmaceuticals have a proven track record of 
     substantially lowering drug costs. Studies have shown that 
     for every 1 percent increase in generic drug utilization, 
     consumer, business, and health plan purchasers save over $1 
     billion. The increased use of generics can play an invaluable 
     role in helping Medicare, Medicaid, the Federal Employees 
     Health Benefit Plan (FEHBP) and other Federal and private 
     plans assure that beneficiaries have access to quality, 
     affordable medications. A tiered co-pay system with a 
     significant differential between brand and generic 
     pharmaceuticals will ensure an appropriate incentive is in 
     place for seniors to consider more cost-effective options 
     when making choices about pharmaceutical therapies. We 
     believe an explicit dollar co-pay will also provide seniors 
     with the comfort of knowing they will pay a fixed cost to 
     have their prescriptions filled.
       With your leadership, the Graham/Miller/Kennedy bill 
     employs a number of private sector best practices that are 
     now widely used to assure access to cost-effective, quality 
     affordable medications. These provisions not only encourage 
     the appropriate and beneficial use of these products, but 
     provide unbiased and greatly needed educational information 
     to the public about the benefits of these medicines.
       The Graham/Miller/Kennedy bill adheres to GPhA's principles 
     for creating a Medicare prescription drug benefit and steers 
     the Medicare reform debate down a prudent public policy path. 
     We look forward to working with you, your cosponsors and with 
     other Members of the House and Senate of both parties to 
     further our common objective of providing our nation's nearly 
     40 million Medicare beneficiaries and the taxpayers who help 
     support them with the most affordable and highest quality 
     prescription drug benefit possible. If the rest of the 
     Congress and the Administration follow your lead in 
     recognizing the role generics must play in reaching this 
     objective, we are confident we will achieve this goal.

[[Page 10412]]

       Thank you again for your efforts. If we can be of any 
     assistance to you, please do not hesitate to call.
           Sincerely,
                                                  Kathleen Jaeger,
                                                President and CEO.

  Mr. GRAHAM. I want to thank Senators Miller and Kennedy for their 
leadership and commitment to this issue, and urge all of our colleagues 
to join us in ensuring passage of this critical legislation this year.
  I ask unanimous consent that the text of the legislation be printed 
in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2625

       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 
     Outpatient Prescription Drug Act of 2002''.
       (b) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Medicare outpatient prescription drug benefit program.

         ``Part D--Outpatient Prescription Drug Benefit Program

``Sec. 1860. Definitions.
``Sec. 1860A. Establishment of outpatient prescription drug benefit 
              program.
``Sec. 1860B. Enrollment under program.
``Sec. 1860C. Enrollment in a plan.
``Sec. 1860D. Providing information to beneficiaries.
``Sec. 1860E. Premiums.
``Sec. 1860F. Outpatient prescription drug benefits.
``Sec. 1860G. Entities eligible to provide outpatient drug benefit.
``Sec. 1860H. Minimum standards for eligible entities.
``Sec. 1860I. Payments.
``Sec. 1860J. Employer incentive program for employment-based retiree 
              drug coverage.
``Sec. 1860K. Prescription Drug Account in the Federal Supplementary 
              Medical Insurance Trust Fund.
``Sec. 1860L. Medicare Prescription Drug Advisory Committee.''.
Sec. 3. Part D benefits under Medicare+Choice plans.
Sec. 4. Additional assistance for low-income beneficiaries.
Sec. 5. Medigap revisions.
Sec. 6. HHS studies and report on uniform pharmacy benefit cards and 
              systems for transferring prescriptions electronically.
Sec. 7. GAO study and biennial reports on competition and savings.
Sec. 8. Expansion of membership and duties of Medicare Payment Advisory 
              Commission (MedPAC).

     SEC. 2. MEDICARE OUTPATIENT PRESCRIPTION DRUG BENEFIT 
                   PROGRAM.

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

         ``Part D--Outpatient Prescription Drug Benefit Program


                             ``definitions

       ``Sec. 1860. In this part:
       ``(1) Covered outpatient drug.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the term `covered outpatient drug' means any of the following 
     products:
       ``(i) A drug which may be dispensed only upon prescription, 
     and--

       ``(I) which is approved for safety and effectiveness as a 
     prescription drug under section 505 of the Federal Food, 
     Drug, and Cosmetic Act;
       ``(II)(aa) which was commercially used or sold in the 
     United States before the date of enactment of the Drug 
     Amendments of 1962 or which is identical, similar, or related 
     (within the meaning of section 310.6(b)(1) of title 21 of the 
     Code of Federal Regulations) to such a drug, and (bb) which 
     has not been the subject of a final determination by the 
     Secretary that it is a `new drug' (within the meaning of 
     section 201(p) of the Federal Food, Drug, and Cosmetic Act) 
     or an action brought by the Secretary under section 301, 
     302(a), or 304(a) of such Act to enforce section 502(f) or 
     505(a) of such Act; or
       ``(III)(aa) which is described in section 107(c)(3) of the 
     Drug Amendments of 1962 and for which the Secretary has 
     determined there is a compelling justification for its 
     medical need, or is identical, similar, or related (within 
     the meaning of section 310.6(b)(1) of title 21 of the Code of 
     Federal Regulations) to such a drug, and (bb) for which the 
     Secretary has not issued a notice of an opportunity for a 
     hearing under section 505(e) of the Federal Food, Drug, and 
     Cosmetic Act on a proposed order of the Secretary to withdraw 
     approval of an application for such drug under such section 
     because the Secretary has determined that the drug is less 
     than effective for all conditions of use prescribed, 
     recommended, or suggested in its labeling.

       ``(ii) A biological product which--

       ``(I) may only be dispensed upon prescription;
       ``(II) is licensed under section 351 of the Public Health 
     Service Act; and

       ``(III) is produced at an establishment licensed under such 
     section to produce such product.

       ``(iii) Insulin approved under appropriate Federal law, 
     including needles, syringes, and disposable pumps for the 
     administration of such insulin.
       ``(iv) A prescribed drug or biological product that would 
     meet the requirements of clause (i) or (ii) except that it is 
     available over-the-counter in addition to being available 
     upon prescription.
       ``(B) Exclusion.--The term `covered outpatient drug' does 
     not include any product--
       ``(i) except as provided in subparagraph (A)(iv), which may 
     be distributed to individuals without a prescription;
       ``(ii) for which payment is available under part A or B or 
     would be available under part B but for the application of a 
     deductible under such part (unless payment for such product 
     is not available because benefits under part A or B have been 
     exhausted), determined, except as provided in subparagraph 
     (C), without regard to whether the beneficiary involved is 
     entitled to benefits under part A or enrolled under part B; 
     or
       ``(iii) except for agents used to promote smoking cessation 
     and agents used for the treatment of obesity, for which 
     coverage may be excluded or restricted under section 
     1927(d)(2).
       ``(C) Clarification regarding immunosuppressive drugs.--In 
     the case of a beneficiary who is not eligible for any 
     coverage under part B of drugs described in section 
     1861(s)(2)(J) because of the requirements under such section 
     (and would not be so eligible if the individual were enrolled 
     under such part), the term `covered outpatient drug' shall 
     include such drugs if the drugs would otherwise be described 
     in subparagraph (A).
       ``(2) Eligible beneficiary.--The term `eligible 
     beneficiary' means an individual that is entitled to benefits 
     under part A or enrolled under part B.
       ``(3) Eligible entity.--The term `eligible entity' means 
     any entity that the Secretary determines to be appropriate to 
     provide eligible beneficiaries with covered outpatient drugs 
     under a plan under this part, including--
       ``(A) a pharmacy benefit management company;
       ``(B) a retail pharmacy delivery system;
       ``(C) a health plan or insurer;
       ``(D) a State (through mechanisms established under a State 
     plan under title XIX);
       ``(E) any other entity approved by the Secretary; or
       ``(F) any combination of the entities described in 
     subparagraphs (A) through (E) if the Secretary determines 
     that such combination--
       ``(i) increases the scope or efficiency of the provision of 
     benefits under this part; and
       ``(ii) is not anticompetitive.
       ``(4) Medicare+choice organization; medicare+choice plan.--
     The terms `Medicare+Choice organization' and `Medicare+Choice 
     plan' have the meanings given such terms in subsections 
     (a)(1) and (b)(1), respectively, of section 1859 (relating to 
     definitions relating to Medicare+Choice organizations).
       ``(5) Prescription drug account.--The term `Prescription 
     Drug Account' means the Prescription Drug Account (as 
     established under section 1860K) in the Federal Supplementary 
     Medical Insurance Trust Fund under section 1841.


    ``establishment of outpatient prescription drug benefit program

       ``Sec. 1860A. (a) Provision of Benefit.--
       ``(1) In general.--Beginning in 2004, the Secretary shall 
     provide for and administer an outpatient prescription drug 
     benefit program under which each eligible beneficiary 
     enrolled under this part shall be provided with coverage of 
     covered outpatient drugs as follows:
       ``(A) Medicare+choice plan.--If the eligible beneficiary is 
     eligible to enroll in a Medicare+Choice plan, the 
     beneficiary--
       ``(i) may enroll in such a plan; and
       ``(ii) if so enrolled, shall obtain coverage of covered 
     outpatient drugs through such plan.
       ``(B) Medicare prescription drug plan.--If the eligible 
     beneficiary is not enrolled in a Medicare+Choice plan, the 
     beneficiary shall obtain coverage of covered outpatient drugs 
     through enrollment in a plan offered by an eligible entity 
     with a contract under this part.
       ``(2) Voluntary nature of program.--Nothing in this part 
     shall be construed as requiring an eligible beneficiary to 
     enroll in the program established under this part.
       ``(3) Scope of benefits.--The program established under 
     this part shall provide for coverage of all therapeutic 
     classes of covered outpatient drugs.
       ``(b) Access to Alternative Prescription Drug Coverage.--In 
     the case of an eligible beneficiary who has creditable 
     prescription drug coverage (as defined in section 
     1860B(b)(1)(F)), such beneficiary--
       ``(1) may continue to receive such coverage and not enroll 
     under this part; and

[[Page 10413]]

       ``(2) pursuant to section 1860B(b)(1)(C), is permitted to 
     subsequently enroll under this part without any penalty and 
     obtain coverage of covered outpatient drugs in the manner 
     described in subsection (a) if the beneficiary involuntarily 
     loses such coverage.
       ``(c) Financing.--The costs of providing benefits under 
     this part shall be payable from the Prescription Drug 
     Account.


                       ``enrollment under program

       ``Sec. 1860B. (a) Establishment of Process.--
       ``(1) Process similar to enrollment under part b.--The 
     Secretary shall establish a process through which an eligible 
     beneficiary (including an eligible beneficiary enrolled in a 
     Medicare+Choice plan offered by a Medicare+Choice 
     organization) may make an election to enroll under this part. 
     Such process shall be similar to the process for enrollment 
     in part B under section 1837, including the deeming 
     provisions of such section.
       ``(2) Requirement of enrollment.--An eligible beneficiary 
     must enroll under this part in order to be eligible to 
     receive covered outpatient drugs under this title.
       ``(b) Special Enrollment Procedures.--
       ``(1) Late enrollment penalty.--
       ``(A) Increase in premium.--Subject to the succeeding 
     provisions of this paragraph, in the case of an eligible 
     beneficiary whose coverage period under this part began 
     pursuant to an enrollment after the beneficiary's initial 
     enrollment period under part B (determined pursuant to 
     section 1837(d)) and not pursuant to the open enrollment 
     period described in paragraph (2), the Secretary shall 
     establish procedures for increasing the amount of the monthly 
     part D premium under section 1860E(a) applicable to such 
     beneficiary--
       ``(i) by an amount that is equal to 10 percent of such 
     premium for each full 12-month period (in the same continuous 
     period of eligibility) in which the eligible beneficiary 
     could have been enrolled under this part but was not so 
     enrolled; or
       ``(ii) if determined appropriate by the Secretary, by an 
     amount that the Secretary determines is actuarily sound for 
     each such period.
       ``(B) Periods taken into account.--For purposes of 
     calculating any 12-month period under subparagraph (A), there 
     shall be taken into account--
       ``(i) the months which elapsed between the close of the 
     eligible beneficiary's initial enrollment period and the 
     close of the enrollment period in which the beneficiary 
     enrolled; and
       ``(ii) in the case of an eligible beneficiary who reenrolls 
     under this part, the months which elapsed between the date of 
     termination of a previous coverage period and the close of 
     the enrollment period in which the beneficiary reenrolled.
       ``(C) Periods not taken into account.--
       ``(i) In general.--For purposes of calculating any 12-month 
     period under subparagraph (A), subject to clause (ii), there 
     shall not be taken into account months for which the eligible 
     beneficiary can demonstrate that the beneficiary had 
     creditable prescription drug coverage (as defined in 
     subparagraph (F)).
       ``(ii) Application.--This subparagraph shall only apply 
     with respect to a coverage period the enrollment for which 
     occurs before the end of the 60-day period that begins on the 
     first day of the month which includes--

       ``(I) in the case of a beneficiary with coverage described 
     in clause (ii) of subparagraph (F), the date on which the 
     plan terminates, ceases to provide, or reduces the value of 
     the prescription drug coverage under such plan to below the 
     actuarial value of the coverage provided under the program 
     under this part; or
       ``(II) in the case of a beneficiary with coverage described 
     in clause (i), (iii), or (iv) of subparagraph (F), the date 
     on which the beneficiary loses eligibility for such coverage.

       ``(D) Periods treated separately.--Any increase in an 
     eligible beneficiary's monthly part D premium under 
     subparagraph (A) with respect to a particular continuous 
     period of eligibility shall not be applicable with respect to 
     any other continuous period of eligibility which the 
     beneficiary may have.
       ``(E) Continuous period of eligibility.--
       ``(i) In general.--Subject to clause (ii), for purposes of 
     this paragraph, an eligible beneficiary's `continuous period 
     of eligibility' is the period that begins with the first day 
     on which the beneficiary is eligible to enroll under section 
     1836 and ends with the beneficiary's death.
       ``(ii) Separate period.--Any period during all of which an 
     eligible beneficiary satisfied paragraph (1) of section 1836 
     and which terminated in or before the month preceding the 
     month in which the beneficiary attained age 65 shall be a 
     separate `continuous period of eligibility' with respect to 
     the beneficiary (and each such period which terminates shall 
     be deemed not to have existed for purposes of subsequently 
     applying this paragraph).
       ``(F) Creditable prescription drug coverage defined.--For 
     purposes of this part, the term `creditable prescription drug 
     coverage' means any of the following:
       ``(i) Medicaid prescription drug coverage.--Prescription 
     drug coverage under a medicaid plan under title XIX, 
     including through the Program of All-inclusive Care for the 
     Elderly (PACE) under section 1934 and through a social health 
     maintenance organization (referred to in section 4104(c) of 
     the Balanced Budget Act of 1997).
       ``(ii) Prescription drug coverage under a group health 
     plan.--Prescription drug coverage under a group health plan, 
     including a health benefits plan under the Federal Employees 
     Health Benefit Program under chapter 89 of title 5, United 
     States Code, and a qualified retiree prescription drug plan 
     (as defined in section 1860J(e)(3)), that provides coverage 
     of the cost of prescription drugs the actuarial value of 
     which (as defined by the Secretary) to the beneficiary equals 
     or exceeds the actuarial value of the benefits provided to an 
     individual enrolled in the outpatient prescription drug 
     benefit program under this part.
       ``(iii) State pharmaceutical assistance program.--Coverage 
     of prescription drugs under a State pharmaceutical assistance 
     program.
       ``(iv) Veterans' coverage of prescription drugs.--Coverage 
     of prescription drugs for veterans, and survivors and 
     dependents of veterans, under chapter 17 of title 38, United 
     States Code.
       ``(2) Open enrollment period for current beneficiaries in 
     which late enrollment procedures do not apply.--
       ``(A) In general.--The Secretary shall establish an 
     applicable period, which shall begin on the date on which the 
     Secretary first begins to accept elections for enrollment 
     under this part, during which any eligible beneficiary may 
     enroll under this part without the application of the late 
     enrollment procedures established under paragraph (1)(A).
       ``(B) Open enrollment period to begin prior to january 1, 
     2004.--The Secretary shall ensure that eligible beneficiaries 
     are permitted to enroll under this part prior to January 1, 
     2004, in order to ensure that coverage under this part is 
     effective as of such date.
       ``(3) Special enrollment period for beneficiaries who 
     involuntarily lose creditable prescription drug coverage.--
     The Secretary shall establish a special open enrollment 
     period for an eligible beneficiary that loses creditable 
     prescription drug coverage.
       ``(c) Period of Coverage.--
       ``(1) In general.--Except as provided in paragraph (2) and 
     subject to paragraph (3), an eligible beneficiary's coverage 
     under the program under this part shall be effective for the 
     period provided in section 1838, as if that section applied 
     to the program under this part.
       ``(2) Open and special enrollment.--Subject to paragraph 
     (3), an eligible beneficiary who enrolls under the program 
     under this part pursuant to paragraph (2) or (3) of 
     subsection (b) shall be entitled to the benefits under this 
     part beginning on the first day of the month following the 
     month in which such enrollment occurs.
       ``(3) Limitation.--Coverage under this part shall not begin 
     prior to January 1, 2004.
       ``(d) Termination.--
       ``(1) In general.--The causes of termination specified in 
     section 1838 shall apply to this part in the same manner as 
     such causes apply to part B.
       ``(2) Coverage terminated by termination of coverage under 
     parts a and b.--
       ``(A) In general.--In addition to the causes of termination 
     specified in paragraph (1), the Secretary shall terminate an 
     individual's coverage under this part if the individual is no 
     longer enrolled in either part A or B.
       ``(B) Effective date.--The termination described in 
     subparagraph (A) shall be effective on the effective date of 
     termination of coverage under part A or (if later) under part 
     B.
       ``(3) Procedures regarding termination of a beneficiary 
     under a plan.--The Secretary shall establish procedures for 
     determining the status of an eligible beneficiary's 
     enrollment under this part if the beneficiary's enrollment in 
     a plan offered by an eligible entity under this part is 
     terminated by the entity for cause (pursuant to procedures 
     established by the Secretary under section 1860C(a)(1)).


                         ``enrollment in a plan

       ``Sec. 1860C. (a) Process.--
       ``(1) Establishment.--
       ``(A) In general.--The Secretary shall establish a process 
     through which an eligible beneficiary who is enrolled under 
     this part but not enrolled in a Medicare+Choice plan offered 
     by a Medicare+Choice organization shall make an annual 
     election to enroll in any plan offered by an eligible entity 
     that has been awarded a contract under this part and serves 
     the geographic area in which the beneficiary resides. Such 
     process shall include for the default enrollment in such a 
     plan in the case of an eligible beneficiary who is enrolled 
     under this part but who has failed to make an election of 
     such a plan.
       ``(B) Rules.--In establishing the process under 
     subparagraph (A), the Secretary shall--
       ``(i) use rules similar to the rules for enrollment, 
     disenrollment, and termination of enrollment with a 
     Medicare+Choice plan under section 1851, including--

       ``(I) the establishment of special election periods under 
     subsection (e)(4) of such section; and

[[Page 10414]]

       ``(II) the application of the guaranteed issue and renewal 
     provisions of subsection (g) of such section (other than 
     paragraph (3)(C)(i), relating to default enrollment); and

       ``(ii) 
     coordinate enrollments, disenrollments, and terminations of 
     enrollment under part C with enrollments, disenrollments, and 
     terminations of enrollment under this part.
       ``(2) First enrollment period for plan enrollment.--The 
     process developed under paragraph (1) shall--
       ``(A) ensure that eligible beneficiaries who choose to 
     enroll under this part are permitted to enroll with an 
     eligible entity prior to January 1, 2004, in order to ensure 
     that coverage under this part is effective as of such date; 
     and
       ``(B) be coordinated with the open enrollment period under 
     section 1860B(b)(2)(A).
       ``(b) Medicare+Choice Enrollees.--
       ``(1) In general.--An eligible beneficiary who is enrolled 
     under this part and enrolled in a Medicare+Choice plan 
     offered by a Medicare+Choice organization shall receive 
     coverage of covered outpatient drugs under this part through 
     such plan.
       ``(2) Rules.--Enrollment in a Medicare+Choice plan is 
     subject to the rules for enrollment in such a plan under 
     section 1851.


                ``providing information to beneficiaries

       ``Sec. 1860D. (a) Activities.--
       ``(1) In general.--The Secretary shall conduct activities 
     that are designed to broadly disseminate information to 
     eligible beneficiaries (and prospective eligible 
     beneficiaries) regarding the coverage provided under this 
     part.
       ``(2) Special rule for first enrollment under the 
     program.--To the extent practicable, the activities described 
     in paragraph (1) shall ensure that eligible beneficiaries are 
     provided with such information at least 30 days prior to the 
     open enrollment period described in section 1860B(b)(2)(A).
       ``(b) Requirements.--
       ``(1) In general.--The activities described in subsection 
     (a) shall--
       ``(A) be similar to the activities performed by the 
     Secretary under section 1851(d);
       ``(B) be coordinated with the activities performed by the 
     Secretary under such section and under section 1804; and
       ``(C) provide for the dissemination of information 
     comparing the plans offered by eligible entities under this 
     part that are available to eligible beneficiaries residing in 
     an area.
       ``(2) Comparative information.--The comparative information 
     described in paragraph (1)(C) shall include a comparison of 
     the following:
       ``(A) Benefits.--The benefits provided under the plan, 
     including the prices beneficiaries will be charged for 
     covered outpatient drugs, any preferred pharmacy networks 
     used by the eligible entity under the plan, and the 
     formularies and appeals processes under the plan.
       ``(B) Quality and performance.--To the extent available, 
     the quality and performance of the eligible entity offering 
     the plan.
       ``(C) Beneficiary cost-sharing.--The cost-sharing required 
     of eligible beneficiaries under the plan.
       ``(D) Consumer satisfaction surveys.--To the extent 
     available, the results of consumer satisfaction surveys 
     regarding the plan and the eligible entity offering such 
     plan.
       ``(E) Additional information.--Such additional information 
     as the Secretary may prescribe.
       ``(3) Information standards.--The Secretary shall develop 
     standards to ensure that the information provided to eligible 
     beneficiaries under this part is complete, accurate, and 
     uniform.
       ``(c) Use of Medicare Consumer Coalitions To Provide 
     Information.--
       ``(1) In general.--The Secretary may contract with Medicare 
     Consumer Coalitions to conduct the informational activities 
     under--
       ``(A) this section;
       ``(B) section 1851(d); and
       ``(C) section 1804.
       ``(2) Selection of coalitions.--If the Secretary determines 
     the use of Medicare Consumer Coalitions to be appropriate, 
     the Secretary shall--
       ``(A) develop and disseminate, in such areas as the 
     Secretary determines appropriate, a request for proposals for 
     Medicare Consumer Coalitions to contract with the Secretary 
     in order to conduct any of the informational activities 
     described in paragraph (1); and
       ``(B) select a proposal of a Medicare Consumer Coalition to 
     conduct the informational activities in each such area, with 
     a preference for broad participation by organizations with 
     experience in providing information to beneficiaries under 
     this title.
       ``(3) Payment to medicare consumer coalitions.--The 
     Secretary shall make payments to Medicare Consumer Coalitions 
     contracting under this subsection in such amounts and in such 
     manner as the Secretary determines appropriate.
       ``(4) Authorization of appropriations.--There are 
     authorized to be appropriated to the Secretary such sums as 
     may be necessary to contract with Medicare Consumer 
     Coalitions under this section.
       ``(5) Medicare consumer coalition defined.--In this 
     subsection, the term `Medicare Consumer Coalition' means an 
     entity that is a nonprofit organization operated under the 
     direction of a board of directors that is primarily composed 
     of beneficiaries under this title.


                               ``premiums

       ``Sec. 1860E. (a) Annual Establishment of Monthly Part D 
     Premium Rates.--
       ``(1) In general.--The Secretary shall, during September of 
     each year (beginning in 2003), determine and promulgate a 
     monthly part D premium rate for the succeeding year.
       ``(2) Amount.--The Secretary shall determine the monthly 
     part D premium rate for the succeeding year as follows:
       ``(A) Premium for 2004.--The monthly part D premium rate 
     for 2004 shall be $25.
       ``(B) Inflation adjustment of premium for 2005 and 
     subsequent years.--
       ``(i) In general.--Subject to clause (ii), in the case of 
     any calendar year beginning after 2004, the monthly part D 
     premium rate for the year shall be the amount described in 
     subparagraph (A) increased by an amount equal to--

       ``(I) such dollar amount, multiplied by
       ``(II) the percentage (if any) by which the amount of the 
     average annual per capita aggregate expenditures payable from 
     the Prescription Drug Account for the year (as estimated 
     under section 1860J(c)(2)(C)) exceeds the amount of such 
     expenditures in 2004.

       ``(ii) Rounding.--If the monthly part D premium rate 
     determined under clause (i) is not a multiple of $1, such 
     rate shall be rounded to the nearest multiple of $1.
       ``(b) Collection of Part D Premium.--The monthly part D 
     premium applicable to an eligible beneficiary under this part 
     (after application of any increase under section 1860B(b)(1)) 
     shall be collected and credited to the Prescription Drug 
     Account in the same manner as the monthly premium determined 
     under section 1839 is collected and credited to the Federal 
     Supplementary Medical Insurance Trust Fund under section 
     1840.


                ``outpatient prescription drug benefits

       ``Sec. 1860F. (a) Requirement.--A plan offered by an 
     eligible entity under this part shall provide eligible 
     beneficiaries enrolled in such plan with--
       ``(1) coverage of covered outpatient drugs--
       ``(A) without the application of any deductible; and
       ``(B) with the cost-sharing described in subsection (b); 
     and
       ``(2) access to negotiated prices for such drugs under 
     subsection (c).
       ``(b) Cost-Sharing.--
       ``(1) Three-tiered copayment structure for drugs included 
     in the formulary.--
       ``(A) In general.--Subject to the succeeding provisions of 
     this subsection, in the case of a covered outpatient drug 
     that is dispensed in a year to an eligible beneficiary and 
     that is included in the formulary established by the eligible 
     entity (pursuant to section 1860H(c)) for the plan, the 
     beneficiary shall be responsible for a copayment for the drug 
     in an amount equal to the following:
       ``(i) Generic drugs.--In the case of a generic covered 
     outpatient drug, $10 for each prescription (as defined by the 
     Secretary in consultation with the Medicare Prescription Drug 
     Advisory Committee established under section 1860L) of such 
     drug.
       ``(ii) Preferred brand name drugs.--In the case of a 
     preferred brand name covered outpatient drug (including a 
     drug treated as a preferred brand name drug under 
     subparagraph (C)), $40 for each prescription (as so defined) 
     of such drug.
       ``(iii) Nonpreferred brand name drug.--In the case of a 
     nonpreferred brand name covered outpatient drug (that is not 
     treated as a preferred brand name drug under subparagraph 
     (C)), $60 for each prescription (as so defined) of such drug.
       ``(B) Reduction by eligible entity.--An eligible entity 
     offering a plan under this part may reduce the applicable 
     copayment amount that an eligible beneficiary enrolled in the 
     plan is subject to under subparagraph (A) if the Secretary 
     determines that such reduction--
       ``(i) is tied to the performance requirements described in 
     section 1860I(b)(1)(C); and
       ``(ii) will not result in an increase in the expenditures 
     made from the Prescription Drug Account.
       ``(C) Treatment of medically necessary nonpreferred and 
     nonformulary drugs.--The eligible entity shall treat a 
     nonpreferred brand name drug and a nonformulary drug as a 
     preferred brand name drug under subparagraph (A)(ii) if such 
     nonpreferred or nonformulary drug, as the case may be, is 
     determined (pursuant to subparagraph (D) or (E) of section 
     1860H(a)(3)) to be medically necessary.
       ``(2) Authority for increased cost-sharing for nonformulary 
     drugs.--Pursuant to section 1860H(c)(3)(A), an eligible 
     entity offering a plan under this part may require cost-
     sharing for a nonformulary drug that is higher than the 
     copayment amount described in paragraph (1)(A)(iii).
       ``(3) Cost-sharing may not exceed negotiated price.--
       ``(A) In general.--If the amount of cost-sharing for a 
     covered outpatient drug that would otherwise be required 
     under this subsection (but for this paragraph) is greater 
     than the applicable amount, then the amount of such cost-
     sharing shall be reduced

[[Page 10415]]

     to an amount equal to such applicable amount.
       ``(B) Applicable amount defined.--For purposes of 
     subparagraph (A), the term `applicable amount' means an 
     amount equal to--
       ``(i) in the case of generic drugs and preferred brand name 
     drugs, the negotiated price for the drug (as reported to the 
     Secretary pursuant to section 1860H(a)(5)(A)) less $5; and
       ``(ii) in the case of nonpreferred brand name drugs and 
     nonformulary drugs, the negotiated price for the drug (as so 
     reported).
       ``(4) No cost-sharing once expenses equal annual out-of-
     pocket limit.--
       ``(A) In general.--An eligible entity offering a plan under 
     this part shall provide coverage of covered outpatient drugs 
     without any cost-sharing if the individual has incurred costs 
     (as described in subparagraph (C)) for covered outpatient 
     drugs in a year equal to the annual out-of-pocket limit 
     specified in subparagraph (B).
       ``(B) Annual out-of-pocket limit.--Subject to paragraph 
     (5), for purposes of this part, the `annual out-of-pocket 
     limit' specified in this subparagraph is equal to $4,000.
       ``(C) Application.--In applying subparagraph (A)--
       ``(i) incurred costs shall only include costs incurred for 
     the cost-sharing described in this subsection; but
       ``(ii) such costs shall be treated as incurred without 
     regard to whether the individual or another person, including 
     a State program or other third-party coverage, has paid for 
     such costs.
       ``(5) Inflation adjustment for copayment amounts and annual 
     out-of-pocket limit.--
       ``(A) In general.--For any year after 2005--
       ``(i) the copayment amounts described in clauses (i), (ii), 
     and (iii) of paragraph (1)(A) are equal to the copayment 
     amounts determined under such paragraph (or this paragraph) 
     for the previous year increased by the annual percentage 
     increase described in subparagraph (B); and
       ``(ii) the annual out-of-pocket limit specified in 
     paragraph (4)(B) is equal to the annual out-of-pocket limit 
     determined under such paragraph (or this paragraph) for the 
     previous year increased by the annual percentage increase 
     described in subparagraph (B).
       ``(B) Annual percentage increase.--The annual percentage 
     increase specified in this subparagraph for a year is equal 
     to the annual percentage increase in the prices of covered 
     outpatient drugs (including both price inflation and price 
     changes due to changes in therapeutic mix), as determined by 
     the Secretary for the 12-month period ending in July of the 
     previous year.
       ``(C) Rounding.--If any amount determined under 
     subparagraph (A) is not a multiple of $1, such amount shall 
     be rounded to the nearest multiple of $1.
       ``(c) Access to Negotiated Prices.--Under a plan offered by 
     an eligible entity with a contract under this part, the 
     eligible entity offering such plan shall provide eligible 
     beneficiaries enrolled in such plan with access to negotiated 
     prices (including applicable discounts) used for payment for 
     covered outpatient drugs, regardless of the fact that only 
     partial benefits may be payable under the coverage with 
     respect to such drugs because of the application of the cost-
     sharing under subsection (b).


         ``entities eligible to provide outpatient drug benefit

       ``Sec. 1860G. (a) Establishment of Panels of Plans 
     Available in an Area.--
       ``(1) In general.--The Secretary shall establish procedures 
     under which the Secretary--
       ``(A) accepts bids submitted by eligible entities for the 
     plans which such entities intend to offer in an area 
     established under subsection (b); and
       ``(B) awards contracts to such entities to provide such 
     plans to eligible beneficiaries in the area.
       ``(2) Competitive procedures.--Competitive procedures (as 
     defined in section 4(5) of the Office of Federal Procurement 
     Policy Act (41 U.S.C. 403(5))) shall be used to enter into 
     contracts under this part.
       ``(b) Area for Contracts.--
       ``(1) Regional basis.--
       ``(A) In general.--Except as provided in subparagraph (B) 
     and subject to paragraph (2), the contract entered into 
     between the Secretary and an eligible entity with respect to 
     a plan shall require the eligible entity to provide coverage 
     of covered outpatient drugs under the plan in a region 
     determined by the Secretary under paragraph (2).
       ``(B) Partial regional basis.--
       ``(i) In general.--If determined appropriate by the 
     Secretary, the Secretary may permit the coverage described in 
     subparagraph (A) to be provided in a partial region 
     determined appropriate by the Secretary.
       ``(ii) Requirements.--If the Secretary permits coverage 
     pursuant to clause (i), the Secretary shall ensure that the 
     partial region in which coverage is provided is--

       ``(I) at least the size of the commercial service area of 
     the eligible entity for that area; and
       ``(II) not smaller than a State.

       ``(2) Determination.--
       ``(A) In general.--In determining regions for contracts 
     under this part, the Secretary shall--
       ``(i) take into account the number of eligible 
     beneficiaries in an area in order to encourage participation 
     by eligible entities; and
       ``(ii) ensure that there are at least 10 different regions 
     in the United States.
       ``(B) No administrative or judicial review.--The 
     determination of coverage areas under this part shall not be 
     subject to administrative or judicial review.
       ``(c) Submission of Bids.--
       ``(1) Submission.--
       ``(A) In general.--Subject to subparagraph (B), each 
     eligible entity desiring to offer a plan under this part in 
     an area shall submit a bid with respect to such plan to the 
     Secretary at such time, in such manner, and accompanied by 
     such information as the Secretary may reasonably require.
       ``(B) Bid that covers multiple areas.--The Secretary shall 
     permit an eligible entity to submit a single bid for multiple 
     areas if the bid is applicable to all such areas.
       ``(2) Required information.--The bids described in 
     paragraph (1) shall include--
       ``(A) a proposal for the estimated prices of covered 
     outpatient drugs and the projected annual increases in such 
     prices, including differentials between formulary and 
     nonformulary prices, if applicable;
       ``(B) a statement regarding the amount that the entity will 
     charge the Secretary for managing, administering, and 
     delivering the benefits under the contract;
       ``(C) a statement regarding whether the entity will reduce 
     the applicable cost-sharing amount pursuant to section 
     1860F(b)(1)(B) and if so, the amount of such reduction and 
     how such reduction is tied to the performance requirements 
     described in section 1860I(b)(1)(C);
       ``(D) a detailed description of the performance 
     requirements for which the payments to the entity will be 
     subject to risk pursuant to section 1860I(b)(1)(C);
       ``(E) a detailed description of access to pharmacy services 
     provided under the plan, including information regarding--
       ``(i) whether the entity will use a preferred pharmacy 
     network under the plan; and
       ``(ii) if a preferred pharmacy network is used, whether the 
     entity will offer access to pharmacies that are outside such 
     network and if such access is provided, rules for accessing 
     such pharmacies;
       ``(F) with respect to the formulary used by the entity, a 
     detailed description of the procedures and standards the 
     entity will use for--
       ``(i) adding new drugs to a therapeutic class within the 
     formulary; and
       ``(ii) determining when and how often the formulary should 
     be modified;
       ``(G) a detailed description of any ownership or shared 
     financial interests with other entities involved in the 
     delivery of the benefit as proposed under the plan;
       ``(H) a detailed description of the entity's estimated 
     marketing and advertising expenditures related to enrolling 
     eligible beneficiaries under the plan and retaining such 
     enrollment; and
       ``(I) such other information that the Secretary determines 
     is necessary in order to carry out this part, including 
     information relating to the bidding process under this part.
       ``(d) Access to Benefits in Certain Areas.--
       ``(1) Areas not covered by contracts.--The Secretary shall 
     develop procedures for the provision of covered outpatient 
     drugs under this part to each eligible beneficiary enrolled 
     under this part that resides in an area that is not covered 
     by any contract under this part.
       ``(2) Beneficiaries residing in different locations.--The 
     Secretary shall develop procedures to ensure that each 
     eligible beneficiary enrolled under this part that resides in 
     different areas in a year is provided the benefits under this 
     part throughout the entire year.
       ``(e) Awarding of Contracts.--
       ``(1) Number of contracts.--The Secretary shall, consistent 
     with the requirements of this part and the goal of containing 
     costs under this title, award in a competitive manner at 
     least 2 contracts to offer a plan in an area, unless only 1 
     bidding entity (and the plan offered by the entity) meets the 
     minimum standards specified under this part and by the 
     Secretary.
       ``(2) Determination.--In determining which of the eligible 
     entities that submitted bids that meet the minimum standards 
     specified under this part and by the Secretary to award a 
     contract, the Secretary shall consider the comparative merits 
     of each bid, as determined on the basis of the past 
     performance of the entity and other relevant factors, with 
     respect to--
       ``(A) how well the entity (and the plan offered by the 
     entity) meet such minimum standards;
       ``(B) the amount that the entity will charge the Secretary 
     for managing, administering, and delivering the benefits 
     under the contract;
       ``(C) the performance requirements for which the payments 
     to the entity will be subject to risk pursuant to section 
     1860I(b)(1)(C);
       ``(D) the proposed negotiated prices of covered outpatient 
     drugs and annual increases in such prices;

[[Page 10416]]

       ``(E) the factors described in section 1860D(b)(2);
       ``(F) prior experience of the entity in managing, 
     administering, and delivering a prescription drug benefit 
     program;
       ``(G) effectiveness of the entity and plan in containing 
     costs through pricing incentives and utilization management; 
     and
       ``(H) such other factors as the Secretary deems necessary 
     to evaluate the merits of each bid.
       ``(3) Exception to conflict of interest rules.--In awarding 
     contracts under this part, the Secretary may waive conflict 
     of interest laws generally applicable to Federal acquisitions 
     (subject to such safeguards as the Secretary may find 
     necessary to impose) in circumstances where the Secretary 
     finds that such waiver--
       ``(A) is not inconsistent with the--
       ``(i) purposes of the programs under this title; or
       ``(ii) best interests of beneficiaries enrolled under this 
     part; and
       ``(B) permits a sufficient level of competition for such 
     contracts, promotes efficiency of benefits administration, or 
     otherwise serves the objectives of the program under this 
     part.
       ``(4) No administrative or judicial review.--The 
     determination of the Secretary to award or not award a 
     contract to an eligible entity with respect to a plan under 
     this part shall not be subject to administrative or judicial 
     review.
       ``(f) Approval of Marketing Material and Application 
     Forms.--The provisions of section 1851(h) shall apply to 
     marketing material and application forms under this part in 
     the same manner as such provisions apply to marketing 
     material and application forms under part C.
       ``(g) Duration of Contracts.--Each contract awarded under 
     this part shall be for a term of at least 2 years but not 
     more than 5 years, as determined by the Secretary.


               ``minimum standards for eligible entities

       ``Sec. 1860H. (a) In General.--The Secretary shall not 
     award a contract to an eligible entity under this part unless 
     the Secretary finds that the eligible entity agrees to comply 
     with such terms and conditions as the Secretary shall 
     specify, including the following:
       ``(1) Quality and financial standards.--The eligible entity 
     meets the quality and financial standards specified by the 
     Secretary.
       ``(2) Procedures to ensure proper utilization, compliance, 
     and avoidance of adverse drug reactions.--
       ``(A) In general.--The eligible entity has in place drug 
     utilization review procedures to ensure--
       ``(i) the appropriate utilization by eligible beneficiaries 
     enrolled in the plan covered by the contract of the benefits 
     to be provided under the plan;
       ``(ii) the avoidance of adverse drug reactions among such 
     beneficiaries, including problems due to therapeutic 
     duplication, drug-disease contraindications, drug-drug 
     interactions (including serious interactions with 
     nonprescription or over-the-counter drugs), incorrect drug 
     dosage or duration of drug treatment, drug-allergy 
     interactions, and clinical abuse and misuse; and
       ``(iii) the reasonable application of peer-reviewed medical 
     literature pertaining to improvements in pharmaceutical 
     safety and appropriate use of drugs.
       ``(B) Authority to use certain compendia and literature.--
     The eligible entity may use the compendia and literature 
     referred to in clauses (i) and (ii), respectively, of section 
     1927(g)(1)(B) as a source for the utilization review under 
     subparagraph (A).
       ``(3) Patient protections.--
       ``(A) Access.--
       ``(i) In general.--The eligible entity ensures that the 
     covered outpatient drugs are accessible and convenient to 
     eligible beneficiaries enrolled in the plan covered by the 
     contract, including by offering the services 24 hours a day 
     and 7 days a week for emergencies.
       ``(ii) Agreements with pharmacies.--The eligible entity 
     shall enter into a participation agreement with any pharmacy 
     that meets the requirements of subsection (d) to furnish 
     covered prescription drugs to eligible beneficiaries under 
     this part. Such agreements shall include the payment of a 
     reasonable dispensing fee for covered outpatient drugs 
     dispensed to a beneficiary under the agreement.
       ``(iii) Preferred pharmacy networks.--If the eligible 
     entity utilizes a preferred pharmacy network, the network 
     complies with the standards under subsection (e).
       ``(B) Ensuring that beneficiaries are not overcharged.--The 
     eligible entity has procedures in place to ensure that each 
     pharmacy with a participation agreement under this part with 
     the entity complies with the requirements under subsection 
     (d)(1)(C) (relating to adherence to negotiated prices).
       ``(C) Continuity of care.--
       ``(i) In general.--The eligible entity ensures that, in the 
     case of an eligible beneficiary who loses coverage under this 
     part with such entity under circumstances that would permit a 
     special election period (as established by the Secretary 
     under section 1860C(a)(1)), the entity will continue to 
     provide coverage under this part to such beneficiary until 
     the beneficiary enrolls and receives such coverage with 
     another eligible entity under this part or, if eligible, with 
     a Medicare+Choice organization.
       ``(ii) Limited period.--In no event shall an eligible 
     entity be required to provide the extended coverage required 
     under clause (i) beyond the date which is 30 days after the 
     coverage with such entity would have terminated but for this 
     subparagraph.
       ``(D) Procedures regarding the determination of drugs that 
     are medically necessary.--
       ``(i) In general.--The eligible entity has in place 
     procedures on a case-by-case basis to treat a nonpreferred 
     brand name drug as a preferred brand name drug and a 
     nonformulary drug as a preferred brand name drug under this 
     part if the nonpreferred brand name drug or the nonformulary 
     drug, as the case may be, is determined--

       ``(I) to be not as effective for the enrollee in preventing 
     or slowing the deterioration of, or improving or maintaining, 
     the health of the enrollee; or
       ``(II) to have a significant adverse effect on the 
     enrollee.

       ``(ii) Requirement.--The procedures under clause (i) shall 
     require that determinations under such clause are based on 
     professional medical judgment, the medical condition of the 
     enrollee, and other medical evidence.
       ``(E) Procedures regarding appeal rights with respect to 
     denials of care.--The eligible entity has in place procedures 
     to ensure--
       ``(i) a timely internal review for resolution of denials of 
     coverage (in whole or in part and including those regarding 
     the coverage of nonpreferred brand name drugs and 
     nonformulary drugs as preferred brand name drugs) in 
     accordance with the medical exigencies of the case and a 
     timely resolution of complaints, by enrollees in the plan, or 
     by providers, pharmacists, and other individuals acting on 
     behalf of each such enrollee (with the enrollee's consent) in 
     accordance with requirements (as established by the 
     Secretary) that are comparable to such requirements for 
     Medicare+Choice organizations under part C (and are not less 
     favorable to the enrollee than such requirements under such 
     part as in effect on the date of enactment of the Medicare 
     Outpatient Prescription Drug Act of 2002);
       ``(ii) that the entity complies in a timely manner with 
     requirements established by the Secretary that (I) provide 
     for an external review by an independent entity selected by 
     the Secretary of denials of coverage described in clause (i) 
     not resolved in the favor of the beneficiary (or other 
     complainant) under the process described in such clause, and 
     (II) are comparable to the external review requirements 
     established for Medicare+Choice organizations under part C 
     (and are not less favorable to the enrollee than such 
     requirements under such part as in effect on the date of 
     enactment of the Medicare Outpatient Prescription Drug Act of 
     2002); and
       ``(iii) that enrollees are provided with information 
     regarding the appeals procedures under this part at the time 
     of enrollment with the entity and upon request thereafter.
       ``(F) Procedures regarding patient confidentiality.--
     Insofar as an eligible entity maintains individually 
     identifiable medical records or other health information 
     regarding eligible beneficiaries enrolled in the plan that is 
     covered by the contract, the entity has in place procedures 
     to--
       ``(i) safeguard the privacy of any individually 
     identifiable beneficiary information;
       ``(ii) maintain such records and information in a manner 
     that is accurate and timely;
       ``(iii) ensure timely access by such beneficiaries to such 
     records and information; and
       ``(iv) otherwise comply with applicable laws relating to 
     patient confidentiality.
       ``(G) Procedures regarding transfer of medical records.--
       ``(i) In general.--The eligible entity has in place 
     procedures for the timely transfer of records and information 
     described in subparagraph (F) (with respect to a beneficiary 
     who loses coverage under this part with the entity and 
     enrolls with another entity (including a Medicare+Choice 
     organization) under this part) to such other entity.
       ``(ii) Patient confidentiality.--The procedures described 
     in clause (i) shall comply with the patient confidentiality 
     procedures described in subparagraph (F).
       ``(H) Procedures regarding medical errors.--The eligible 
     entity has in place procedures for--
       ``(i) working with the Secretary to deter medical errors 
     related to the provision of covered outpatient drugs; and
       ``(ii) ensuring that pharmacies with a contract with the 
     entity have in place procedures to deter medical errors 
     related to the provision of covered outpatient drugs.
       ``(4) Procedures to control fraud, abuse, and waste.--The 
     eligible entity has in place procedures to control fraud, 
     abuse, and waste.
       ``(5) Reporting requirements.--
       ``(A) In general.--The eligible entity provides the 
     Secretary with reports containing information regarding the 
     following:
       ``(i) The negotiated prices that the eligible entity is 
     paying for covered outpatient drugs.

[[Page 10417]]

       ``(ii) The prices that eligible beneficiaries enrolled in 
     the plan that is covered by the contract will be charged for 
     covered outpatient drugs.
       ``(iii) The management costs of providing such benefits.
       ``(iv) Utilization of such benefits.
       ``(v) Marketing and advertising expenditures related to 
     enrolling and retaining eligible beneficiaries.
       ``(B) Timeframe for submitting reports.--
       ``(i) In general.--The eligible entity shall submit a 
     report described in subparagraph (A) to the Secretary within 
     3 months after the end of each 12-month period in which the 
     eligible entity has a contract under this part. Such report 
     shall contain information concerning the benefits provided 
     during such 12-month period.
       ``(ii) Last year of contract.--In the case of the last year 
     of a contract under this part, the Secretary may require that 
     a report described in subparagraph (A) be submitted 3 months 
     prior to the end of the contract. Such report shall contain 
     information concerning the benefits provided between the 
     period covered by the most recent report under this 
     subparagraph and the date that a report is submitted under 
     this clause.
       ``(C) Confidentiality of information.--
       ``(i) In general.--Notwithstanding any other provision of 
     law and subject to clause (ii), information disclosed by an 
     eligible entity pursuant to subparagraph (A) (except for 
     information described in clause (ii) of such subparagraph) is 
     confidential and shall only be used by the Secretary for the 
     purposes of, and to the extent necessary, to carry out this 
     part.
       ``(ii) Utilization data.--Subject to patient 
     confidentiality laws, the Secretary shall make information 
     disclosed by an eligible entity pursuant to subparagraph 
     (A)(iv) (regarding utilization data) available for research 
     purposes. The Secretary may charge a reasonable fee for 
     making such information available.
       ``(6) Approval of marketing material and application 
     forms.--The eligible entity complies with the requirements 
     described in section 1860G(f).
       ``(7) Records and audits.--The eligible entity maintains 
     adequate records related to the administration of the 
     benefits under this part and affords the Secretary access to 
     such records for auditing purposes.
       ``(b) Special Rules Regarding Cost-Effective Provision of 
     Benefits.--In providing the benefits under a contract under 
     this part, an eligible entity shall--
       ``(1) employ mechanisms to provide the benefits 
     economically, such as through the use of--
       ``(A) alternative methods of distribution;
       ``(B) preferred pharmacy networks (pursuant to subsection 
     (e)); and
       ``(C) generic drug substitution;
       ``(2) use mechanisms to encourage eligible beneficiaries to 
     select cost-effective drugs or less costly means of receiving 
     drugs, such as through the use of--
       ``(A) pharmacy incentive programs;
       ``(B) therapeutic interchange programs; and
       ``(C) disease management programs;
       ``(3) encourage pharmacy providers to--
       ``(A) inform beneficiaries of the differentials in price 
     between generic and brand name drug equivalents; and
       ``(B) provide medication therapy management programs in 
     order to enhance beneficiaries' understanding of the 
     appropriate use of medications and to reduce the risk of 
     potential adverse events associated with medications; and
       ``(4) develop and implement a formulary in accordance with 
     subsection (c).
       ``(c) Requirements for Formularies.--
       ``(1) In general.--The formulary developed and implemented 
     by the eligible entity shall comply with standards 
     established by the Secretary in consultation with the 
     Medicare Prescription Drug Advisory Committee established 
     under section 1860L.
       ``(2) Requirements for standards.--The standards 
     established under paragraph (1) shall require that the 
     eligible entity--
       ``(A) use a pharmacy and therapeutic committee (that meets 
     the standards for a pharmacy and therapeutic committee 
     established by the Secretary in consultation with such 
     Medicare Prescription Drug Advisory Committee) to develop and 
     implement the formulary;
       ``(B) assign all brand name drugs included in the formulary 
     to either the preferred category or nonpreferred category of 
     drugs;
       ``(C) include--
       ``(i) all generic covered outpatient drugs in the 
     formulary;
       ``(ii) at least 1 brand name covered outpatient drug from 
     each therapeutic class (as defined by the Secretary in 
     consultation with such Medicare Prescription Drug Advisory 
     Committee) as a preferred brand name drug in the formulary; 
     and
       ``(iii) if there is more than 1 brand name covered 
     outpatient drug available in a therapeutic class, at least 1 
     such drug as a preferred brand name drug in the formulary and 
     at least 1 such drug as a nonpreferred brand name drug in the 
     formulary;
       ``(D) develop procedures for the modification of the 
     formulary, including for the addition of new drugs to an 
     existing therapeutic class;
       ``(E) pursuant to section 1860F(b)(1)(C), provide for 
     coverage of nonpreferred brand name drugs and nonformulary 
     drugs at the preferred rate when determined under 
     subparagraph (D) or (E) of subsection (a)(3) to be medically 
     necessary;
       ``(F) disclose to current and prospective beneficiaries and 
     to providers in the service area the nature of the formulary 
     restrictions, including information regarding the drugs 
     included in the formulary and any difference in the cost-
     sharing for--
       ``(i) drugs included in the formulary; and
       ``(ii) for drugs not included in the formulary; and
       ``(G) provide a reasonable amount of notice to 
     beneficiaries enrolled in the plan that is covered by the 
     contract under this part of any change in the formulary.
       ``(3) Construction.--Nothing in this part shall be 
     construed as precluding an eligible entity from--
       ``(A) except as provided in section 1860F(b)(1)(C) 
     (relating to the coverage of medically necessary drugs at the 
     preferred rate), requiring cost-sharing for nonformulary 
     drugs that is higher than the copayment amount established in 
     section 1860F(b)(1)(A)(iii);
       ``(B) educating prescribing providers, pharmacists, and 
     beneficiaries about the medical and cost benefits of drugs 
     included in the formulary (including generic drugs); or
       ``(C) requesting prescribing providers to consider a drug 
     included in the formulary prior to dispensing of a drug not 
     so included or a preferred brand name drug prior to 
     dispensing of a nonpreferred brand name drug, as long as such 
     a request does not unduly delay the provision of the drug.
       ``(d) Terms of Participation Agreement With Pharmacies.--
       ``(1) In general.--A participation agreement between an 
     eligible entity and a pharmacy under this part (pursuant to 
     subsection (a)(3)(A)(ii)) shall include the following terms 
     and conditions:
       ``(A) Applicable requirements.--The pharmacy shall meet 
     (and throughout the contract period continue to meet) all 
     applicable Federal requirements and State and local licensing 
     requirements.
       ``(B) Access and quality standards.--The pharmacy shall 
     comply with such standards as the Secretary (and the eligible 
     entity) shall establish concerning the quality of, and 
     enrolled beneficiaries' access to, pharmacy services under 
     this part. Such standards shall require the pharmacy--
       ``(i) not to refuse to dispense covered outpatient drugs to 
     any eligible beneficiary enrolled under this part;
       ``(ii) to keep patient records (including records on 
     expenses) for all covered outpatient drugs dispensed to such 
     enrolled beneficiaries;
       ``(iii) to submit information (in a manner specified by the 
     Secretary to be necessary to administer this part) on all 
     purchases of such drugs dispensed to such enrolled 
     beneficiaries; and
       ``(iv) to comply with periodic audits to assure compliance 
     with the requirements of this part and the accuracy of 
     information submitted.
       ``(C) Ensuring that beneficiaries are not overcharged.--
       ``(i) Adherence to negotiated prices.--The total charge for 
     each covered outpatient drug dispensed by the pharmacy to a 
     beneficiary enrolled in the plan, without regard to whether 
     the individual is financially responsible for any or all of 
     such charge, shall not exceed the negotiated price for the 
     drug (as reported to the Secretary pursuant to subsection 
     (a)(5)(A)).
       ``(ii) Adherence to beneficiary obligation.--The pharmacy 
     may not charge (or collect from) such beneficiary an amount 
     that exceed's the cost-sharing that the beneficiary is 
     responsible for under this part (as determined under section 
     1860F(b) using the negotiated price of the drug).
       ``(D) Additional requirements.--The pharmacy shall meet 
     such additional contract requirements as the eligible entity 
     specifies under this section.
       ``(2) Applicability of fraud and abuse provisions.--The 
     provisions of section 1128 through 1128C (relating to fraud 
     and abuse) apply to pharmacies participating in the program 
     under this part.
       ``(e) Preferred Pharmacy Networks.--
       ``(1) In general.--If an eligible entity uses a preferred 
     pharmacy network to deliver benefits under this part, such 
     network shall meet minimum access standards established by 
     the Secretary.
       ``(2) Standards.--In establishing standards under paragraph 
     (1), the Secretary shall take into account reasonable 
     distances to pharmacy services in both urban and rural areas.


                               ``payments

       ``Sec. 1860I. (a) Procedures for Payments to Eligible 
     Entities.--The Secretary shall establish procedures for 
     making payments to each eligible entity with a contract under 
     this part for the management, administration, and delivery of 
     the benefits under this part.
       ``(b) Requirements for Procedures.--
       ``(1) In general.--The procedures established under 
     subsection (a) shall provide for the following:

[[Page 10418]]

       ``(A) Management payment.--Payment for the management, 
     administration, and delivery of the benefits under this part.
       ``(B) Reimbursement for negotiated costs of drugs 
     provided.--Payments for the negotiated costs of covered 
     outpatient drugs provided to eligible beneficiaries enrolled 
     under this part and in a plan offered by the eligible entity, 
     reduced by any applicable cost-sharing under section 
     1860F(b).
       ``(C) Risk requirement to ensure pursuit of performance 
     requirements.--An adjustment of a percentage (as determined 
     under paragraph (2)) of the payments made to an entity under 
     subparagraph (A) to ensure that the entity, in managing, 
     administering, and delivering the benefits under this part, 
     pursues performance requirements established by the 
     Secretary, including the following:
       ``(i) Control of medicare and beneficiary costs.--The 
     entity contains costs to the Prescription Drug Account and to 
     eligible beneficiaries enrolled under this part and in the 
     plan offered by the entity, as measured by generic 
     substitution rates, price discounts, and other factors 
     determined appropriate by the Secretary that do not reduce 
     the access of such beneficiaries to medically necessary 
     covered outpatient drugs.
       ``(ii) Quality clinical care.--The entity provides such 
     beneficiaries with quality clinical care, as measured by such 
     factors as--

       ``(I) the level of adverse drug reactions and medical 
     errors among such beneficiaries; and
       ``(II) providing specific clinical suggestions to improve 
     health and patient and prescriber education as appropriate.

       ``(iii) Quality service.--The entity provides such 
     beneficiaries with quality services, as measured by such 
     factors as sustained pharmacy network access, timeliness and 
     accuracy of service delivery in claims processing and card 
     production, pharmacy and member service support access, 
     response time in mail delivery service, and timely action 
     with regard to appeals and current beneficiary service 
     surveys.
       ``(2) Percentage of payment tied to risk.--
       ``(A) In general.--Subject to subparagraph (B), the 
     Secretary shall determine the percentage (which may be up to 
     100 percent) of the payments made to an entity under 
     subparagraph (A) that will be tied to the performance 
     requirements described in paragraph (1)(C).
       ``(B) Limitation on risk to ensure program stability.--In 
     order to provide for program stability, the Secretary may not 
     establish a percentage to be adjusted under this subsection 
     at a level that jeopardizes the ability of an eligible entity 
     to administer and deliver the benefits under this part or 
     administer and deliver such benefits in a quality manner.
       ``(3) Risk adjustment of payments based on enrollees in 
     plan.--To the extent that an eligible entity is at risk under 
     this subsection, the procedures established under subsection 
     (a) may include a methodology for risk adjusting the payments 
     made to such entity based on the differences in actuarial 
     risk of different enrollees being served if the Secretary 
     determines such adjustments to be necessary and appropriate.
       ``(4) Pass-through of rebates and price concessions 
     obtained by the eligible entity.--The Secretary, if 
     determined by the Secretary to be in the best interests of 
     the medicare program or eligible beneficiaries, may establish 
     procedures for reducing the amount of payments to an eligible 
     entity under subsection (a) to take into account any rebates 
     or price concessions obtained by the entity from 
     manufacturers of covered outpatient drugs.
       ``(c) Payments to Medicare+Choice Organizations.--For 
     provisions related to payments to Medicare+Choice 
     organizations for the administration and delivery of benefits 
     under this part to eligible beneficiaries enrolled in a 
     Medicare+Choice plan offered by the organization, see section 
     1853(c)(8).
       ``(d) Secondary Payer Provisions.--The provisions of 
     section 1862(b) shall apply to the benefits provided under 
     this part.


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

       ``Sec. 1860J. (a) Program Authority.--The Secretary is 
     authorized to develop and implement a program under this 
     section to be known as the `Employer Incentive Program' that 
     encourages employers and other sponsors of employment-based 
     health care coverage to provide adequate prescription drug 
     benefits to retired individuals by subsidizing, in part, the 
     sponsor's cost of providing coverage under qualifying plans.
       ``(b) Sponsor Requirements.--In order to be eligible to 
     receive an incentive payment under this section with respect 
     to coverage of an individual under a qualified retiree 
     prescription drug plan (as defined in subsection (e)(3)), a 
     sponsor shall meet the following requirements:
       ``(1) Assurances.--The sponsor shall--
       ``(A) annually attest, and provide such assurances as the 
     Secretary may require, that the coverage offered by the 
     sponsor is a qualified retiree prescription drug plan, and 
     will remain such a plan for the duration of the sponsor's 
     participation in the program under this section; and
       ``(B) guarantee that it will give notice to the Secretary 
     and covered retirees--
       ``(i) at least 120 days before terminating its plan; and
       ``(ii) immediately upon determining that the actuarial 
     value of the prescription drug benefit under the plan falls 
     below the actuarial value of the outpatient prescription drug 
     benefit under this part.
       ``(2) Beneficiary information.--The sponsor shall report to 
     the Secretary, for each calendar quarter for which it seeks 
     an incentive payment under this section, the names and social 
     security numbers of all retirees (and their spouses and 
     dependents) covered under such plan during such quarter and 
     the dates (if less than the full quarter) during which each 
     such individual was covered.
       ``(3) Audits.--The sponsor and the employment-based retiree 
     health coverage plan seeking incentive payments under this 
     section shall agree to maintain, and to afford the Secretary 
     access to, such records as the Secretary may require for 
     purposes of audits and other oversight activities necessary 
     to ensure the adequacy of prescription drug coverage, the 
     accuracy of incentive payments made, and such other matters 
     as may be appropriate.
       ``(4) Other requirements.--The sponsor shall provide such 
     other information, and comply with such other requirements, 
     as the Secretary may find necessary to administer the program 
     under this section.
       ``(c) Incentive Payments.--
       ``(1) In general.--A sponsor that meets the requirements of 
     subsection (b) with respect to a quarter in a calendar year 
     shall be entitled to have payment made by the Secretary on a 
     quarterly basis (to the sponsor or, at the sponsor's 
     direction, to the appropriate employment-based health plan) 
     of an incentive payment, in the amount determined in 
     paragraph (2), for each retired individual (or spouse or 
     dependent) who--
       ``(A) was covered under the sponsor's qualified retiree 
     prescription drug plan during such quarter; and
       ``(B) was eligible for, but was not enrolled in, the 
     outpatient prescription drug benefit program under this part.
       ``(2) Amount of payment.--
       ``(A) In general.--The amount of the payment for a quarter 
     shall be, for each individual described in paragraph (1), \2/
     3\ of the sum of the monthly Government contribution amounts 
     (computed under subparagraph (B)) for each of the 3 months in 
     the quarter.
       ``(B) Computation of monthly government contribution 
     amount.--For purposes of subparagraph (A), the monthly 
     Government contribution amount for a month in a year is equal 
     to the amount by which--
       ``(i) \1/12\ of the amount estimated under subparagraph (C) 
     for the year involved; exceeds
       ``(ii) the monthly Part D premium under section 1860E(a) 
     (determined without regard to any increase under section 
     1860B(b)(1)) for the month involved.
       ``(C) Estimate of average annual per capita aggregate 
     expenditures.--
       ``(i) In general.--The Secretary shall for each year after 
     2003 estimate for that year an amount equal to average annual 
     per capita aggregate expenditures payable from the 
     Prescription Drug Account for that year.
       ``(ii) Timeframe for estimation.--The Secretary shall make 
     the estimate described in clause (i) for a year before the 
     beginning of that year.
       ``(3) Payment date.--The payment under this section with 
     respect to a calendar quarter shall be payable as of the end 
     of the next succeeding calendar quarter.
       ``(d) Civil Money Penalties.--A sponsor, health plan, or 
     other entity that the Secretary determines has, directly or 
     through its agent, provided information in connection with a 
     request for an incentive payment under this section that the 
     entity knew or should have known to be false shall be subject 
     to a civil monetary penalty in an amount up to 3 times the 
     total incentive amounts under subsection (c) that were paid 
     (or would have been payable) on the basis of such 
     information.
       ``(e) Definitions.--In this section:
       ``(1) Employment-based retiree health coverage.--The term 
     `employment-based retiree health coverage' means health 
     insurance or other coverage, whether provided by voluntary 
     insurance coverage or pursuant to statutory or contractual 
     obligation, of health care costs for retired individuals (or 
     for such individuals and their spouses and dependents) based 
     on their status as former employees or labor union members.
       ``(2) Employer.--The term `employer' has the meaning given 
     the term in section 3(5) of the Employee Retirement Income 
     Security Act of 1974 (except that such term shall include 
     only employers of 2 or more employees).
       ``(3) Qualified retiree prescription drug plan.--The term 
     `qualified retiree prescription drug plan' means health 
     insurance coverage included in employment-based retiree 
     health coverage that--
       ``(A) provides coverage of the cost of prescription drugs 
     with an actuarial value (as defined by the Secretary) to each 
     retired beneficiary that equals or exceeds the actuarial 
     value of the benefits provided to an individual enrolled in 
     the outpatient prescription drug benefit program under this 
     part; and
       ``(B) does not deny, limit, or condition the coverage or 
     provision of prescription drug benefits for retired 
     individuals based on age

[[Page 10419]]

     or any health status-related factor described in section 
     2702(a)(1) of the Public Health Service Act.
       ``(4) Sponsor.--The term `sponsor' has the meaning given 
     the term `plan sponsor' in section 3(16)(B) of the Employer 
     Retirement Income Security Act of 1974.
       ``(f) Authorization of Appropriations.--There are 
     authorized to be appropriated from time to time, out of any 
     moneys in the Treasury not otherwise appropriated, such sums 
     as may be necessary to carry out the program under this 
     section.


   ``prescription drug account in the federal supplementary medical 
                          insurance trust fund

       ``Sec. 1860K. (a) Establishment.--
       ``(1) In general.--There is created within the Federal 
     Supplementary Medical Insurance Trust Fund established by 
     section 1841 an account to be known as the `Prescription Drug 
     Account' (in this section referred to as the `Account').
       ``(2) Funds.--The Account shall consist of such gifts and 
     bequests as may be made as provided in section 201(i)(1), and 
     such amounts as may be deposited in, or appropriated to, the 
     account as provided in this part.
       ``(3) Separate from rest of trust fund.--Funds provided 
     under this part to the Account shall be kept separate from 
     all other funds within the Federal Supplementary Medical 
     Insurance Trust Fund.
       ``(b) Payments From Account.--
       ``(1) In general.--The Managing Trustee shall pay from time 
     to time from the Account such amounts as the Secretary 
     certifies are necessary to make payments to operate the 
     program under this part, including payments to eligible 
     entities under section 1860I, payments to Medicare+Choice 
     organizations under section 1853(c)(8), and payments with 
     respect to administrative expenses under this part in 
     accordance with section 201(g).
       ``(2) Treatment in relation to part b premium.--Amounts 
     payable from the Account shall not be taken into account in 
     computing actuarial rates or premium amounts under section 
     1839.
       ``(c) Appropriations To Cover Benefits and Administrative 
     Costs.--
       ``(1) In general.--Subject to paragraph (2), there are 
     appropriated to the Account in a fiscal year, out of any 
     moneys in the Treasury not otherwise appropriated, an amount 
     equal to the amount by which the benefits and administrative 
     costs of providing the benefits under this part in the year 
     exceed the premiums collected under section 1860E(b) for the 
     year.
       ``(2) Limitation.--No amounts shall be appropriated, and no 
     amounts expended, for expenses incurred for providing 
     coverage of covered outpatient drugs after January 1, 2011. 
     The Secretary may make payments on or after such date for 
     expenses incurred to the extent such expenses were incurred 
     for providing coverage of covered outpatient drugs prior to 
     such date.


            ``medicare prescription drug advisory committee

       ``Sec. 1860L. (a) Establishment of Committee.--There is 
     established a Medicare Prescription Drug Advisory Committee 
     (in this section referred to as the `Committee').
       ``(b) Functions of Committee.--On and after March 1, 2003, 
     the Committee shall advise the Secretary on policies related 
     to--
       ``(1) the development of guidelines for the implementation 
     and administration of the outpatient prescription drug 
     benefit program under this part; and
       ``(2) the development of--
       ``(A) standards for a pharmacy and therapeutics committee 
     required of eligible entities under section 1860H(c)(2)(A);
       ``(B) standards required under subparagraphs (D) and (E) of 
     section 1860H(a)(3) for determining if a drug is medically 
     necessary;
       ``(C) standards for--
       ``(i) establishing therapeutic classes;
       ``(ii) adding new therapeutic classes to a formulary; and
       ``(iii) defining a prescription of covered outpatient drugs 
     for purposes of applying cost-sharing under section 1860F(b);
       ``(D) procedures to evaluate the bids submitted by eligible 
     entities under this part; and
       ``(E) procedures to ensure that eligible entities with a 
     contract under this part are in compliance with the 
     requirements under this part.
       ``(c) Structure and Membership of the Committee.--
       ``(1) Structure.--The Committee shall be composed of 19 
     members who shall be appointed by the Secretary.
       ``(2) Membership.--
       ``(A) In general.--The members of the Committee shall be 
     chosen on the basis of their integrity, impartiality, and 
     good judgment, and shall be individuals who are, by reason of 
     their education, experience, attainments, and understanding 
     of pharmaceutical cost control and quality enhancement, 
     exceptionally qualified to perform the duties of members of 
     the Committee.
       ``(B) Specific members.--Of the members appointed under 
     paragraph (1)--
       ``(i) five shall be chosen to represent physicians, 2 of 
     whom shall be geriatricians;
       ``(ii) two shall be chosen to represent nurse 
     practitioners;
       ``(iii) four shall be chosen to represent pharmacists;
       ``(iv) one shall be chosen to represent the Centers for 
     Medicare & Medicaid Services;
       ``(v) four shall be chosen to represent actuaries, 
     pharmacoeconomists, researchers, and other appropriate 
     experts;
       ``(vi) one shall be chosen to represent emerging drug 
     technologies;
       ``(vii) one shall be closed to represent the Food and Drug 
     Administration; and
       ``(viii) one shall be chosen to represent individuals 
     enrolled under this part.
       ``(d) Terms of Appointment.--Each member of the Committee 
     shall serve for a term determined appropriate by the 
     Secretary. The terms of service of the members initially 
     appointed shall begin on January 1, 2003.
       ``(e) Chairperson.--The Secretary shall designate a member 
     of the Committee as Chairperson. The term as Chairperson 
     shall be for a 1-year period.
       ``(f) Committee Personnel Matters.--
       ``(1) Members.--
       ``(A) Compensation.--Each member of the Committee who is 
     not an officer or employee of the Federal Government shall be 
     compensated at a rate equal to the daily equivalent of the 
     annual rate of basic pay prescribed for level IV of the 
     Executive Schedule under section 5315 of title 5, United 
     States Code, for each day (including travel time) during 
     which such member is engaged in the performance of the duties 
     of the Committee. All members of the Committee who are 
     officers or employees of the United States shall serve 
     without compensation in addition to that received for their 
     services as officers or employees of the United States.
       ``(B) Travel expenses.--The members of the Committee shall 
     be allowed travel expenses, including per diem in lieu of 
     subsistence, at rates authorized for employees of agencies 
     under subchapter I of chapter 57 of title 5, United States 
     Code, while away from their homes or regular places of 
     business in the performance of services for the Committee.
       ``(2) Staff.--The Committee may appoint such personnel as 
     the Committee considers appropriate.
       ``(g) Operation of the Committee.--
       ``(1) Meetings.--The Committee shall meet at the call of 
     the Chairperson (after consultation with the other members of 
     the Committee) not less often than quarterly to consider a 
     specific agenda of issues, as determined by the Chairperson 
     after such consultation.
       ``(2) Quorum.--Ten members of the Committee shall 
     constitute a quorum for purposes of conducting business.
       ``(h) Federal Advisory Committee Act.--Section 14 of the 
     Federal Advisory Committee Act (5 U.S.C. App.) shall not 
     apply to the Committee.
       ``(i) Transfer of Personnel, Resources, and Assets.--For 
     purposes of carrying out its duties, the Secretary and the 
     Committee may provide for the transfer to the Committee of 
     such civil service personnel in the employ of the Department 
     of Health and Human Services (including the Centers for 
     Medicare & Medicaid Services), and such resources and assets 
     of the Department used in carrying out this title, as the 
     Committee requires.
       ``(j) Authorization of Appropriations.--There are 
     authorized to be appropriated such sums as may be necessary 
     to carry out the purposes of this section.''.
       (b) Exclusions From Coverage.--
       (1) Application to part d.--Section 1862(a) of the Social 
     Security Act (42 U.S.C. 1395y(a)) is amended in the matter 
     preceding paragraph (1) by striking ``part A or part B'' and 
     inserting ``part A, B, or D''.
       (2) Prescription drugs not excluded from coverage if 
     reasonable and necessary.--Section 1862(a)(1) of the Social 
     Security Act (42 U.S.C. 1395y(a)(1)) is amended--
       (A) in subparagraph (H), by striking ``and'' at the end;
       (B) in subparagraph (I), by striking the semicolon at the 
     end and inserting ``, and''; and
       (C) by adding at the end the following new subparagraph:
       ``(J) in the case of prescription drugs covered under part 
     D, which are not reasonable and necessary to prevent or slow 
     the deterioration of, or improve or maintain, the health of 
     eligible beneficiaries;''.
       (c) Conforming Amendments to Federal Supplementary Medical 
     Insurance Trust Fund.--Section 1841 of the Social Security 
     Act (42 U.S.C. 1395t) is amended--
       (1) in the last sentence of subsection (a)--
       (A) by striking ``and'' before ``such amounts''; and
       (B) by inserting before the period the following: ``, and 
     such amounts as may be deposited in, or appropriated to, the 
     Prescription Drug Account established by section 1860K'';
       (2) in subsection (g), by inserting after ``by this part,'' 
     the following: ``the payments provided for under part D (in 
     which case the payments shall be made from the Prescription 
     Drug Account in the Trust Fund),'';
       (3) in subsection (h), by inserting after ``1840(d)'' the 
     following: ``and section 1860E(b) (in which case the payments 
     shall be made from the Prescription Drug Account in the Trust 
     Fund)''; and

[[Page 10420]]

       (4) in subsection (i), by inserting after ``section 
     1840(b)(1)'' the following: ``, section 1860E(b) (in which 
     case the payments shall be made from the Prescription Drug 
     Account in the Trust Fund),''.
       (d) Conforming References to Previous Part D.--
       (1) In general.--Any reference in law (in effect before the 
     date of enactment of this Act) to part D of title XVIII of 
     the Social Security Act is deemed a reference to part E of 
     such title (as in effect after such date).
       (2) Secretarial submission of legislative proposal.--Not 
     later than 6 months after the date of enactment of this Act, 
     the Secretary of Health and Human Services shall submit to 
     Congress a legislative proposal providing for such technical 
     and conforming amendments in the law as are required by the 
     provisions of this Act.

     SEC. 3. PART D BENEFITS UNDER MEDICARE+CHOICE PLANS.

       (a) Eligibility, Election, and Enrollment.--Section 1851 of 
     the Social Security Act (42 U.S.C. 1395w-21) is amended--
       (1) in subsection (a)(1)(A), by striking ``parts A and B'' 
     and inserting ``parts A, B, and D''; and
       (2) in subsection (i)(1), by striking ``parts A and B'' and 
     inserting ``parts A, B, and D''.
       (b) Voluntary Beneficiary Enrollment for Drug Coverage.--
     Section 1852(a)(1)(A) of the Social Security Act (42 U.S.C. 
     1395w-22(a)(1)(A)) is amended by inserting ``(and under part 
     D to individuals also enrolled under that part)'' after 
     ``parts A and B''.
       (c) Access to Services.--Section 1852(d)(1) of the Social 
     Security Act (42 U.S.C. 1395w-22(d)(1)) is amended--
       (1) in subparagraph (D), by striking ``and'' at the end;
       (2) in subparagraph (E), by striking the period at the end 
     and inserting ``; and''; and
       (3) by adding at the end the following new subparagraph:
       ``(F) in the case of covered outpatient drugs (as defined 
     in section 1860(1)) provided to individuals enrolled under 
     part D, the organization complies with the access 
     requirements applicable under part D.''.
       (d) Payments to Organizations for Part D Benefits.--
       (1) In general.--Section 1853(a)(1)(A) of the Social 
     Security Act (42 U.S.C. 1395w-23(a)(1)(A)) is amended--
       (A) by inserting ``determined separately for the benefits 
     under parts A and B and under part D (for individuals 
     enrolled under that part)'' after ``as calculated under 
     subsection (c)'';
       (B) by striking ``that area, adjusted for such risk 
     factors'' and inserting ``that area. In the case of payment 
     for the benefits under parts A and B, such payment shall be 
     adjusted for such risk factors as''; and
       (C) by inserting before the last sentence the following: 
     ``In the case of the payments under subsection (c)(8) for the 
     provision of coverage of covered outpatient drugs to 
     individuals enrolled under part D, such payment shall be 
     adjusted for the risk factors of each enrollee as the 
     Secretary determines to be feasible and appropriate to ensure 
     actuarial equivalence.''.
       (2) Amount.--Section 1853(c) of the Social Security Act (42 
     U.S.C. 1395w-23(c)) is amended--
       (A) in paragraph (1), in the matter preceding subparagraph 
     (A), by inserting ``for benefits under parts A and B'' after 
     ``capitation rate''; and
       (B) by adding at the end the following new paragraph:
       ``(8) Capitation rate for part d benefits.--
       ``(A) In general.--In the case of a Medicare+Choice plan 
     that provides coverage of covered outpatient drugs to an 
     individual enrolled under part D, the capitation rate for 
     such coverage shall be the amount described in subparagraph 
     (B). Such payments shall be made in the same manner and at 
     the same time as the payments to the Medicare+Choice 
     organization offering the plan for benefits under parts A and 
     B are otherwise made, but such payments shall be payable from 
     the Prescription Drug Account in the Federal Supplementary 
     Medical Insurance Trust Fund under section 1841.
       ``(B) Amount.--The amount described in this paragraph is an 
     amount equal to \1/12\ of the average annual per capita 
     aggregate expenditures payable from the Prescription Drug 
     Account for the year (as estimated under section 
     1860J(c)(2)(C)).''.
       (e) Limitation on Enrollee Liability.--Section 1854(e) of 
     the Social Security Act (42 U.S.C. 1395w-24(e)) is amended by 
     adding at the end the following new paragraph:
       ``(5) Special rule for part d benefits.--With respect to 
     outpatient prescription drug benefits under part D, a 
     Medicare+Choice organization may not require that an enrollee 
     pay any deductible or pay a cost-sharing amount that exceeds 
     the amount of cost-sharing applicable for such benefits for 
     an eligible beneficiary under part D.''.
       (f) Requirement for Additional Benefits.--Section 
     1854(f)(1) of the Social Security Act (42 U.S.C. 1395w-
     24(f)(1)) is amended by adding at the end the following new 
     sentence: ``Such determination shall be made separately for 
     the benefits under parts A and B and for prescription drug 
     benefits under part D.''.
       (g) Effective Date.--The amendments made by this section 
     shall apply to items and services provided under a 
     Medicare+Choice plan on or after January 1, 2004.

     SEC. 4. ADDITIONAL ASSISTANCE FOR LOW-INCOME BENEFICIARIES.

       (a) Inclusion in Medicare Cost-Sharing.--Section 1905(p)(3) 
     of the Social Security Act (42 U.S.C. 1396d(p)(3)) is 
     amended--
       (1) in subparagraph (A)--
       (A) in clause (i), by striking ``and'' at the end;
       (B) in clause (ii), by inserting ``and'' at the end; and
       (C) by adding at the end the following new clause:
       ``(iii) premiums under section 1860E(a).''; and
       (2) in subparagraph (B), by inserting ``and cost-sharing 
     described in section 1860F(b)'' after ``section 1813''.
       (b) Expansion of Medical Assistance.--Section 
     1902(a)(10)(E) of the Social Security Act (42 U.S.C. 
     1396a(a)(10)(E)) is amended--
       (1) in clause (iii)--
       (A) by striking ``section 1905(p)(3)(A)(ii)'' and inserting 
     ``clauses (ii) and (iii) of section 1905(p)(3)(A) and for 
     medicare cost-sharing described in section 1905(p)(3)(B) (but 
     only insofar as it relates to benefits provided under part D 
     of title XVIII),''; and
       (B) by striking ``and'' at the end;
       (2) by redesignating clause (iv) as clause (vi); and
       (3) by inserting after clause (iii) the following new 
     clauses:
       ``(iv) for making medical assistance available for medicare 
     cost-sharing described in section 1905(p)(3)(A)(iii) and for 
     medicare cost-sharing described in section 1905(p)(3)(B) (but 
     only insofar as it relates to benefits provided under part D 
     of title XVIII) for individuals who would be qualified 
     medicare beneficiaries described in section 1905(p)(1) but 
     for the fact that their income exceeds 120 percent but does 
     not exceed 135 percent of such official poverty line for a 
     family of the size involved;
       ``(v) for making medical assistance available for medicare 
     cost-sharing described in section 1905(p)(3)(A)(iii) on a 
     linear sliding scale based on the income of such individuals 
     for individuals who would be qualified medicare beneficiaries 
     described in section 1905(p)(1) but for the fact that their 
     income exceeds 135 percent but does not exceed 150 percent of 
     such official poverty line for a family of the size involved; 
     and''.
       (c) Nonapplicability of Resource Requirements to Medicare 
     Part D Cost-Sharing.--Section 1905(p)(1) of the Social 
     Security Act (42 U.S.C. 1396d(p)(1)) is amended by adding at 
     the end the following flush sentence:

     ``In determining if an individual is a qualified medicare 
     beneficiary under this paragraph, subparagraph (C) shall not 
     be applied for purposes of providing the individual with 
     medicare cost-sharing described in section 1905(p)(3)(A)(iii) 
     or for medicare cost-sharing described in section 
     1905(p)(3)(B) (but only insofar as it relates to benefits 
     provided under part D of title XVIII).''.
       (d) Nonapplicability of Payment Differential Requirements 
     to Medicare Part D Cost-Sharing.--Section 1902(n)(2) of the 
     Social Security Act (42 U.S.C. 1396a(n)(2)) is amended by 
     adding at the end the following new sentence: ``The preceding 
     sentence shall not apply to the cost-sharing described in 
     section 1860F(b).''.
       (e) 100 Percent Federal Medical Assistance Percentage.--The 
     first sentence of section 1905(b) of the Social Security Act 
     (42 U.S.C. 1396d(b)) is amended--
       (1) by striking ``and'' before ``(4)''; and
       (2) by inserting before the period at the end the 
     following: ``, and (5) the Federal medical assistance 
     percentage shall be 100 percent with respect to medical 
     assistance provided under clauses (iv) and (v) of section 
     1902(a)(10)(E)''.
       (f) Treatment of Territories.--Section 1108(g) of the 
     Social Security Act (42 U.S.C. 1308(g)) is amended by adding 
     at the end the following new paragraph:
       ``(3) Notwithstanding the preceding provisions of this 
     subsection, with respect to fiscal year 2004 and any fiscal 
     year thereafter, the amount otherwise determined under this 
     subsection (and subsection (f)) for the fiscal year for a 
     Commonwealth or territory shall be increased by the ratio (as 
     estimated by the Secretary) of--
       ``(A) the aggregate amount of payments made to the 50 
     States and the District of Columbia for the fiscal year under 
     title XIX that are attributable to making medical assistance 
     available for individuals described in clauses (i), (iii), 
     (iv), and (v) of section 1902(a)(10)(E) for payment of 
     medicare cost-sharing described in section 1905(p)(3)(A)(iii) 
     and for medicare cost-sharing described in section 
     1905(p)(3)(B) (but only insofar as it relates to benefits 
     provided under part D of title XVIII); to
       ``(B) the aggregate amount of total payments made to such 
     States and District for the fiscal year under such title.''.
       (g) Conforming Amendments.--Section 1933 of the Social 
     Security Act (42 U.S.C. 1396u-3) is amended--
       (1) in subsection (a), by striking ``section 
     1902(a)(10)(E)(iv)'' and inserting ``section 
     1902(a)(10)(E)(vi)'';
       (2) in subsection (c)(2)(A)--

[[Page 10421]]

       (A) in clause (i), by striking ``section 
     1902(a)(10)(E)(iv)(I)'' and inserting ``section 
     1902(a)(10)(E)(vi)(I)''; and
       (B) in clause (ii), by striking ``section 
     1902(a)(10)(E)(iv)(II)'' and inserting ``section 
     1902(a)(10)(E)(vi)(II)'';
       (3) in subsection (d), by striking ``section 
     1902(a)(10)(E)(iv)'' and inserting ``section 
     1902(a)(10)(E)(vi)''; and
       (4) in subsection (e), by striking ``section 
     1902(a)(10)(E)(iv)'' and inserting ``section 
     1902(a)(10)(E)(vi)''.
       (h) Effective Date.--The amendments made by this section 
     shall apply for medical assistance provided under section 
     1902(a)(10)(E) of the Social Security Act (42 U.S.C. 
     1396a(a)(10)(E)) on and after January 1, 2004.

     SEC. 5. MEDIGAP REVISIONS.

       Section 1882 of the Social Security Act (42 U.S.C. 1395ss) 
     is amended by adding at the end the following new subsection:
       ``(v) Modernized Benefit Packages for Medicare Supplemental 
     Policies.--
       ``(1) Revision of benefit packages.--
       ``(A) In general.--Notwithstanding subsection (p), the 
     benefit packages classified as `H', `I', and `J' under the 
     standards established by subsection (p)(2) (including the 
     benefit package classified as `J' with a high deductible 
     feature, as described in subsection (p)(11)) shall be revised 
     so that--
       ``(i) the coverage of outpatient prescription drugs 
     available under such benefit packages is replaced with 
     coverage of outpatient prescription drugs that complements 
     but does not duplicate the coverage of outpatient 
     prescription drugs that is otherwise available under this 
     title;
       ``(ii) the revised benefit packages provide a range of 
     coverage options for outpatient prescription drugs for 
     beneficiaries, but do not provide coverage for more than 90 
     percent of the cost-sharing amount applicable to an 
     individual under section 1860F(b);
       ``(iii) uniform language and definitions are used with 
     respect to such revised benefits;
       ``(iv) uniform format is used in the policy with respect to 
     such revised benefits;
       ``(v) such revised standards meet any additional 
     requirements imposed by the amendments made by the Medicare 
     Outpatient Prescription Drug Act of 2002; and
       ``(vi) except as revised under the preceding clauses or as 
     provided under subsection (p)(1)(E), the benefit packages are 
     identical to the benefit packages that were available on the 
     date of enactment of the Medicare Outpatient Prescription 
     Drug Act of 2002.
       ``(B) Manner of revision.--The benefit packages revised 
     under this section shall be revised in the manner described 
     in subparagraph (E) of subsection (p)(1), except that for 
     purposes of subparagraph (C) of such subsection, the 
     standards established under this subsection shall take effect 
     not later than January 1, 2004.
       ``(2) Construction of benefits in other medicare 
     supplemental policies.--Nothing in the benefit packages 
     classified as `A' through `G' under the standards established 
     by subsection (p)(2) (including the benefit package 
     classified as `F' with a high deductible feature, as 
     described in subsection (p)(11)) shall be construed as 
     providing coverage for benefits for which payment may be made 
     under part D.
       ``(3) Guaranteed issuance and renewal of revised 
     policies.--The provisions of subsections (q) and (s), 
     including provisions of subsection (s)(3) (relating to 
     special enrollment periods in cases of termination or 
     disenrollment), shall apply to medicare supplemental policies 
     revised under this subsection in the same manner as such 
     provisions apply to medicare supplemental policies issued 
     under the standards established under subsection (p).
       ``(4) Opportunity of current policyholders to purchase 
     revised policies.--
       ``(A) In general.--No medicare supplemental policy of an 
     issuer with a benefit package that is revised under paragraph 
     (1) shall be deemed to meet the standards in subsection (c) 
     unless the issuer--
       ``(i) provides written notice during the 60-day period 
     immediately preceding the period established for the open 
     enrollment period established under section 1860B(b)(2)(A), 
     to each individual who is a policyholder or certificate 
     holder of a medicare supplemental policy issued by that 
     issuer (at the most recent available address of that 
     individual) of the offer described in clause (ii) and of the 
     fact that such individual will no longer be covered under 
     such policy as of January 1, 2004; and
       ``(ii) offers the policyholder or certificate holder under 
     the terms described in subparagraph (B), during at least the 
     period established under section 1860B(b)(2)(A), a medicare 
     supplemental policy with the benefit package that the 
     Secretary determines is most comparable to the policy in 
     which the individual is enrolled with coverage effective as 
     of the date on which the individual is first entitled to 
     benefits under part D.
       ``(B) Terms of offer described.--The terms described in 
     this subparagraph are terms which do not--
       ``(i) deny or condition the issuance or effectiveness of a 
     medicare supplemental policy described in subparagraph 
     (A)(ii) that is offered and is available for issuance to new 
     enrollees by such issuer;
       ``(ii) discriminate in the pricing of such policy because 
     of health status, claims experience, receipt of health care, 
     or medical condition; or
       ``(iii) impose an exclusion of benefits based on a 
     preexisting condition under such policy.
       ``(5) Elimination of obsolete policies with no 
     grandfathering.--No person may sell, issue, or renew a 
     medicare supplemental policy with a benefit package that is 
     classified as `H', `I', or `J' (or with a benefit package 
     classified as `J' with a high deductible feature) that has 
     not been revised under this subsection on or after January 1, 
     2004.
       ``(6) Penalties.--Each penalty under this section shall 
     apply with respect to policies revised under this subsection 
     as if such policies were issued under the standards 
     established under subsection (p), including the penalties 
     under subsections (a), (d), (p)(8), (p)(9), (q)(5), 
     (r)(6)(A), (s)(4), and (t)(2)(D).''.

     SEC. 6. HHS STUDIES AND REPORT ON UNIFORM PHARMACY BENEFIT 
                   CARDS AND SYSTEMS FOR TRANSFERRING 
                   PRESCRIPTIONS ELECTRONICALLY.

       (a) Studies.--The Secretary of Health and Human Services 
     shall conduct a study to determine the feasibility and 
     advisability of--
       (1) establishing a uniform format for pharmacy benefit 
     cards provided to beneficiaries by eligible entities under 
     the outpatient prescription drug benefit program under part D 
     of title XVIII of the Social Security Act (as added by 
     section 2); and
       (2) developing systems to electronically transfer 
     prescriptions under such program from the prescriber to the 
     pharmacist.
       (b) Report.--Not later than 2 years after the date of 
     enactment of this Act, the Secretary of Health and Human 
     Services shall submit to Congress a report on the results of 
     the studies conducted under subsection (a) together with any 
     recommendations for legislation that the Secretary determines 
     to be appropriate as a result of such studies.

     SEC. 7. GAO STUDY AND BIENNIAL REPORTS ON COMPETITION AND 
                   SAVINGS.

       (a) Ongoing Study.--The Comptroller General of the United 
     States shall conduct an ongoing study and analysis of the 
     outpatient prescription drug benefit program under part D of 
     title XVIII of the Social Security Act (as added by section 
     2), including an analysis of--
       (1) the extent to which the competitive bidding process 
     under such program fosters maximum competition and 
     efficiency; and
       (2) the savings to the medicare program resulting from such 
     outpatient prescription drug benefit program, including the 
     reduction in the number or length of hospital visits.
       (b) Initial Report on Competitive Bidding Process.--Not 
     later than 9 months after the date of enactment of this Act, 
     the Comptroller General of the United States shall submit to 
     Congress a report on the results of the portion of the study 
     conducted pursuant to subsection (a)(1).
       (c) Biennial Reports.--Not later than January 1, 2005, and 
     biennially thereafter, the Comptroller General of the United 
     States shall submit to Congress a report on the results of 
     the study conducted under subsection (a) together with such 
     recommendations for legislation and administrative action as 
     the Comptroller General determines appropriate.

     SEC. 8. EXPANSION OF MEMBERSHIP AND DUTIES OF MEDICARE 
                   PAYMENT ADVISORY COMMISSION (MEDPAC).

       (a) Expansion of Membership.--
       (1) In general.--Section 1805(c) of the Social Security Act 
     (42 U.S.C. 1395b-6(c)) is amended--
       (A) in paragraph (1), by striking ``17'' and inserting 
     ``19''; and
       (B) in paragraph (2)(B), by inserting ``experts in the area 
     of pharmacology and prescription drug benefit programs,'' 
     after ``other health professionals,''.
       (2) Initial terms of additional members.--
       (A) In general.--For purposes of staggering the initial 
     terms of members of the Medicare Payment Advisory Commission 
     under section 1805(c)(3) of the Social Security Act (42 
     U.S.C. 1395b-6(c)(3)), the initial terms of the 2 additional 
     members of the Commission provided for by the amendment under 
     paragraph (1)(A) are as follows:
       (i) One member shall be appointed for 1 year.
       (ii) One member shall be appointed for 2 years.
       (B) Commencement of terms.--Such terms shall begin on 
     January 1, 2003.
       (b) Expansion of Duties.--Section 1805(b)(2) of the Social 
     Security Act (42 U.S.C. 1395b-6(b)(2)) is amended by adding 
     at the end the following new subparagraph:
       ``(D) Prescription medicine benefit program.--Specifically, 
     the Commission shall review, with respect to the outpatient 
     prescription drug benefit program under part D, the impact of 
     such program on--
       ``(i) the pharmaceutical market, including costs and 
     pricing of pharmaceuticals, beneficiary access to such 
     pharmaceuticals, and trends in research and development;
       ``(ii) franchise, independent, and rural pharmacies; and
       ``(iii) beneficiary access to outpatient prescription 
     drugs, including an assessment of out-of-pocket spending, 
     generic and brand name drug utilization, and pharmacists' 
     services.''.


[[Page 10422]]

  Mr. MILLER. Madam President, I am proud to tell America's seniors who 
have been waiting in line for a long time that, finally, they have 
reached the front of the line. Their time has come. This Senate is 
ready to take action on prescription drugs.
  Our action cannot come soon enough. Most of our elderly in this 
country are not wealthy. Many live on fixed incomes. They are the ones 
who are hurt first and hurt most by rising health care costs.
  Our elderly have been waiting a long time. Waiting for Congress to do 
something. Waiting for Congress to help them with the skyrocketing 
costs of their prescription drugs.
  Our bill provides an affordable prescription drug benefit under 
Medicare for all seniors for the first time. Coverage begins with the 
first prescription filled because there is no deductible.
  For the roughly 12 million seniors in this country who earn less than 
$11,900 a year, there is no premium and no copayment. For our neediest 
seniors, our bill gives them their medicine for free.
  For those who earn more, our plan has an affordable a $25 monthly 
premium and a copayment of $10 for generic drugs and $40 for brand-name 
drugs. Also, our bill has no gap in coverage and an out-of-pocket 
maximum of $4,000 a year.
  We realize it is a huge, complex and complicated undertaking. And 
that is why this bill provides that in 2011, we will come back and re-
evaluate this program, just like we do with other complicated 
legislation.
  We believe that is the wise and judicious thing to do. In fact, if 
the original Medicare program had required such a reauthorization, we 
probably would have had a prescription drug benefit added to it long 
ago.
  But since Medicare was permanently authorized from the beginning, 
there was no requirement for Congress to re-evaluate and therefore 
modernize the program as circumstances changed over the years.
  And, reauthorization is not anything new or different. We re-evaluate 
many programs on a regular basis: We just did it with the Farm Bill. 
Welfare Reform, the Elementary and Secondary Education program, Head 
Start, all of them are re-evaluated at regular intervals.
  I hope that all members of the Senate will come together and pass 
this bill in the next few weeks so that our elderly across this land of 
plenty, those folks who have played by the rules and worked hard, can 
have some hope and some dignity in the last few years they are on this 
earth.
  Mr. KENNEDY. Madam President, Medicare is a solemn promise between 
government and its citizens and between the generations. It says, 
``Contribute to the system during your working years and we will assure 
you health security in your retirement years.'' But that promise is 
broken every day, because Medicare does not cover prescription drugs. 
The Graham-Miller-Kennedy Medicare Prescription Drug Act of 2002 sends 
the message loud and clear: it is time to mend Medicare's broken 
promise.
  There is no domestic issue that is more important to the American 
people than assuring that senior citizens can afford the prescription 
drugs they need. Senior citizens have an average income of $15,000, and 
they spend an average of $2,000 of that limited income on prescription 
drugs. Too many of our elderly citizens must choose between food on the 
table and the medicine their doctors prescribe. Too many of the elderly 
are taking half the drugs their doctor prescribes, or none at all, 
because they simply can't afford them.
  Every day we delay, the problem becomes worse. Prescription drugs 
costs are escalating at double-digit rates. One-third of all senior 
citizens don't have a dime of prescription drug coverage, and those who 
do have coverage are in danger of losing it. The sad fact is that the 
only senior citizens who have reliable, affordable, adequate coverage 
are the very poor on Medicaid. That is not good enough, and we are here 
today to say that America owes it to its senior citizens to do better.
  Every politician understands that senior citizens, and their 
children, and their grandchildren want action. Every politician 
understands that opposition to a prescription drug benefit is not a 
sustainable position. The question is not whether Congress will pass a 
bill; the question is whether we will pass a bill that truly provides 
the protection senior citizens need. The elderly do not need a 
prescription drug benefit that cannot pass the truth in advertising 
test. They don't need a benefit that pays pennies on the dollar for the 
medicines the elderly need to survive. They do not need a benefit that 
offers the pretence of relief but not the performance.
  The bill we are offering today mends the broken promise of Medicare. 
It offers real benefits at a price the elderly can afford. It is a 
lifeline for every senior citizen who needs prescription drugs. It is a 
priority for the American people.
  It is time to pass a Medicare prescription drug benefit. It is time 
for Congress to listen to the American people instead of the powerful 
special interests.
                                 ______
                                 
      By Mr. CLELAND:
  S. 2627. A bill to protect marine species off the coast of Georgia; 
to the Committee on Commerce, Science, and Transportation.
  Mr. CLELAND. Madam President, I rise today to introduce legislation 
to help protect marine species in the exclusive economic zone off the 
coast of Georgia. Shark gillnetting causes bycatch of many marine 
species, including valuable gamefish such as tarpon, red drum, king 
mackerel, and cobia and leatherback sea turtles, a protected species. 
Gillnets are already prohibited in Georgia's State waters, and my 
legislation would also prohibit this gear from being used in the 
Federal waters off the coast of Georgia. This legislation is supported 
by the Georgia Department of Natural Resources, which has jurisdiction 
over the State's coastal resources.
  My proposal does not prohibit shark fishing but rather affects the 
means of fishing. Shark fishers can use other methods for fishing such 
as long-lines or hook and line as alternatives. Additionally, this bill 
only affects the waters off the coast of Georgia. The neighboring 
States are still allowed to handle the bycatch, enforcement, and other 
issues as they believe is appropriate.
  The waters affected by the legislation are home to many types of 
marine life that are vitally important to Georgia's traditional and 
expanding charter fishery, as well as the state's coastal communities 
and tourism industry. These businesses are negatively impacted by the 
shark gillnetting bycatch rates and its impacts on gamefish 
populations, including some already overfished stocks. In August 2000, 
I was contacted by some of these Georgia business people who are 
concerned over what they see as a dramatic decrease in the fish 
population and about the future viability of their businesses. These 
citizens work to create a delicate balance between the environment and 
their livelihood by limiting their catches and releasing fish to help 
insure the sustained health of local fish stocks and their habitats. 
Shark gillnetting has disrupted this balance. My legislation is the 
first step to bringing this balance back in line.
  As the Commerce Committee, of which I am a member, begins the 
reauthorization of the Magnuson-Stevens Fishery Conservation Management 
Act, I will work with Chairman Hollings to address this issue. It is at 
once an environmental issue, a small business issue, a state 
sovereignty issue, and it is the right thing to do.
                                 ______
                                 
      By Mr. KENNEDY (for himself, Mr. DeWine, Mr. Harkin, Mr. McCain, 
        Mr. Durbin, Mr. Graham, Mr. Wellstone, Ms. Collins, Mrs. 
        Feinstein, and Mr. Reed):
  S. 2626. A bill to protect the public health by providing the Food 
and Drug Administration with certain authority to regulate tobacco 
products; to the Committee on Health, Education, Labor, and Pensions.
  Mr. DeWINE. Madam President, today Senator Kennedy, my colleague from 
Massachusetts, and I, Senator

[[Page 10423]]

Durbin, and others are introducing a bill designed to help protect 
children from the dangers of tobacco. Quite simply, our bill would 
finally give the Food and Drug Administration the authority it needs to 
effectively regulate both the manufacture and the sale of tobacco 
products.
  My colleagues will all remember that we visited this issue a few 
years ago, in 1998, when our colleague from Arizona, Senator McCain, 
and others introduced the Universal Tobacco Settlement Act, which 
included a major section that provided the FDA with the authority to 
regulate tobacco products. Also, of course, during 1998, 46 States 
entered into an agreement known as the Master Settlement Agreement, 
MSA. They entered into that agreement with the major tobacco companies 
to settle all State lawsuits seeking to recover the Medicaid costs of 
treating smokers.
  Fast forward from 1998 until today. Tobacco proponents would have you 
believe this master settlement resolved the issue of tobacco use by 
imposing all these restrictions. But the truth is, it did not. Smoking 
among young people remains a huge national problem.
  Every day in this country, nearly 5,000 young people under the age of 
18 try their first cigarette. In my own home State of Ohio, 33 
percent--one-third--of children 18 and under smoke. These kids in Ohio, 
by themselves, go through 45 million packs of cigarettes each year.
  If that is not bad enough, look at it another way: 90 percent of 
smokers start smoking before the age of 19. More than 6.4 million 
children across this country will die prematurely because of a decision 
they will make as children, as adolescents--a decision to start smoking 
cigarettes.
  In my home State of Ohio, as I indicated, one-third of the children 
smoke. We know the statistics are that one-third of people who smoke in 
this country will die prematurely because of an alcohol-related 
illness. One-third of the one-third, therefore, in the State of Ohio 
will die prematurely.
  While States have limited options available for tobacco advertising 
under this 1998 Master Settlement Agreement, the reality is that the 
tobacco companies still are able to choose the contents of their 
advertisements. They are still able to get around this settlement. They 
are still able to run ads like this: ``Skol, A Pinch Better.'' Guess 
where that ad ran? In Sports Illustrated.
  How many young people in this country every week wait for that Sports 
Illustrated to come in the mail, or buy it when it comes to the store?
  The companies are savvy. They have really changed their marketing 
strategies. They have concentrated more money into different 
advertising markets. As a result, more than 3 years after the major 
tobacco companies agreed to stop marketing to children as part of this 
tobacco settlement, children are still twice as likely as adults to be 
exposed to tobacco advertising.
  Let me repeat that. Children are still twice as likely as adults to 
be exposed to tobacco advertising.
  This chart shows and represents a poll which was done. The question 
asked was: Have you seen any advertising for cigarettes or tobacco in 
the last 2 weeks? Among teens, 64 percent said yes; adults, only 27 
percent.
  In spite of the claim that tobacco companies are not targeting 
children, for whatever reason that is the market that is hearing it; 
that is who is seeing the message; that is who is hearing the message; 
that is whom the message is affecting.
  According to the Federal Trade Commission's annual report on 
cigarette sales and advertising, the year 2000 represented the largest 
increase ever in tobacco companies' spending on ``promotional 
allowances''; that is, the money tobacco companies pay retailers to 
promote their products in prominent locations in stores, or for high 
visible shelf space. We know that is one of the greatest marketing 
techniques--put it somewhere I can see it when I walk in the store. It 
is right at eye level for kids near the cash register, in an aisle 
where the customer must walk by to pay the cashier.
  That same year--the year 2000--cigarette manufacturers spent a record 
$9.5 billion on advertising and promotion. That is an increase of 16 
percent from the year 1999.
  Tobacco companies also spend billions of dollars advertising through 
enticing promotional items--lighters, hats, and other products--they 
give away for free at the ``point of sale,'' or, in other words, at the 
cash register or the place of checkout in the grocery store or the 
convenience store.
  In fact, spending on such promotional or value-added items increased 
by 37 percent between 1999 and the year 2000.
  Let us not fool ourselves. These promotional strategies and 
advertisements reach our children. Statistics show that 75 percent of 
our children visit a convenience store at least once a week.
  I ask my colleagues. The next time you walk into a convenience store, 
look at how many different times you see an advertisement for tobacco 
products. They are everywhere. You walk in the store, and it may be on 
the clock--a little promotional clock that says when the store is open 
and when the store is closed. They will be at eye level. They will be 
by the cashier when you check out. They will be everywhere--image after 
image after image. It is calculated, and it works. Convenience stores 
are a place--right or wrong--where kids go. Seventy-five percent of 
kids visit convenience stores, as I said, at least once a week. That is 
a target area.
  This isn't just about advertising and marketing schemes. It is also 
about to be manufacturers' failure to disclose the specific ingredients 
in their products.
  I realize full well that tobacco users and nonusers alike recognize 
and understand that tobacco products are hazardous to their health. 
Everybody knows that. That is not what I am talking about. I am talking 
about requiring the tobacco companies to list the ingredients in their 
products. They do not have to do that today. Tobacco is an unregulated 
product. I believe it makes common sense that tobacco companies should 
be required to list when they put arsenic--and they do--or put 
formaldehyde or ammonia in the cigarettes. They should have to at least 
list it. It just makes common sense. Yet the law today does not require 
them to do that.
  While simply listing the ingredients, toxic as they may be, might not 
seem like much, think about it this way. Current law makes sure that we 
know what is in products designed to help people quit smoking--products 
such as the patch or the Nicorette gum, which are regulated, but not 
the very product that gets people addicted in the first place, the 
cigarettes. Doesn't that seem absurd?
  Think about it this way: Right now, the Food and Drug Administration 
requires Philip Morris to print the ingredients in its Kraft Macaroni 
and Cheese. They have to print all of the ingredients. Pick up a box. 
Every single ingredient that is in there they have to print but not the 
ingredients in cigarettes, a product, by the way, that contributes to 
the deaths of more than 440,000 people a year.
  Right now the FDA requires Philip Morris, which owns Nabisco, to 
print the ingredients contained in Oreo cookies and Ritz crackers but 
not the ingredients in Camel or Winston cigarettes, even though 
cigarettes cause one-third of all cancer deaths and 90 percent of lung 
cancer deaths. It is unfathomable to me--and I think it is unfathomable 
to everybody--that we would require the listing of ingredients on these 
products. We even require the listing of the ingredients on bottled 
water. Yet we do not require the listing of ingredients for one of the 
leading causes of death and disease in this country.
  Right now, the FDA requires printed ingredients for chewing gum, 
lipstick, bottled water, and ice cream, but not for cigarettes--a 
product that causes 20 percent of all heart disease deaths, 90 percent 
of lung cancer, which is the leading cause of cancer deaths among 
women, and the leading cause of preventable death in the United States.
  Another way to look at it is if a company wants to market a food 
product as ``fat-free'' or ``reduced-fat'' or

[[Page 10424]]

``lite,'' that company is required to meet certain standards regarding 
the number of calories or the amount of fat grams in that product. You 
can look right on that package and find it. Yet cigarette companies can 
call a cigarette a ``Camel Light'' or a ``Marlboro Light'' and not 
reveal a thing about the amount of tar or nicotine or arsenic in that 
supposedly ``light'' cigarette.
  Not having access to all of the information about this deadly product 
just makes no sense. It is something we need to change. With the bill 
we are introducing, we can change it.
  It is time we finally give the FDA the authority it needs to fix 
these problems. The legislation that Senator Kennedy and Senator Durbin 
and I are introducing will do just that.
  First, the bill would make changes regarding tobacco advertising. It 
would give the FDA authority to restrict tobacco industry marketing--
consistent with the first amendment--that targets our children.
  Additionally, our bill would require advertisements to be in black 
and white text only, unless they are in adult publications, and would 
define adult publications in terms of readership.
  Next, our legislation would give consumers more information about the 
ingredients in tobacco products. Specifically, the bill would provide 
the FDA with the ability to publish the ingredients of tobacco 
products.
  It would require a listing of all ingredients, substances, and 
compounds added by the manufacturer to the tobacco, to the paper, or to 
the filter.
  It would require a description of the content, delivery, and form of 
nicotine in each tobacco product.
  It would require information on the health, behavioral, or 
physiologic effects of the tobacco products.
  Further, it would require tobacco companies to provide information on 
the reduction of risk to health available through technology.
  And finally, it would establish an approval process for all new 
tobacco products entering the market--new products such as Advance with 
its ``trionic filter'', which claims to have--and I quote--``all of the 
taste . . . less of the toxins'' of other cigarettes.
  Obviously, we already know that smoking is a health risk. We all know 
that. But, what we don't know about is the harm caused by or what 
adverse health effects are created by the other ingredients in tobacco 
products or by how the tobacco is burned. We do not know all the 
details about that. Tobacco companies should share that. There are 
tobacco products on the market that are not conventional cigarettes. 
They have carbon filters running down the center of them. They are 
sophisticated products that burn tobacco differently, that affect the 
body differently, and that may cause people to smoke them differently. 
These are all things that should be examined, they should be reviewed, 
and they should be commented on by the Food and Drug Administration, so 
the public knows what they are choosing to consume.
  Here we have a pack of Eclipse cigarettes, which claims it will--and 
I quote--``Change the way you smoke.'' It also claims that it--and 
again I quote--``may present less risk of cancer, bronchitis, and 
possibly emphysema.'' This is what they say in the bold print. I don't 
know who ``they'' are, and I don't know where they got their 
information, but the public should know.
  Below the bold print in this same pack is the following, smaller 
print:

       Evidence suggests that smokers who already have 
     cardiovascular disease and who switch to Eclipse may further 
     increase their health risk.

  So in the bold print we have a statement that is not cited and not 
supported, and then in the fine print we have a statement that is 
supported by numerous studies. Which claim are you more likely to 
believe? And which statement should be broadcast in bold lettering to 
the consumer?
  By introducing this bill, we are finally saying we are not going to 
let tobacco manufacturers have free rein over markets and consumers 
anymore.
  Today, we are taking a step towards making sure the public gets 
adequate information about whether to continue to smoke or even to 
start smoking in the first place. We all know it is dangerous. But the 
tobacco companies no longer should be able to hide all the facts.
  With this bill, we are not just saying, ``Buyer beware''--we all know 
there are dangers--but what we are saying is, ``Tobacco companies, be 
honest.'' We are saying, ``Tobacco companies, stop marketing to our 
kids.'' We are saying, ``Tobacco companies, tell consumers about what 
they are really buying.''
  Madam President, it is time we hold these companies to the same 
standards we expect from other producers. It is time to give kids a 
fighting chance when it comes to resisting cigarettes. It is time to 
finally just do the right thing.
  I thank the Chair and yield the floor.
  The PRESIDING OFFICER. The Senator from Massachusetts is recognized.
  Mr. KENNEDY. Madam President, I join my friend and colleague from 
Ohio, Senator DeWine, in expressing our appreciation to all of our 
cosponsors for this legislation that we have introduced. And I commend 
him for the excellent presentation and description of the legislation 
that he has just given to the Senate this morning.
  We indicate to our friends and colleagues that this legislation is 
very similar to the legislation that was included in the larger tobacco 
legislation the Senate considered several years ago. It was not really 
subject to any amendments that I remember during that period of time. 
That overall legislation, I believe, gained 58 votes on the floor of 
the Senate. So we had broad support for the legislation. In many 
respects, I think there is even broader support for this particular 
legislation.
  So we are very hopeful we will be able to make progress in 
considering this legislation favorably in the Senate, and in the House, 
and have it become law. We have every intention of holding hearings 
and, hopefully a markup in July. I believe we will have very broad 
support from our colleagues for the reasons Senator DeWine has 
outlined.
  This legislation is focused on children and what we can do to 
discourage children from becoming addicted to tobacco in this country. 
I will just take a very few moments to review the highlights.
  Just very quickly, every day, 5,000 children try their first 
cigarette. More than 2,000 become new daily smokers. A third will die 
prematurely.
  If the current trend continues, 6.4 million children, who are under 
18 years of age, will die prematurely from smoking related illness. 
400,000 people a year die from smoke related illness. We are telling 
the youth of America their lives are going to be greatly shortened as a 
result of this kind of addiction.
  As I mentioned, 400,000 Americans die each year from smoke-caused 
disease, and tobacco costs $75 billion in annual health care costs. 
These are costs that are spent by Medicare, Medicaid, veterans 
hospitals, and expended privately.
  Again, to give the focus of where the advertising is going, this 
chart shows the number of teens between 12 and 17 who were reached five 
or more times by tobacco advertising in the year 1999.
  A March 2002 study asked teenagers and adults, ``have you seen any 
advertising for cigarettes or spit tobacco in the last 2 weeks?'' For 
the teenagers, 64 percent had seen advertising; while for adults, just 
27 percent.
  What we are maintaining is that the industry is targeting children. 
These are commercial surveys, and they substantiate our point.
  The money that is being expended for these extraordinary advertising 
budgets is targeted to teenagers, to effectively hook them and addict 
them.
  This chart shows the very substantial increase in promotional 
expenditures from 1997 to the year 2000. As the chart showed, 
expenditures totaled $5.660 billion in 1997 and increased to $9.5 
billion in the year 2000.
  Over the last 5 years, it has virtually doubled. Where is it being 
targeted? The children. Are the children seeing it? Yes. Are they 
becoming more addicted? Yes. Is this really a national

[[Page 10425]]

problem? Yes. Can we do something about it? Yes. Will this legislation 
do something about it? Yes, because it incorporates many of the 
recommendations made by former heads of the FDA as well as from the 
many experts we have heard from at a range of hearings we have held.
  The bottom line: If smoking rates do not decline, over 6 million 
children who are alive today under the age of 18 will suffer premature 
death.
  This is a matter of enormous importance. It is of importance to 
families, to parents, to children, and to our country. We have 
targeted, responsible legislation to deal with this issue. We are 
serious about presenting it to the Senate, which we will do. We are 
looking for broad support from the American people.
  We are grateful for all of the public health agencies that support 
it: cancer, heart, lung, all of the various health-related agencies 
that support this legislation. They are going to be strong allies.
  Mr. Myers, who is with Tobacco Free Children, has done such an 
extraordinary job and has made this a high priority. We are serious 
about it, and we hope to be able to help the families in this country 
by doing something about children being addicted to cigarettes.
  This bill will give the Food and Drug Administration broad authority 
to regulate tobacco products for the protection of the public health. 
We cannot in good conscience allow the federal agency most responsible 
for protecting the public health to remain powerless to deal with the 
enormous risks of tobacco, the most deadly of all consumer products.
  The provisions in this bill closely track those in the bipartisan 
compromise reached during Senate consideration of comprehensive tobacco 
control legislation in 1998. Fifty-eight Senators supported it at that 
time. That legislation was never enacted because of disputes over 
tobacco taxation and litigation, not over FDA authority.
  This FDA provision is a fair and balanced approach to FDA regulation. 
It creates a new section in FDA jurisdiction for the regulation of 
tobacco products, with standards that allow for consideration of the 
unique issues raised by tobacco use. It is sensitive to the concerns of 
tobacco farmers, small businesses, and nicotine-dependent smokers. But, 
it clearly gives FDA the authority it needs in order to prevent youth 
smoking and to reduce addiction to this highly lethal product.
  I believe that any attempt to weaken the 1998 language would 
undermine the FDA's ability to deal effectively with the enormous 
health risks posed by smoking. This concern is shared by a number of 
independent public health experts. The bipartisan compromise agreed to 
in 1998 is still the best opportunity for Senators to come together and 
grant FDA the regulatory authority it needs to substantially reduce the 
number of children who start smoking and to help addicted smokers quit. 
Nothing less will do the job.
  The stakes are vast. Five thousand children have their first 
cigarette every day, and two thousand of them become daily smokers. 
Nearly a thousand of them will die prematurely from tobacco-induced 
diseases. Smoking is the number one preventable cause of death in the 
nation today. Cigarettes kill well over four hundred thousand Americans 
each year. That is more lives lost than from automobile accidents, 
alcohol abuse, illegal drugs, AIDS, murder, suicide, and fires 
combined. Our response to a public health problem of this magnitude 
must consist of more than half-way measures.
  We must deal firmly with tobacco company marketing practices that 
target children and mislead the public. The Food and Drug 
Administration needs broad authority to regulate the sale, 
distribution, and advertising of cigarettes and smokeless tobacco.
  The tobacco industry currently spends over nine billion dollars a 
year to promote its products. Much of that money is spent in ways 
designed to tempt children to start smoking, before they are mature 
enough to appreciate the enormity of the health risk. The industry 
knows that more than 90 percent of smokers begin as children and are 
addicted by the time they reach adulthood.
  Documents obtained from tobacco companies prove, in the companies' 
own words, the magnitude of the industry's efforts to trap children 
into dependency on their deadly product. Recent studies by the 
Institute of Medicine and the Centers for Disease Control show the 
substantial role of industry advertising in decisions by young people 
to use tobacco products. If we are serious about reducing youth 
smoking, FDA must have the power to prevent industry advertising 
designed to appeal to children wherever it will be seen by children. 
This legislation will give FDA the ability to stop tobacco advertising 
which glamorizes smoking from appearing where it will be seen by 
significant numbers of children.
  FDA authority must also extend to the sale of tobacco products. 
Nearly every state makes it illegal to sell cigarettes to children 
under 18, but surveys show that those laws are rarely enforced and 
frequently violated. FDA must have the power to limit the sale of 
cigarettes to face-to-face transactions in which the age of the 
purchaser can be verified by identification. This means an end to self-
service displays and vending machine sales. There must also be serious 
enforcement efforts with real penalties for those caught selling 
tobacco products to children. This is the only way to ensure that 
children under 18 are not able to buy cigarettes.
  The FDA conducted the longest rulemaking proceeding in its history, 
studying which regulations would most effectively reduce the number of 
children who smoke. Seven hundred thousand public comments were 
received in the course of that rulemaking. At the conclusion of its 
proceeding, the Agency promulgated rules on the manner in which 
cigarettes are advertised and sold. Due to litigation, most of those 
regulations were never implemented. If we are serious about curbing 
youth smoking as much as possible, as soon as possible; it makes no 
sense to require FDA to reinvent the wheel by conducting a new multi-
year rulemaking process on the same issues. This legislation will give 
the youth access and advertising restrictions already developed by FDA 
the immediate force of law, as if they had been issued under the new 
statute.
  The legislation also provides for stronger warnings on all cigarette 
and smokeless tobacco packages, and in all print advertisements. These 
warnings will be more explicit in their description of the medical 
problems which can result from tobacco use. The FDA is given the 
authority to change the text of these warning labels periodically, to 
keep their impact strong.
  Nicotine in cigarettes is highly addictive. Medical experts say that 
it is as addictive as heroin or cocaine. Yet for decades, tobacco 
companies have vehemently denied the addictiveness of their products. 
No one can forget the parade of tobacco executives who testified under 
oath before Congress as recently as 1994 that smoking cigarettes is not 
addictive. Overwhelming evidence in industry documents obtained through 
the discovery process proves that the companies not only knew of this 
addictiveness for decades, but actually relied on it as the basis for 
their marketing strategy. As we now know, cigarette manufacturers 
chemically manipulated the nicotine in their products to make it even 
more addictive.
  The tobacco industry has a long, dishonorable history of providing 
misleading information about the health consequences of smoking. These 
companies have repeatedly sought to characterize their products as far 
less hazardous than they are. They made minor innovations in product 
design seem far more significant for the health of the user than they 
actually were. It is essential that FDA have clear and unambiguous 
authority to prevent such misrepresentations in the future. The largest 
disinformation campaign in the history of the corporate world must end.
  Given the addictiveness of tobacco products, it is essential that the 
FDA regulate them for the protection of the

[[Page 10426]]

public health. Over forty million Americans are currently addicted to 
cigarettes. No responsible public health official believes that 
cigarettes should be banned. A ban would leave forty million people 
without a way to satisfy their drug dependency. FDA should be able to 
take the necessary steps to help addicted smokers overcome their 
addiction, and to make the product less toxic for smokers who are 
unable or unwilling to stop. To do so, FDA must have the authority to 
reduce or remove hazardous ingredients from cigarettes, to the extent 
that it becomes scientifically feasible. The inherent risk in smoking 
should not be unnecessarily compounded.
  Recent statements by several tobacco companies make clear that they 
plan to develop what they characterize as ``reduced risk'' cigarettes. 
This legislation will require manufacturers to submit such ``reduced 
risk'' products to the FDA for analysis before they can be marketed. No 
health-related claims will be permitted until they have been verified 
to the FDA's satisfaction. These safeguards are essential to prevent 
deceptive industry marketing campaigns, which could lull the public 
into a false sense of health safety.
  Smoking is the number one preventable cause of death in America. 
Congress must vest FDA not only with the responsibility for regulating 
tobacco products, but with full authority to do the job effectively.
  This legislation will give the FDA the legal authority it needs: To 
reduce youth smoking by preventing tobacco advertising which targets 
children; to prevent the sale of tobacco products to minors; to help 
smokers overcome their addiction; to make tobacco products less toxic 
for those who continue to use them; and to prevent the tobacco industry 
from misleading the public about the dangers of smoking.
  We cannot allow the tobacco industry to stop us from doing what we 
know is right for America's children. I intend to do all I can to see 
that Congress enacts this legislation this year. The public health 
demands it.
  Mrs. FEINSTEIN. Mr. President, I rise today with Senators Kennedy and 
DeWine in support of legislation to empower the Food and Drug 
Administration, FDA, to regulate tobacco products.
  During my time in the Senate, I have become very involved with 
cancer. I am the Co-Chair of the Senate Cancer Caucus and the Vice-
Chair of the National Dialogue on Cancer, which is Chaired by former 
President and Barbara Bush.
  The cancer community is united in the belief that the single most 
important preventive measure is to place tobacco products under the 
regulatory control of the FDA. I stand behind the cancer community and 
express the same belief.
  Smoking causes one-third of all cancers, and is the cause of 
approximately 165,000 deaths annually.
  I firmly believe that cancer cannot be conquered without addressing 
smoking and the use of tobacco products.
  Smoking results in death or disability for over half of tobacco 
users, according to the Centers for Disease Control, CDC. Smoking costs 
the health care system over $70 billion annually.
  Over the past two decades, we have learned that tobacco companies 
have manipulated the level of nicotine in cigarettes to increase the 
number of people addicted to their product.
  There are more than 40 chemicals in tobacco smoke that cause cancer 
in humans and animals, according to the CDC. Tobacco smoke has toxic 
components, as well as tar, carbon monoxide and other dangerous 
additives.
  It is long past time to reduce the addictive nature of cigarettes and 
curtail the marketing of these products to young people. I believe that 
empowering the FDA to regulate tobacco will help do that.
  The U.S. Surgeon General and the Centers for Disease Control and 
Prevention have unequivocally demonstrated that, for example, anti-
smoking campaigns can reduce smoking, a major cause of cancer.
  California is a good example: My state started an aggressive tobacco 
control program in 1989 and throughout the 1990s, tobacco use dropped 
at two to three times faster than the rest of the country.
  Ninety percent of adult smokers begin before age 18 and every day, 
3,000 young people become smokers.
  This bill will provide meaningful regulation by the Food and Drug 
Administration of the content and marketing of tobacco products, 
especially the addicting and carcinogenic components.
  Dr. C. Everett Koop, former US Surgeon General, and Dr. David 
Kessler, former Commissioner of the Food and Drug Administration, in 
1997 report, cited FDA and other studies and said:

       Nicotine in cigarettes and smokeless tobacco has the same 
     pharmacological effects as other drugs that FDA has 
     traditionally regulated . . . nicotine is extremely addictive 
     . . . and the vast majority of people who use nicotine-
     containing cigarettes and smokeless tobacco do so to satisfy 
     their craving for the pharmacological effects of nicotine; 
     that is, to satisfy their drug-dependence or addiction.

  They go to recommend that the ``FDA should continue to have authority 
to regulate all areas of nicotine, as well as other constituents and 
ingredients, and that authority should be made completely explicit.''
  I am pleased that to note that even the Philip Morris Companies has 
acknowledged the need for FDA to regulate tobacco. On their website, 
they say:

       We believe federal legislation that includes granting FDA 
     authority to regulate tobacco products could effectively 
     address many of the complex tobacco issues that concern the 
     public, the public health community and us.

  It is long past time to reduce the addictive nature of cigarettes and 
curtail the marketing of these products to young people. This bill 
gives FDA the power to regulate tobacco products' content, design, 
sale, and marketing.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2626

       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 ``Youth 
     Smoking Prevention and Public Health Protection Act''.
       (b) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title.
Sec. 2. Findings.
Sec. 3. Purpose.
Sec. 4. Scope and effect.

         TITLE I--AUTHORITY OF THE FOOD AND DRUG ADMINISTRATION

Sec. 101. Amendment of Federal Food, Drug, and Cosmetic Act.

                     ``CHAPTER IX--TOBACCO PRODUCTS

``Sec. 900. Definitions.
``Sec. 901. FDA authority over tobacco products
``Sec. 902. Adulterated tobacco products.
``Sec. 903. Misbranded tobacco products.
``Sec. 904. Submission of health information to the Secretary.
``Sec. 905. Annual registration.
``Sec. 906. General provisions respecting control of tobacco products.
``Sec. 907. Performance standards.
``Sec. 908. Notification and other remedies
``Sec. 909. Records and reports on tobacco products.
``Sec. 910. Premarket review of certain tobacco products.
``Sec. 911. Judicial review.
``Sec. 912. Postmarket surveillance
``Sec. 913. Reduced risk tobacco products.
``Sec. 914. Equal treatment of retail outlets.
``Sec. 915. Jurisdiction of and coordination with the Federal Trade 
              Commission.
``Sec. 916. Congressional review provisions.
``Sec. 917. Regulation requirement.
``Sec. 918. Preservation of State and local authority.
``Sec. 919. Tobacco Products Scientific Advisory Committee.
Sec. 102. Construction of current regulations.
Sec. 103. Conforming and other amendments to general provisions.

  TITLE II--TOBACCO PRODUCT WARNINGS AND SMOKE CONSTITUENT DISCLOSURE

Sec. 201. Cigarette label and advertising warnings.
Sec. 202. Authority to revise cigarette warning label Statements.
Sec. 203. Smokeless tobacco labels and advertising warnings.
Sec. 204. Authority to revise smokeless tobacco product warning label 
              Statements.

[[Page 10427]]

Sec. 205. Tar, nicotine, and other smoke constituent disclosure to the 
              public.
Sec. 206. Unlawful advertisements.

     SEC. 2. FINDINGS.

       The Congress finds the following:
       (1) The use of tobacco products by the Nation's children is 
     a pediatric disease of epic and worsening proportions that 
     results in new generations of tobacco-dependent children and 
     adults.
       (2) A consensus exists within the scientific and medical 
     communities that tobacco products are inherently dangerous 
     and cause cancer, heart disease, and other serious adverse 
     health effects.
       (3) Nicotine is an addictive drug.
       (4) Virtually all new users of tobacco products are under 
     the minimum legal age to purchase such products.
       (5) Tobacco advertising and marketing contribute 
     significantly to the use of nicotine-containing tobacco 
     products by adolescents.
       (6) Because past efforts to restrict advertising and 
     marketing of tobacco products have failed adequately to curb 
     tobacco use by adolescents, comprehensive restrictions on the 
     sale, promotion, and distribution of such products are 
     needed.
       (7) Federal and State governments have lacked the legal and 
     regulatory authority and resources they need to address 
     comprehensively the public health and societal problems 
     caused by the use of tobacco products.
       (8) Federal and State public health officials, the public 
     health community, and the public at large recognize that the 
     tobacco industry should be subject to ongoing oversight.
       (9) Under Article I, Section 8 of the Constitution, the 
     Congress is vested with the responsibility for regulating 
     interstate commerce and commerce with Indian tribes.
       (10) The sale, distribution, marketing, advertising, and 
     use of tobacco products are activities in and substantially 
     affecting interstate commerce because they are sold, 
     marketed, advertised, and distributed in interstate commerce 
     on a nationwide basis, and have a substantial effect on the 
     Nation's economy.
       (11) The sale, distribution, marketing, advertising, and 
     use of such products substantially affect interstate commerce 
     through the health care and other costs attributable to the 
     use of tobacco products.
       (12) It is in the public interest for Congress to enact 
     legislation that provides the Food and Drug Administration 
     with the authority to regulate tobacco products. The benefits 
     to the American people from enacting such legislation would 
     be significant in human and economic terms.
       (13) Tobacco use is the foremost preventable cause of 
     premature death in America. It causes over 400,000 deaths in 
     the United States each year.
       (14) Reducing the use of tobacco by minors by 50 percent 
     would prevent well over 10,000,000 of today's children from 
     becoming regular, daily smokers, saving over 3,000,000 of 
     them from premature death due to tobacco induced disease. 
     Such a reduction in youth smoking would also result in 
     approximately $110,000,000,000 in savings attributable to 
     reduced health care costs.
       (15) Advertising, marketing, and promotion of tobacco 
     products have been especially directed to attract young 
     persons to use tobacco products and these efforts have 
     resulted in increased use of such products by youth. Past 
     efforts to oversee these activities have not been successful 
     in adequately preventing such increased use.
       (16) In 1999, the tobacco industry spent close to 
     $8,240,000,000 to attract new users, retain current users, 
     increase current consumption, and generate favorable long-
     term attitudes toward smoking and tobacco use.
       (17) Tobacco product advertising often misleadingly 
     portrays the use of tobacco as socially acceptable and 
     healthful to minors.
       (18) Tobacco product advertising is regularly seen by 
     persons under the age of 18, and persons under the age of 18 
     are regularly exposed to tobacco product promotional efforts.
       (19) Through advertisements during and sponsorship of 
     sporting events, tobacco has become strongly associated with 
     sports and has become portrayed as an integral part of sports 
     and the healthy lifestyle associated with rigorous sporting 
     activity.
       (20) Children are exposed to substantial and unavoidable 
     tobacco advertising that leads to favorable beliefs about 
     tobacco use, plays a role in leading young people to 
     overestimate the prevalence of tobacco use, and increases the 
     number of young people who begin to use tobacco.
       (21) The use of tobacco products in motion pictures and 
     other mass media glamorizes its use for young people and 
     encourages them to use tobacco products.
       (22) Tobacco advertising expands the size of the tobacco 
     market by increasing consumption of tobacco products 
     including tobacco use by young people.
       (23) Children are more influenced by tobacco advertising 
     than adults, they smoke the most advertised brands, and 
     children as young as 3 to 6 years old can recognize a 
     character associated with smoking at the same rate as they 
     recognize cartoons and fast food characters.
       (24) Tobacco company documents indicate that young people 
     are an important and often crucial segment of the tobacco 
     market.
       (25) Comprehensive advertising restrictions will have a 
     positive effect on the smoking rates of young people.
       (26) Restrictions on advertising are necessary to prevent 
     unrestricted tobacco advertising from undermining legislation 
     prohibiting access to young people and providing for 
     education about tobacco use.
       (27) International experience shows that advertising 
     regulations that are stringent and comprehensive have a 
     greater impact on overall tobacco use and young people's use 
     than weaker or less comprehensive ones.
       (28) Text-only requirements, while not as stringent as a 
     ban, will help reduce underage use of tobacco products while 
     preserving the informational function of advertising.
       (29) It is in the public interest for Congress to adopt 
     legislation to address the public health crisis created by 
     actions of the tobacco industry.
       (30) The final regulations promulgated by the Secretary of 
     Health and Human Services in the August 28, 1996, issue of 
     the Federal Register (62 Fed. Reg. 44615-44618) for inclusion 
     as part 897 of title 21, Code of Federal Regulations, are 
     consistent with the standards set forth in the amendments 
     made by this Act for the regulation of tobacco products by 
     the Food and Drug Administration and the restriction on the 
     sale and distribution, including access to and the 
     advertising and promotion of, tobacco products contained in 
     such regulations are substantially related to accomplishing 
     the public health goals of this Act.
       (31) The regulations described in paragraph (30) will 
     directly and materially advance the Federal Government's 
     substantial interest in reducing the number of children and 
     adolescents who use cigarettes and smokeless tobacco and in 
     preventing the life-threatening health consequences 
     associated with tobacco use. An overwhelming majority of 
     Americans who use tobacco products begin using such products 
     while they are minors and become addicted to the nicotine in 
     those product before reaching the age of 18. Tobacco 
     advertising and promotion plays a crucial role in the 
     decision of these minors to begin using tobacco products. 
     Less restrictive and less comprehensive approaches have not 
     and will not be effective in reducing the problems addressed 
     by such regulations. The reasonable restrictions on the 
     advertising and promotion of tobacco products contained in 
     such regulations will lead to a significant decrease in the 
     number of minors using and becoming addicted to those 
     products.
       (32) The regulations described in paragraph (30) impose no 
     more extensive restrictions on communication by tobacco 
     manufacturers and sellers than are necessary to reduce the 
     number of children and adolescents who use cigarettes and 
     smokeless tobacco and to prevent the life-threatening health 
     consequences associated with tobacco use. Such regulations 
     are narrowly tailored to restrict those advertising and 
     promotional practices which are most likely to be seen or 
     heard by youth and most likely to entice them into tobacco 
     use, while affording tobacco manufacturers and sellers ample 
     opportunity to convey information about their products to 
     adult consumers.

     SEC. 3. PURPOSE.

       The purposes of this Act are--
       (1) to provide authority to the Food and Drug 
     Administration to regulate tobacco products under the Federal 
     Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.), by 
     recognizing it as the primary Federal regulatory authority 
     with respect to the manufacture, marketing, and distribution 
     of tobacco products;
       (2) to ensure that the Food and Drug Administration has the 
     authority to address issues of particular concern to public 
     health officials, especially the use of tobacco by young 
     people and dependence on tobacco;
       (3) to authorize the Food and Drug Administration to set 
     national standards controlling the manufacture of tobacco 
     products and the identity, public disclosure, and amount of 
     ingredients used in such products;
       (4) to provide new and flexible enforcement authority to 
     ensure that there is effective oversight of the tobacco 
     industry's efforts to develop and introduce less harmful 
     tobacco products;
       (5) to vest the Food and Drug Administration with the 
     authority to regulate the levels of tar, nicotine, and other 
     harmful components of tobacco products;
       (6) in order to ensure that adults are better informed, to 
     require tobacco product manufacturers to disclose research 
     which has not previously been made available, as well as 
     research generated in the future, relating to the health and 
     dependency effects or safety of tobacco products;
       (7) to continue to permit the sale of tobacco products to 
     adults in conjunction with measures to ensure that they are 
     not sold or accessible to underage purchasers; and
       (8) to impose appropriate regulatory controls on the 
     tobacco industry

     SEC. 4. SCOPE AND EFFECT.

       (a) Intended Effect.--Nothing in this Act (or an amendment 
     made by this Act) shall be construed to--

[[Page 10428]]

       (1) establish a precedent with regard to any other 
     industry, situation, circumstance, or legal action; or
       (2) affect any action pending in State, Tribal, or Federal 
     court, or any agreement, consent decree, or contract of any 
     kind.
       (b) Agricultural Activities.--The provisions of this Act 
     (or an amendment made by this Act) which authorize the 
     Secretary to take certain actions with regard to tobacco and 
     tobacco products shall not be construed to affect any 
     authority of the Secretary of Agriculture under existing law 
     regarding the growing, cultivation, or curing of raw tobacco.

         TITLE I--AUTHORITY OF THE FOOD AND DRUG ADMINISTRATION

     SEC. 101. AMENDMENT OF FEDERAL FOOD, DRUG, AND COSMETIC ACT.

       (a) Definition of Tobacco Products.--Section 201 of the 
     Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321) is 
     amended by adding at the end the following:
       ``(kk) The term `tobacco product' means any product made or 
     derived from tobacco that is intended for human consumption, 
     including any component, part, or accessory of a tobacco 
     product (except for raw materials other than tobacco used in 
     manufacturing a component, part, or accessory of a tobacco 
     product).''.
       (b) FDA Authority Over Tobacco Products.--The Federal Food, 
     Drug, and Cosmetic Act (21 U.S.C. 301 et seq.) is amended--
       (1) by redesignating chapter IX as chapter X;
       (2) by redesignating sections 901 through 907 as sections 
     1001 through 1007; and
       (3) by inserting after section 803 the following:

                     ``CHAPTER IX--TOBACCO PRODUCTS

     ``SEC. 900. DEFINITIONS.

       ``In this chapter:
       ``(1) Brand.--The term `brand' means a variety of tobacco 
     product distinguished by the tobacco used, tar content, 
     nicotine content, flavoring used, size, filtration, or 
     packaging, logo, registered trademark or brand name, 
     identifiable pattern of colors, or any combination of such 
     attributes.
       ``(2) Cigarette.--The term `cigarette' has the meaning 
     given that term by section 3(1) of the Federal Cigarette 
     Labeling and Advertising Act (15 U.S.C. 1332(1)), but also 
     includes tobacco, in any form, that is functional in the 
     product, which, because of its appearance, the type of 
     tobacco used in the filler, or its packaging and labeling, is 
     likely to be offered to, or purchased by, consumers as a 
     cigarette or as roll-your-own tobacco.
       ``(3) Cigarette tobacco.--The term `cigarette tobacco' 
     means any product that consists of loose tobacco that is 
     intended for use by consumers in a cigarette. Unless 
     otherwise stated, the requirements for cigarettes shall also 
     apply to cigarette tobacco.
       ``(4) Commerce.--The term `commerce' has the meaning given 
     that term by section 3(2) of the Federal Cigarette Labeling 
     and Advertising Act (15 U.S.C. 1332(2)).
       ``(5) Distributor.--The term `distributor' as regards a 
     tobacco product means any person who furthers the 
     distribution of cigarette or smokeless tobacco, whether 
     domestic or imported, at any point from the original place of 
     manufacture to the person who sells or distributes the 
     product to individuals for personal consumption. Common 
     carriers are not considered distributors for purposes of this 
     chapter.
       ``(6) Indian tribe.--The term `Indian tribe' has the 
     meaning given such term in section 4(e) of the Indian Self 
     Determination and Education Assistance Act (25 U.S.C. 
     450b(e)).
       ``(7) Little cigar.--The term `little cigar' has the 
     meaning given that term by section 3(7) of the Federal 
     Cigarette Labeling and Advertising Act (15 U.S.C. 1332(7)).
       ``(8) Nicotine.--The term `nicotine' means the chemical 
     substance named 3-(1-Methyl-2-pyrrolidinyl) pyridine or 
     C[10]H[14]N[2], including any salt or complex of nicotine.
       ``(9) Package.--The term `package' means a pack, box, 
     carton, or container of any kind or, if no other container, 
     any wrapping (including cellophane), in which cigarettes or 
     smokeless tobacco are offered for sale, sold, or otherwise 
     distributed to consumers.
       ``(10) Retailer.--The term `retailer' means any person who 
     sells cigarettes or smokeless tobacco to individuals for 
     personal consumption, or who operates a facility where self-
     service displays of tobacco products are permitted.
       ``(11) Roll-your-own tobacco.--The term `roll-your-own 
     tobacco' means any tobacco which, because of its appearance, 
     type, packaging, or labeling, is suitable for use and likely 
     to be offered to, or purchased by, consumers as tobacco for 
     making cigarettes.
       ``(12) Smokeless tobacco.--The term `smokeless tobacco' 
     means any product that consists of cut, ground, powdered, or 
     leaf tobacco and that is intended to be placed in the oral or 
     nasal cavity.
       ``(13) State.--The term `State' means any State of the 
     United States and, for purposes of this chapter, includes the 
     District of Columbia, the Commonwealth of Puerto Rico, Guam, 
     the Virgin Islands, American Samoa, Wake Island, Midway 
     Islands, Kingman Reef, Johnston Atoll, the Northern Mariana 
     Islands, and any other trust territory or possession of the 
     United States.
       ``(14) Tobacco product manufacturer.--Term `tobacco product 
     manufacturer' means any person, including any repacker or 
     relabeler, who--
       ``(A) manufactures, fabricates, assembles, processes, or 
     labels a finished cigarette or smokeless tobacco product; or
       ``(B) imports a finished cigarette or smokeless tobacco 
     product for sale or distribution in the United States.
       ``(15) United states.--The term `United States' means the 
     50 States of the United States of America and the District of 
     Columbia, the Commonwealth of Puerto Rico, Guam, the Virgin 
     Islands, American Samoa, Wake Island, Midway Islands, Kingman 
     Reef, Johnston Atoll, the Northern Mariana Islands, and any 
     other trust territory or possession of the United States.

     ``SEC. 901. FDA AUTHORITY OVER TOBACCO PRODUCTS.

        ``(a) In General.--Tobacco products shall be regulated by 
     the Secretary under this chapter and shall not be subject to 
     the provisions of chapter V, unless--
       ``(1) such products are intended for use in the diagnosis, 
     cure, mitigation, treatment, or prevention of disease (within 
     the meaning of section 201(g)(1)(B) or section 201(h)(2)); or
       ``(2) a health claim is made for such products under 
     section 201(g)(1)(C) or 201(h)(3).
       ``(b) Applicability.--This chapter shall apply to all 
     tobacco products subject to the regulations referred to in 
     section 102 of the Youth Smoking Prevention and Public Health 
     Protection Act, and to any other tobacco products that the 
     Secretary by regulation deems to be subject to this chapter.
       ``(c) Scope.--
       ``(1) In general.--Nothing in this chapter, or any policy 
     issued or regulation promulgated thereunder, or the Youth 
     Smoking Prevention and Public Health Protection Act, shall be 
     construed to affect the Secretary's authority over, or the 
     regulation of, products under this Act that are not tobacco 
     products under chapter V or any other chapter.
       ``(2) Tobacco leaf.--
       ``(A) In general.--The provisions of this chapter shall not 
     apply to tobacco leaf that is not in the possession of the 
     manufacturer, or to the producers of tobacco leaf, including 
     tobacco growers, tobacco warehouses, and tobacco grower 
     cooperatives, nor shall any employee of the Food and Drug 
     Administration have any authority to enter onto a farm owned 
     by a producer of tobacco leaf without the written consent of 
     such producer.
       ``(B) Exception.--Notwithstanding any other provision of 
     this subparagraph, if a producer of tobacco leaf is also a 
     tobacco product manufacturer or controlled by a tobacco 
     product manufacturer, the producer shall be subject to this 
     chapter in the producer's capacity as a manufacturer.
       ``(C) Rule of construction.--Nothing in this chapter shall 
     be construed to grant the Secretary authority to promulgate 
     regulations on any matter that involves the production of 
     tobacco leaf or a producer thereof, other than activities by 
     a manufacturer affecting production. For purposes of the 
     preceding sentence, the term `controlled by' means a member 
     of the same controlled group of corporations as that term is 
     used in section 52(a) of the Internal Revenue Code of 1986, 
     or under common control within the meaning of the regulations 
     promulgated under section 52(b) of such Code.

     ``SEC. 902. ADULTERATED TOBACCO PRODUCTS.

       ``A tobacco product shall be deemed to be adulterated if--
       ``(1) it consists in whole or in part of any filthy, 
     putrid, or decomposed substance, or is otherwise contaminated 
     by any poisonous or deleterious substance that may render the 
     product injurious to health;
       ``(2) it has been prepared, packed, or held under 
     insanitary conditions whereby it may have been contaminated 
     with filth, or whereby it may have been rendered injurious to 
     health;
       ``(3) its container is composed, in whole or in part, of 
     any poisonous or deleterious substance which may render the 
     contents injurious to health;
       ``(4) it is, or purports to be or is represented as, a 
     tobacco product which is subject to a performance standard 
     established under section 907 unless such tobacco product is 
     in all respects in conformity with such standard;
       ``(5) it is required by section 910(a) to have premarket 
     approval, is not exempt under section 906(f), and does not 
     have an approved application in effect;
       ``(6) the methods used in, or the facilities or controls 
     used for, its manufacture, packing or storage are not in 
     conformity with applicable requirements under section 
     906(e)(1) or an applicable condition prescribed by an order 
     under section 906(e)(2); or
       ``(7) it is a tobacco product for which an exemption has 
     been granted under section 906(f) for investigational use and 
     the person who was granted such exemption or any investigator 
     who uses such tobacco product under such exemption fails to 
     comply with a requirement prescribed by or under such 
     section.

     ``SEC. 903. MISBRANDED TOBACCO PRODUCTS.

       ``(a) In General.--A tobacco product shall be deemed to be 
     misbranded--
       ``(1) if its labeling is false or misleading in any 
     particular;
       ``(2) if in package form unless it bears a label 
     containing--

[[Page 10429]]

       ``(A) the name and place of business of the tobacco product 
     manufacturer, packer, or distributor;
       ``(B) an accurate statement of the quantity of the contents 
     in terms of weight, measure, or numerical count; and
       ``(C) an accurate statement of the percentage of the 
     tobacco used in the product that is domestically grown 
     tobacco and the percentage that is foreign grown tobacco,

     except that under subparagraph (B) reasonable variations 
     shall be permitted, and exemptions as to small packages shall 
     be established, by regulations prescribed by the Secretary;
       ``(3) if any word, statement, or other information required 
     by or under authority of this chapter to appear on the label 
     or labeling is not prominently placed thereon with such 
     conspicuousness (as compared with other words, statements or 
     designs in the labeling) and in such terms as to render it 
     likely to be read and understood by the ordinary individual 
     under customary conditions of purchase and use;
       ``(4) if it has an established name, unless its label 
     bears, to the exclusion of any other nonproprietary name, its 
     established name prominently printed in type as required by 
     the Secretary by regulation;
       ``(5) if the Secretary has issued regulations requiring 
     that its labeling bear adequate directions for use, or 
     adequate warnings against use by children, that are necessary 
     for the protection of users unless its labeling conforms in 
     all respects to such regulations;
       ``(6) if it was manufactured, prepared, propagated, 
     compounded, or processed in any State in an establishment not 
     duly registered under section 905(b), if it was not included 
     in a list required by section 905(i), if a notice or other 
     information respecting it was not provided as required by 
     such section or section 905(j), or if it does not bear such 
     symbols from the uniform system for identification of tobacco 
     products prescribed under section 905(e) as the Secretary by 
     regulation requires;
       ``(7) if, in the case of any tobacco product distributed or 
     offered for sale in any State--
       ``(A) its advertising is false or misleading in any 
     particular; or
       ``(B) it is sold or distributed in violation of regulations 
     prescribed under section 906(d);
       ``(8) unless, in the case of any tobacco product 
     distributed or offered for sale in any State, the 
     manufacturer, packer, or distributor thereof includes in all 
     advertisements and other descriptive printed matter issued or 
     caused to be issued by the manufacturer, packer, or 
     distributor with respect to that tobacco product--
       ``(A) a true statement of the tobacco product's established 
     name as defined in paragraph (4), printed prominently; and
       ``(B) a brief statement of--
       ``(i) the uses of the tobacco product and relevant 
     warnings, precautions, side effects, and contraindications; 
     and
       ``(ii) in the case of specific tobacco products made 
     subject to a finding by the Secretary after notice and 
     opportunity for comment that such action is necessary to 
     protect the public health, a full description of the 
     components of such tobacco product or the formula showing 
     quantitatively each ingredient of such tobacco product to the 
     extent required in regulations which shall be issued by the 
     Secretary after an opportunity for a hearing;
       ``(9) if it is a tobacco product subject to a performance 
     standard established under section 907, unless it bears such 
     labeling as may be prescribed in such performance standard; 
     or
       ``(10) if there was a failure or refusal--
       ``(A) to comply with any requirement prescribed under 
     section 904 or 908;
       ``(B) to furnish any material or information required by or 
     under section 909; or
       ``(C) to comply with a requirement under section 912.
       ``(b) Prior Approval of Label Statements.--The Secretary 
     may, by regulation, require prior approval of statements made 
     on the label of a tobacco product. No regulation issued under 
     this subsection may require prior approval by the Secretary 
     of the content of any advertisement. No advertisement of a 
     tobacco product, published after the date of enactment of the 
     Youth Smoking Prevention and Public Health Protection Act 
     shall, with respect to the language of label statements as 
     prescribed under section 4 of the Cigarette Labeling and 
     Advertising Act and section 3 of the Comprehensive Smokeless 
     Tobacco Health Education Act of 1986 or the regulations 
     issued under such sections, be subject to the provisions of 
     sections 12 through 15 of the Federal Trade Commission Act 
     (15 U.S.C. 52 through 55).

     ``SEC. 904. SUBMISSION OF HEALTH INFORMATION TO THE 
                   SECRETARY.

       ``(a) Requirement.--Not later than 6 months after the date 
     of enactment of the Youth Smoking Prevention and Public 
     Health Protection Act, each tobacco product manufacturer or 
     importer of tobacco products, or agents thereof, shall submit 
     to the Secretary the following information:
       ``(1) A listing of all tobacco ingredients, substances and 
     compounds that are, on such date, added by the manufacturer 
     to the tobacco, paper, filter, or other component of each 
     tobacco product by brand and by quantity in each brand and 
     subbrand.
       ``(2) A description of the content, delivery, and form of 
     nicotine in each tobacco product measured in milligrams of 
     nicotine.
       ``(3) All documents (including underlying scientific 
     information) relating to research activities, and research 
     findings, conducted, supported, or possessed by the 
     manufacturer (or agents thereof) on the health, behavioral, 
     or physiologic effects of tobacco products, their 
     constituents, ingredients, and components, and tobacco 
     additives, described in paragraph (1).
       ``(4) All documents (including underlying scientific 
     information) relating to research activities, and research 
     findings, conducted, supported, or possessed by the 
     manufacturer (or agents thereof) that relate to the issue of 
     whether a reduction in risk to health from tobacco products 
     can occur upon the employment of technology available or 
     known to the manufacturer.
       ``(5) All documents (including underlying scientific 
     information) relating to marketing research involving the use 
     of tobacco products.

     An importer of a tobacco product not manufactured in the 
     United States shall supply the information required of a 
     tobacco product manufacturer under this subsection.
       ``(b) Annual Submission.--A tobacco product manufacturer or 
     importer that is required to submit information under 
     subsection (a) shall update such information on an annual 
     basis under a schedule determined by the Secretary.
       ``(c) Time for Submission.--
       ``(1) New products.--At least 90 days prior to the delivery 
     for introduction into interstate commerce of a tobacco 
     product not on the market on the date of enactment of the 
     Youth Smoking Prevention and Public Health Protection Act, 
     the manufacturer of such product shall provide the 
     information required under subsection (a) and such product 
     shall be subject to the annual submission under subsection 
     (b).
       ``(2) Modification of existing products.--If at any time a 
     tobacco product manufacturer adds to its tobacco products a 
     new tobacco additive, increases or decreases the quantity of 
     an existing tobacco additive or the nicotine content, 
     delivery, or form, or eliminates a tobacco additive from any 
     tobacco product, the manufacturer shall within 60 days of 
     such action so advise the Secretary in writing and reference 
     such modification in submissions made under subsection (b).

     ``SEC. 905. ANNUAL REGISTRATION.

       ``(a) Definitions.--In this section:
       ``(1) Manufacture, preparation, compounding, or 
     processing.--The term `manufacture, preparation, compounding, 
     or processing' shall include repackaging or otherwise 
     changing the container, wrapper, or labeling of any tobacco 
     product package in furtherance of the distribution of the 
     tobacco product from the original place of manufacture to the 
     person who makes final delivery or sale to the ultimate 
     consumer or user.
       ``(2) Name.--The term `name' shall include in the case of a 
     partnership the name of each partner and, in the case of a 
     corporation, the name of each corporate officer and director, 
     and the State of incorporation.
       ``(b) Registration by Owners and Operators.--On or before 
     December 31 of each year every person who owns or operates 
     any establishment in any State engaged in the manufacture, 
     preparation, compounding, or processing of a tobacco product 
     or tobacco products shall register with the Secretary the 
     name, places of business, and all such establishments of that 
     person.
       ``(c) Registration of New Owners and Operators.--Every 
     person upon first engaging in the manufacture, preparation, 
     compounding, or processing of a tobacco product or tobacco 
     products in any establishment owned or operated in any State 
     by that person shall immediately register with the Secretary 
     that person's name, place of business, and such 
     establishment.
       ``(d) Registration of Added Establishments.--Every person 
     required to register under subsection (b) or (c) shall 
     immediately register with the Secretary any additional 
     establishment which that person owns or operates in any State 
     and in which that person begins the manufacture, preparation, 
     compounding, or processing of a tobacco product or tobacco 
     products.
       ``(e) Uniform Product Identification System.--The Secretary 
     may by regulation prescribe a uniform system for the 
     identification of tobacco products and may require that 
     persons who are required to list such tobacco products under 
     subsection (i) shall list such tobacco products in accordance 
     with such system.
       ``(f) Public Access to Registration Information.--The 
     Secretary shall make available for inspection, to any person 
     so requesting, any registration filed under this section.
       ``(g) Biennial Inspection of Registered Establishments.--
     Every establishment in any State registered with the 
     Secretary under this section shall be subject to inspection 
     under section 704, and every such establishment engaged in 
     the manufacture, compounding, or processing of a tobacco 
     product or tobacco products shall be so inspected by one or 
     more officers or employees duly designated by the Secretary 
     at least

[[Page 10430]]

     once in the 2-year period beginning with the date of 
     registration of such establishment under this section and at 
     least once in every successive 2-year period thereafter.
       ``(h) Foreign Establishments May Register.--Any 
     establishment within any foreign country engaged in the 
     manufacture, preparation, compounding, or processing of a 
     tobacco product or tobacco products, may register under this 
     section under regulations promulgated by the Secretary. Such 
     regulations shall require such establishment to provide the 
     information required by subsection (i) of this section and 
     shall include provisions for registration of any such 
     establishment upon condition that adequate and effective 
     means are available, by arrangement with the government of 
     such foreign country or otherwise, to enable the Secretary to 
     determine from time to time whether tobacco products 
     manufactured, prepared, compounded, or processed in such 
     establishment, if imported or offered for import into the 
     United States, shall be refused admission on any of the 
     grounds set forth in section 801(a).
       ``(i) Registration Information.--
       ``(1) Product list.--Every person who registers with the 
     Secretary under subsection (b), (c), or (d) shall, at the 
     time of registration under any such subsection, file with the 
     Secretary a list of all tobacco products which are being 
     manufactured, prepared, compounded, or processed by that 
     person for commercial distribution and which has not been 
     included in any list of tobacco products filed by that person 
     with the Secretary under this paragraph or paragraph (2) 
     before such time of registration. Such list shall be prepared 
     in such form and manner as the Secretary may prescribe and 
     shall be accompanied by--
       ``(A) in the case of a tobacco product contained in the 
     applicable list with respect to which a performance standard 
     has been established under section 907 or which is subject to 
     section 910, a reference to the authority for the marketing 
     of such tobacco product and a copy of all labeling for such 
     tobacco product;
       ``(B) in the case of any other tobacco product contained in 
     an applicable list, a copy of all consumer information and 
     other labeling for such tobacco product, a representative 
     sampling of advertisements for such tobacco product, and, 
     upon request made by the Secretary for good cause, a copy of 
     all advertisements for a particular tobacco product; and
       ``(C) if the registrant filing a list has determined that a 
     tobacco product contained in such list is not subject to a 
     performance standard established under section 907, a brief 
     statement of the basis upon which the registrant made such 
     determination if the Secretary requests such a statement with 
     respect to that particular tobacco product.
       ``(2) Biannual report of any change in product list.--Each 
     person who registers with the Secretary under this section 
     shall report to the Secretary once during the month of June 
     of each year and once during the month of December of each 
     year the following:
       ``(A) A list of each tobacco product introduced by the 
     registrant for commercial distribution which has not been 
     included in any list previously filed by that person with the 
     Secretary under this subparagraph or paragraph (1). A list 
     under this subparagraph shall list a tobacco product by its 
     established name and shall be accompanied by the other 
     information required by paragraph (1).
       ``(B) If since the date the registrant last made a report 
     under this paragraph that person has discontinued the 
     manufacture, preparation, compounding, or processing for 
     commercial distribution of a tobacco product included in a 
     list filed under subparagraph (A) or paragraph (1), notice of 
     such discontinuance, the date of such discontinuance, and the 
     identity of its established name.
       ``(C) If since the date the registrant reported under 
     subparagraph (B) a notice of discontinuance that person has 
     resumed the manufacture, preparation, compounding, or 
     processing for commercial distribution of the tobacco product 
     with respect to which such notice of discontinuance was 
     reported, notice of such resumption, the date of such 
     resumption, the identity of such tobacco product by 
     established name, and other information required by paragraph 
     (1), unless the registrant has previously reported such 
     resumption to the Secretary under this subparagraph.
       ``(D) Any material change in any information previously 
     submitted under this paragraph or paragraph (1).
       ``(j) Report Preceding Introduction of Certain 
     Substantially-equivalent Products Into Interstate Commerce.--
       ``(1) In general.--Each person who is required to register 
     under this section and who proposes to begin the introduction 
     or delivery for introduction into interstate commerce for 
     commercial distribution of a tobacco product intended for 
     human use that was not commercially marketed (other than for 
     test marketing) in the United States as of June 1, 2002, as 
     defined by the Secretary by regulation shall, at least 90 
     days before making such introduction or delivery, report to 
     the Secretary (in such form and manner as the Secretary shall 
     by regulation prescribe)--
       ``(A) the basis for such person's determination that the 
     tobacco product is substantially equivalent, within the 
     meaning of section 910, to a tobacco product commercially 
     marketed (other than for test marketing) in the United States 
     as of June 1, 2002, that is in compliance with the 
     requirements of this Act; and
       ``(B) action taken by such person to comply with the 
     requirements under section 907 that are applicable to the 
     tobacco product.
       ``(2) Application to certain post-june 1, 2002 products.--A 
     report under this subsection for a tobacco product that was 
     first introduced or delivered for introduction into 
     interstate commerce for commercial distribution in the United 
     States after June 1, 2002, and before the date of enactment 
     of the Youth Smoking Prevention and Public Health Protection 
     Act shall be submitted to the Secretary within 6 months after 
     the date of enactment of that Act.

     ``SEC. 906. GENERAL PROVISIONS RESPECTING CONTROL OF TOBACCO 
                   PRODUCTS.

       ``(a) In General.--Any requirement established by or under 
     section 902, 903, 905, or 909 applicable to a tobacco product 
     shall apply to such tobacco product until the applicability 
     of the requirement to the tobacco product has been changed by 
     action taken under section 907, section 910, or subsection 
     (d) of this section, and any requirement established by or 
     under section 902, 903, 905, or 909 which is inconsistent 
     with a requirement imposed on such tobacco product under 
     section 907, section 910, or subsection (d) of this section 
     shall not apply to such tobacco product.
       ``(b) Information on Public Access and Comment.--Each 
     notice of proposed rulemaking under section 907, 908, 909, or 
     910, or under this section, any other notice which is 
     published in the Federal Register with respect to any other 
     action taken under any such section and which states the 
     reasons for such action, and each publication of findings 
     required to be made in connection with rulemaking under any 
     such section shall set forth--
       ``(1) the manner in which interested persons may examine 
     data and other information on which the notice or findings is 
     based; and
       ``(2) the period within which interested persons may 
     present their comments on the notice or findings (including 
     the need therefore) orally or in writing, which period shall 
     be at least 60 days but may not exceed 90 days unless the 
     time is extended by the Secretary by a notice published in 
     the Federal Register stating good cause therefore.
       ``(c) Limited Confidentiality of Information.--Any 
     information reported to or otherwise obtained by the 
     Secretary or the Secretary's representative under section 
     904, 907, 908, 909, or 910 or 704, or under subsection (e) or 
     (f) of this section, which is exempt from disclosure under 
     subsection (a) of section 552 of title 5, United States Code, 
     by reason of subsection (b)(4) of that section shall be 
     considered confidential and shall not be disclosed, except 
     that the information may be disclosed to other officers or 
     employees concerned with carrying out this chapter, or when 
     relevant in any proceeding under this chapter.
       ``(d) Restrictions.--
       ``(1) In general.--The Secretary may by regulation require 
     restrictions on the sale and distribution of a tobacco 
     product, including restrictions on the access to, and the 
     advertising and promotion of, the tobacco product, if the 
     Secretary determines that such regulation would be 
     appropriate for the protection of the public health. The 
     Secretary may by regulation impose restrictions on the 
     advertising and promotion of tobacco products consistent with 
     and to full extent permitted by the first amendment to the 
     Constitution. The finding as to whether such regulation would 
     be appropriate for the protection of the public health shall 
     be determined with respect to the risks and benefits to the 
     population as a whole, including users and non-users of the 
     tobacco product, and taking into account--
       ``(A) the increased or decreased likelihood that existing 
     users of tobacco products will stop using such products; and
       ``(B) the increased or decreased likelihood that those who 
     do not use tobacco products will start using such products.

     No such regulation may require that the sale or distribution 
     of a tobacco product be limited to the written or oral 
     authorization of a practitioner licensed by law to prescribe 
     medical products.
       ``(2) Label statements.--The label of a tobacco product 
     shall bear such appropriate statements of the restrictions 
     required by a regulation under subsection (a) as the 
     Secretary may in such regulation prescribe.
       ``(3) Limitation.--No restriction under paragraph (1) may 
     prohibit the sale of any tobacco product in face-to face 
     transactions by a specific category of retail outlets.
       ``(e) Good Manufacturing Practice Requirements.--
       ``(1) Methods, facilities, and controls to conform.--
       ``(A) In general.--The Secretary may, in accordance with 
     subparagraph (B), prescribe regulations requiring that the 
     methods used in, and the facilities and controls used for, 
     the manufacture, pre-production design validation (including 
     a process to assess the performance of a tobacco product), 
     packing and

[[Page 10431]]

     storage of a tobacco product, conform to current good 
     manufacturing practice, as prescribed in such regulations, to 
     assure that the public health is protected and that the 
     tobacco product is in compliance with this chapter.
       ``(B) Requirements.--The Secretary shall--
       ``(i) before promulgating any regulation under subparagraph 
     (A), afford an advisory committee an opportunity to submit 
     recommendations with respect to the regulation proposed to be 
     promulgated;
       ``(ii) before promulgating any regulation under 
     subparagraph (A), afford opportunity for an oral hearing;
       ``(iii) provide the advisory committee a reasonable time to 
     make its recommendation with respect to proposed regulations 
     under subparagraph (A); and
       ``(iv) in establishing the effective date of a regulation 
     promulgated under this subsection, take into account the 
     differences in the manner in which the different types of 
     tobacco products have historically been produced, the 
     financial resources of the different tobacco product 
     manufacturers, and the state of their existing manufacturing 
     facilities, and shall provide for a reasonable period of time 
     for such manufacturers to conform to good manufacturing 
     practices.
       ``(2) Exemptions; variances.--
       ``(A) Petition.--Any person subject to any requirement 
     prescribed under paragraph (1) may petition the Secretary for 
     a permanent or temporary exemption or variance from such 
     requirement. Such a petition shall be submitted to the 
     Secretary in such form and manner as the Secretary shall 
     prescribe and shall--
       ``(i) in the case of a petition for an exemption from a 
     requirement, set forth the basis for the petitioner's 
     determination that compliance with the requirement is not 
     required to assure that the tobacco product will be in 
     compliance with this chapter;
       ``(ii) in the case of a petition for a variance from a 
     requirement, set forth the methods proposed to be used in, 
     and the facilities and controls proposed to be used for, the 
     manufacture, packing, and storage of the tobacco product in 
     lieu of the methods, facilities, and controls prescribed by 
     the requirement; and
       ``(iii) contain such other information as the Secretary 
     shall prescribe.
       ``(B) Referral to advisory committee.--The Secretary may 
     refer to an advisory committee any petition submitted under 
     subparagraph (A). The advisory committee shall report its 
     recommendations to the Secretary with respect to a petition 
     referred to it within 60 days after the date of the 
     petition's referral. Within 60 days after--
       ``(i) the date the petition was submitted to the Secretary 
     under subparagraph (A); or
       ``(ii) the day after the petition was referred to an 
     advisory committee,
     whichever occurs later, the Secretary shall by order either 
     deny the petition or approve it.
       ``(C) Approval.--The Secretary may approve--
       ``(i) a petition for an exemption for a tobacco product 
     from a requirement if the Secretary determines that 
     compliance with such requirement is not required to assure 
     that the tobacco product will be in compliance with this 
     chapter; and
       ``(ii) a petition for a variance for a tobacco product from 
     a requirement if the Secretary determines that the methods to 
     be used in, and the facilities and controls to be used for, 
     the manufacture, packing, and storage of the tobacco product 
     in lieu of the methods, controls, and facilities prescribed 
     by the requirement are sufficient to assure that the tobacco 
     product will be in compliance with this chapter.
       ``(D) Conditions.--An order of the Secretary approving a 
     petition for a variance shall prescribe such conditions 
     respecting the methods used in, and the facilities and 
     controls used for, the manufacture, packing, and storage of 
     the tobacco product to be granted the variance under the 
     petition as may be necessary to assure that the tobacco 
     product will be in compliance with this chapter.
       ``(E) Hearing.--After the issuance of an order under 
     subparagraph (B) respecting a petition, the petitioner shall 
     have an opportunity for an informal hearing on such order.
       ``(3) Compliance.--Compliance with requirements under this 
     subsection shall not be required before the period ending 3 
     years after the date of enactment of the Youth Smoking 
     Prevention and Public Health Protection Act.
       ``(f) Exemption for Investigational Use.--The Secretary may 
     exempt tobacco products intended for investigational use from 
     this chapter under such conditions as the Secretary may 
     prescribe by regulation.
       ``(g) Research and Development.--The Secretary may enter 
     into contracts for research, testing, and demonstrations 
     respecting tobacco products and may obtain tobacco products 
     for research, testing, and demonstration purposes without 
     regard to section 3324(a) and (b) of title 31, United States 
     Code, and section 5 of title 41, United States Code.

     ``SEC. 907. PERFORMANCE STANDARDS.

       ``(a) In General.--
       ``(1) Finding required.--The Secretary may adopt 
     performance standards for a tobacco product if the Secretary 
     finds that a performance standard is appropriate for the 
     protection of the public health. This finding shall be 
     determined with respect to the risks and benefits to the 
     population as a whole, including users and non-users of the 
     tobacco product, and taking into account--
       ``(A) the increased or decreased likelihood that existing 
     users of tobacco products will stop using such products; and
       ``(B) the increased or decreased likelihood that those who 
     do not use tobacco products will start using such products.
       ``(2) Content of performance standards.--A performance 
     standard established under this section for a tobacco 
     product--
       ``(A) shall include provisions to provide performance that 
     is appropriate for the protection of the public health, 
     including provisions, where appropriate--
       ``(i) for the reduction or elimination of nicotine yields 
     of the product;
       ``(ii) for the reduction or elimination of other 
     constituents or harmful components of the product; or
       ``(iii) relating to any other requirement under (B);
       ``(B) shall, where necessary to be appropriate for the 
     protection of the public health, include--
       ``(i) provisions respecting the construction, components, 
     ingredients, and properties of the tobacco product;
       ``(ii) provisions for the testing (on a sample basis or, if 
     necessary, on an individual basis) of the tobacco product;
       ``(iii) provisions for the measurement of the performance 
     characteristics of the tobacco product;
       ``(iv) provisions requiring that the results of each or of 
     certain of the tests of the tobacco product required to be 
     made under clause (ii) show that the tobacco product is in 
     conformity with the portions of the standard for which the 
     test or tests were required; and
       ``(v) a provision requiring that the sale and distribution 
     of the tobacco product be restricted but only to the extent 
     that the sale and distribution of a tobacco product may be 
     restricted under a regulation under section 906(d); and
       ``(C) shall, where appropriate, require the use and 
     prescribe the form and content of labeling for the proper use 
     of the tobacco product.
       ``(3) Periodic re-evaluation of performance standards.--The 
     Secretary shall provide for periodic evaluation of 
     performance standards established under this section to 
     determine whether such standards should be changed to reflect 
     new medical, scientific, or other technological data. The 
     Secretary may provide for testing under paragraph (2) by any 
     person.
       ``(4) Involvement of other agencies; informed persons.--In 
     carrying out duties under this section, the Secretary shall, 
     to the maximum extent practicable--
       ``(A) use personnel, facilities, and other technical 
     support available in other Federal agencies;
       ``(B) consult with other Federal agencies concerned with 
     standard-setting and other nationally or internationally 
     recognized standard-setting entities; and
       ``(C) invite appropriate participation, through joint or 
     other conferences, workshops, or other means, by informed 
     persons representative of scientific, professional, industry, 
     or consumer organizations who in the Secretary's judgment can 
     make a significant contribution.
       ``(b) Establishment of Standards.--
       ``(1) Notice.--
       ``(A) In general.--The Secretary shall publish in the 
     Federal Register a notice of proposed rulemaking for the 
     establishment, amendment, or revocation of any performance 
     standard for a tobacco product.
       ``(B) Requirements of notice.--A notice of proposed 
     rulemaking for the establishment or amendment of a 
     performance standard for a tobacco product shall--
       ``(i) set forth a finding with supporting justification 
     that the performance standard is appropriate for the 
     protection of the public health;
       ``(ii) set forth proposed findings with respect to the risk 
     of illness or injury that the performance standard is 
     intended to reduce or eliminate; and
       ``(iii) invite interested persons to submit an existing 
     performance standard for the tobacco product, including a 
     draft or proposed performance standard, for consideration by 
     the Secretary.
       ``(C) Finding.--A notice of proposed rulemaking for the 
     revocation of a performance standard shall set forth a 
     finding with supporting justification that the performance 
     standard is no longer necessary to be appropriate for the 
     protection of the public health.
       ``(D) Consideration by secretary.--The Secretary shall 
     consider all information submitted in connection with a 
     proposed standard, including information concerning the 
     countervailing effects of the performance standard on the 
     health of adolescent tobacco users, adult tobacco users, or 
     non-tobacco users, such as the creation of a significant 
     demand for contraband or other tobacco products that do not 
     meet the requirements of this chapter and the significance of 
     such demand, and shall issue the standard if the Secretary 
     determines that the standard

[[Page 10432]]

     would be appropriate for the protection of the public health.
       ``(E) Comment.--The Secretary shall provide for a comment 
     period of not less than 60 days.
       ``(2) Promulgation.--
       ``(A) In general.--After the expiration of the period for 
     comment on a notice of proposed rulemaking published under 
     paragraph (1) respecting a performance standard and after 
     consideration of such comments and any report from an 
     advisory committee, the Secretary shall--
       ``(i) promulgate a regulation establishing a performance 
     standard and publish in the Federal Register findings on the 
     matters referred to in paragraph (1); or
       ``(ii) publish a notice terminating the proceeding for the 
     development of the standard together with the reasons for 
     such termination.
       ``(B) Effective date.--A regulation establishing a 
     performance standard shall set forth the date or dates upon 
     which the standard shall take effect, but no such regulation 
     may take effect before one year after the date of its 
     publication unless the Secretary determines that an earlier 
     effective date is necessary for the protection of the public 
     health. Such date or dates shall be established so as to 
     minimize, consistent with the public health, economic loss 
     to, and disruption or dislocation of, domestic and 
     international trade.
       ``(3) Special rule for standard banning class of product or 
     eliminating nicotine content.--Because of the importance of a 
     decision of the Secretary to issue a regulation establishing 
     a performance standard--
       ``(A) eliminating all cigarettes, all smokeless tobacco 
     products, or any similar class of tobacco products, or
       ``(B) requiring the reduction of nicotine yields of a 
     tobacco product to zero,

     it is appropriate for the Congress to have the opportunity to 
     review such a decision. Therefore, any such standard may not 
     take effect before a date that is 2 years after the President 
     notifies the Congress that a final regulation imposing the 
     restriction has been issued.
       ``(4) Amendment; revocation.--
       ``(A) Authority.--The Secretary, upon the Secretary's own 
     initiative or upon petition of an interested person may by a 
     regulation, promulgated in accordance with the requirements 
     of paragraphs (1) and (2)(B), amend or revoke a performance 
     standard.
       ``(B) Effective date.--The Secretary may declare a proposed 
     amendment of a performance standard to be effective on and 
     after its publication in the Federal Register and until the 
     effective date of any final action taken on such amendment if 
     the Secretary determines that making it so effective is in 
     the public interest.
       ``(5) Reference to advisory committee.--The Secretary--
       ``(A) may, on the Secretary's own initiative, refer a 
     proposed regulation for the establishment, amendment, or 
     revocation of a performance standard; or
       ``(B) shall, upon the request of an interested person which 
     demonstrates good cause for referral and which is made before 
     the expiration of the period for submission of comments on 
     such proposed regulation,

     refer such proposed regulation to an advisory committee, for 
     a report and recommendation with respect to any matter 
     involved in the proposed regulation which requires the 
     exercise of scientific judgment. If a proposed regulation is 
     referred under this paragraph to the advisory committee, the 
     Secretary shall provide the advisory committee with the data 
     and information on which such proposed regulation is based. 
     The advisory committee shall, within 60 days after the 
     referral of a proposed regulation and after independent study 
     of the data and information furnished to it by the Secretary 
     and other data and information before it, submit to the 
     Secretary a report and recommendation respecting such 
     regulation, together with all underlying data and information 
     and a statement of the reason or basis for the 
     recommendation. A copy of such report and recommendation 
     shall be made public by the Secretary.

     ``SEC. 908. NOTIFICATION AND OTHER REMEDIES.

       ``(a) Notification.--If the Secretary determines that--
       ``(1) a tobacco product which is introduced or delivered 
     for introduction into interstate commerce for commercial 
     distribution presents an unreasonable risk of substantial 
     harm to the public health; and
       ``(2) notification under this subsection is necessary to 
     eliminate the unreasonable risk of such harm and no more 
     practicable means is available under the provisions of this 
     chapter (other than this section) to eliminate such risk,

     the Secretary may issue such order as may be necessary to 
     assure that adequate notification is provided in an 
     appropriate form, by the persons and means best suited under 
     the circumstances involved, to all persons who should 
     properly receive such notification in order to eliminate such 
     risk. The Secretary may order notification by any appropriate 
     means, including public service announcements. Before issuing 
     an order under this subsection, the Secretary shall consult 
     with the persons who are to give notice under the order.
       ``(b) No Exemption From Other Liability.--Compliance with 
     an order issued under this section shall not relieve any 
     person from liability under Federal or State law. In awarding 
     damages for economic loss in an action brought for the 
     enforcement of any such liability, the value to the plaintiff 
     in such action of any remedy provided under such order shall 
     be taken into account.
       ``(c) Recall Authority.--
       ``(1) In general.--If the Secretary finds that there is a 
     reasonable probability that a tobacco product contains a 
     manufacturing or other defect not ordinarily contained in 
     tobacco products on the market that would cause serious, 
     adverse health consequences or death, the Secretary shall 
     issue an order requiring the appropriate person (including 
     the manufacturers, importers, distributors, or retailers of 
     the tobacco product) to immediately cease distribution of 
     such tobacco product. The order shall provide the person 
     subject to the order with an opportunity for an informal 
     hearing, to be held not later than 10 days after the date of 
     the issuance of the order, on the actions required by the 
     order and on whether the order should be amended to require a 
     recall of such tobacco product. If, after providing an 
     opportunity for such a hearing, the Secretary determines that 
     inadequate grounds exist to support the actions required by 
     the order, the Secretary shall vacate the order.
       ``(2) Amendment of order to require recall.--
       ``(A) In general.--If, after providing an opportunity for 
     an informal hearing under paragraph (1), the Secretary 
     determines that the order should be amended to include a 
     recall of the tobacco product with respect to which the order 
     was issued, the Secretary shall, except as provided in 
     subparagraph (B), amend the order to require a recall. The 
     Secretary shall specify a timetable in which the tobacco 
     product recall will occur and shall require periodic reports 
     to the Secretary describing the progress of the recall.
       ``(B) Notice.--An amended order under subparagraph (A)--
       ``(i) shall not include recall of a tobacco product from 
     individuals; and
       ``(ii) shall provide for notice to persons subject to the 
     risks associated with the use of such tobacco product.

     In providing the notice required by clause (ii), the 
     Secretary may use the assistance of retailers and other 
     persons who distributed such tobacco product. If a 
     significant number of such persons cannot be identified, the 
     Secretary shall notify such persons under section 705(b).
       ``(3) Remedy not exclusive.--The remedy provided by this 
     subsection shall be in addition to remedies provided by 
     subsection (a) of this section.

     ``SEC. 909. RECORDS AND REPORTS ON TOBACCO PRODUCTS.

       ``(a) In General.--Every person who is a tobacco product 
     manufacturer or importer of a tobacco product shall establish 
     and maintain such records, make such reports, and provide 
     such information, as the Secretary may by regulation 
     reasonably require to assure that such tobacco product is not 
     adulterated or misbranded and to otherwise protect public 
     health. Regulations prescribed under the preceding sentence--
       ``(1) may require a tobacco product manufacturer or 
     importer to report to the Secretary whenever the manufacturer 
     or importer receives or otherwise becomes aware of 
     information that reasonably suggests that one of its marketed 
     tobacco products may have caused or contributed to a serious 
     unexpected adverse experience associated with the use of the 
     product or any significant increase in the frequency of a 
     serious, expected adverse product experience;
       ``(2) shall require reporting of other significant adverse 
     tobacco product experiences as determined by the Secretary to 
     be necessary to be reported;
       ``(3) shall not impose requirements unduly burdensome to a 
     tobacco product manufacturer or importer, taking into account 
     the cost of complying with such requirements and the need for 
     the protection of the public health and the implementation of 
     this chapter;
       ``(4) when prescribing the procedure for making requests 
     for reports or information, shall require that each request 
     made under such regulations for submission of a report or 
     information to the Secretary state the reason or purpose for 
     such request and identify to the fullest extent practicable 
     such report or information;
       ``(5) when requiring submission of a report or information 
     to the Secretary, shall state the reason or purpose for the 
     submission of such report or information and identify to the 
     fullest extent practicable such report or information; and
       ``(6) may not require that the identity of any patient or 
     user be disclosed in records, reports, or information 
     required under this subsection unless required for the 
     medical welfare of an individual, to determine risks to 
     public health of a tobacco product, or to verify a record, 
     report, or information submitted under this chapter.

     In prescribing regulations under this subsection, the 
     Secretary shall have due regard for the professional ethics 
     of the medical profession and the interests of patients. The 
     prohibitions of paragraph (6) continue to

[[Page 10433]]

     apply to records, reports, and information concerning any 
     individual who has been a patient, irrespective of whether or 
     when he ceases to be a patient.
       ``(b) Reports of Removals and Corrections.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     Secretary shall by regulation require a tobacco product 
     manufacturer or importer of a tobacco product to report 
     promptly to the Secretary any corrective action taken or 
     removal from the market of a tobacco product undertaken by 
     such manufacturer or importer if the removal or correction 
     was undertaken--
       ``(A) to reduce a risk to health posed by the tobacco 
     product; or
       ``(B) to remedy a violation of this chapter caused by the 
     tobacco product which may present a risk to health.

     A tobacco product manufacturer or importer of a tobacco 
     product who undertakes a corrective action or removal from 
     the market of a tobacco product which is not required to be 
     reported under this subsection shall keep a record of such 
     correction or removal.
       ``(2) Exception.--No report of the corrective action or 
     removal of a tobacco product may be required under paragraph 
     (1) if a report of the corrective action or removal is 
     required and has been submitted under subsection (a).

     ``SEC. 910. PREMARKET REVIEW OF CERTAIN TOBACCO PRODUCTS.

       ``(a) In General.--
       ``(1) Premarket approval required.--
       ``(A) New products.--Approval under this section of an 
     application for premarket approval for any tobacco product 
     that is not commercially marketed (other than for test 
     marketing) in the United States as of June 1, 2002, is 
     required unless the manufacturer has submitted a report under 
     section 905(j), and the Secretary has issued an order that 
     the tobacco product is substantially equivalent to a tobacco 
     product commercially marketed (other than for test marketing) 
     in the United States as of June 1, 2002, that is in 
     compliance with the requirements of this Act.
       ``(B) Products introduced between June 1, 2002, and 
     enactment of this chapter.--Subparagraph (A) does not apply 
     to a tobacco product that--
       ``(i) was first introduced or delivered for introduction 
     into interstate commerce for commercial distribution in the 
     United States after June 1, 2002, and before the date of 
     enactment of the Youth Smoking Prevention and Public Health 
     Protection Act; and
       ``(ii) for which a report was submitted under section 
     905(j) within 6 months after such date,
     until the Secretary issues an order that the tobacco product 
     is substantially equivalent for purposes of this section or 
     requires premarket approval.
       ``(2) Substantially equivalent defined.--
       ``(A) In general.--For purposes of this section and section 
     905(j), the terms `substantially equivalent' or `substantial 
     equivalence' mean, with respect to the tobacco product being 
     compared to the predicate tobacco product, that the Secretary 
     by order has found that the tobacco product--
       ``(i) has the same characteristics as the predicate tobacco 
     product; or
       ``(ii) has different characteristics and the information 
     submitted contains information, including clinical data if 
     deemed necessary by the Secretary, that demonstrates that it 
     is not appropriate to regulate the product under this section 
     because the product does not raise different questions of 
     public health.
       ``(B) Characteristics.--For purposes of subparagraph (A), 
     the term `characteristics' means the materials, ingredients, 
     design, composition, heating source, or other features of a 
     tobacco product.
       ``(C) Limitation.--A tobacco product may not be found to be 
     substantially equivalent to a predicate tobacco product that 
     has been removed from the market at the initiative of the 
     Secretary or that has been determined by a judicial order to 
     be misbranded or adulterated.
       ``(3) Health information.--
       ``(A) Summary.--As part of a submission under section 
     905(j) respecting a tobacco product, the person required to 
     file a premarket notification under such section shall 
     provide an adequate summary of any health information related 
     to the tobacco product or state that such information will be 
     made available upon request by any person.
       ``(B) Required information.--Any summary under subparagraph 
     (A) respecting a tobacco product shall contain detailed 
     information regarding data concerning adverse health effects 
     and shall be made available to the public by the Secretary 
     within 30 days of the issuance of a determination that such 
     tobacco product is substantially equivalent to another 
     tobacco product.
       ``(b) Application.--
       ``(1) Contents.--An application for premarket approval 
     shall contain--
       ``(A) full reports of all information, published or known 
     to, or which should reasonably be known to, the applicant, 
     concerning investigations which have been made to show the 
     health risks of such tobacco product and whether such tobacco 
     product presents less risk than other tobacco products;
       ``(B) a full statement of the components, ingredients, and 
     properties, and of the principle or principles of operation, 
     of such tobacco product;
       ``(C) a full description of the methods used in, and the 
     facilities and controls used for, the manufacture, 
     processing, and, when relevant, packing and installation of, 
     such tobacco product;
       ``(D) an identifying reference to any performance standard 
     under section 907 which would be applicable to any aspect of 
     such tobacco product, and either adequate information to show 
     that such aspect of such tobacco product fully meets such 
     performance standard or adequate information to justify any 
     deviation from such standard;
       ``(E) such samples of such tobacco product and of 
     components thereof as the Secretary may reasonably require;
       ``(F) specimens of the labeling proposed to be used for 
     such tobacco product; and
       ``(G) such other information relevant to the subject matter 
     of the application as the Secretary may require.
       ``(2) Reference to advisory committee.--Upon receipt of an 
     application meeting the requirements set forth in paragraph 
     (1), the Secretary--
       ``(A) may, on the Secretary's own initiative; or
       ``(B) shall, upon the request of an applicant,

     refer such application to an advisory committee and for 
     submission (within such period as the Secretary may 
     establish) of a report and recommendation respecting approval 
     of the application, together with all underlying data and the 
     reasons or basis for the recommendation.
       ``(c) Action on Application.--
       ``(1) Deadline.--
       ``(A) In general.--As promptly as possible, but in no event 
     later than 180 days after the receipt of an application under 
     subsection (b), the Secretary, after considering the report 
     and recommendation submitted under paragraph (2) of such 
     subsection, shall--
       ``(i) issue an order approving the application if the 
     Secretary finds that none of the grounds for denying approval 
     specified in paragraph (2) of this subsection applies; or
       ``(ii) deny approval of the application if the Secretary 
     finds (and sets forth the basis for such finding as part of 
     or accompanying such denial) that one or more grounds for 
     denial specified in paragraph (2) of this subsection apply.
       ``(B) Restrictions on sale and distribution.--An order 
     approving an application for a tobacco product may require as 
     a condition to such approval that the sale and distribution 
     of the tobacco product be restricted but only to the extent 
     that the sale and distribution of a tobacco product may be 
     restricted under a regulation under section 906(d).
       ``(2) Denial of approval.--The Secretary shall deny 
     approval of an application for a tobacco product if, upon the 
     basis of the information submitted to the Secretary as part 
     of the application and any other information before the 
     Secretary with respect to such tobacco product, the Secretary 
     finds that--
       ``(A) there is a lack of a showing that permitting such 
     tobacco product to be marketed would be appropriate for the 
     protection of the public health;
       ``(B) the methods used in, or the facilities or controls 
     used for, the manufacture, processing, or packing of such 
     tobacco product do not conform to the requirements of section 
     906(e);
       ``(C) based on a fair evaluation of all material facts, the 
     proposed labeling is false or misleading in any particular; 
     or
       ``(D) such tobacco product is not shown to conform in all 
     respects to a performance standard in effect under section 
     907, compliance with which is a condition to approval of the 
     application, and there is a lack of adequate information to 
     justify the deviation from such standard.
       ``(3) Denial information.--Any denial of an application 
     shall, insofar as the Secretary determines to be practicable, 
     be accompanied by a statement informing the applicant of the 
     measures required to place such application in approvable 
     form (which measures may include further research by the 
     applicant in accordance with one or more protocols prescribed 
     by the Secretary).
       ``(4) Basis for finding.--For purposes of this section, the 
     finding as to whether approval of a tobacco product is 
     appropriate for the protection of the public health shall be 
     determined with respect to the risks and benefits to the 
     population as a whole, including users and non-users of the 
     tobacco product, and taking into account--
       ``(A) the increased or decreased likelihood that existing 
     users of tobacco products will stop using such products; and
       ``(B) the increased or decreased likelihood that those who 
     do not use tobacco products will start using such products.
       ``(5) Basis for action.--
       ``(A) Investigations.--For purposes of paragraph (2)(A), 
     whether permitting a tobacco product to be marketed would be 
     appropriate for the protection of the public health shall, 
     when appropriate, be determined on the basis of well-
     controlled investigations, which may include one or more 
     clinical investigations by experts qualified by training and 
     experience to evaluate the tobacco product.
       ``(B) Other evidence.--If the Secretary determines that 
     there exists valid scientific

[[Page 10434]]

     evidence (other than evidence derived from investigations 
     described in subparagraph (A)) which is sufficient to 
     evaluate the tobacco product the Secretary may authorize that 
     the determination for purposes of paragraph (2)(A) be made on 
     the basis of such evidence.
       ``(d) Withdrawal and Temporary Suspension.--
       ``(1) In general.--The Secretary shall, upon obtaining, 
     where appropriate, advice on scientific matters from an 
     advisory committee, and after due notice and opportunity for 
     informal hearing to the holder of an approved application for 
     a tobacco product, issue an order withdrawing approval of the 
     application if the Secretary finds--
       ``(A) that the continued marketing of such tobacco product 
     no longer is appropriate for the protection of the public 
     health;
       ``(B) that the application contained or was accompanied by 
     an untrue statement of a material fact;
       ``(C) that the applicant--
       ``(i) has failed to establish a system for maintaining 
     records, or has repeatedly or deliberately failed to maintain 
     records or to make reports, required by an applicable 
     regulation under section 909;
       ``(ii) has refused to permit access to, or copying or 
     verification of, such records as required by section 704; or
       ``(iii) has not complied with the requirements of section 
     905;
       ``(D) on the basis of new information before the Secretary 
     with respect to such tobacco product, evaluated together with 
     the evidence before the Secretary when the application was 
     approved, that the methods used in, or the facilities and 
     controls used for, the manufacture, processing, packing, or 
     installation of such tobacco product do not conform with the 
     requirements of section 906(e) and were not brought into 
     conformity with such requirements within a reasonable time 
     after receipt of written notice from the Secretary of 
     nonconformity;
       ``(E) on the basis of new information before the Secretary, 
     evaluated together with the evidence before the Secretary 
     when the application was approved, that the labeling of such 
     tobacco product, based on a fair evaluation of all material 
     facts, is false or misleading in any particular and was not 
     corrected within a reasonable time after receipt of written 
     notice from the Secretary of such fact; or
       ``(F) on the basis of new information before the Secretary, 
     evaluated together with the evidence before the Secretary 
     when the application was approved, that such tobacco product 
     is not shown to conform in all respects to a performance 
     standard which is in effect under section 907, compliance 
     with which was a condition to approval of the application, 
     and that there is a lack of adequate information to justify 
     the deviation from such standard.
       ``(2) Appeal.--The holder of an application subject to an 
     order issued under paragraph (1) withdrawing approval of the 
     application may, by petition filed on or before the 30th day 
     after the date upon which such holder receives notice of such 
     withdrawal, obtain review thereof in accordance with 
     subsection (e).
       ``(3) Temporary suspension.--If, after providing an 
     opportunity for an informal hearing, the Secretary determines 
     there is reasonable probability that the continuation of 
     distribution of a tobacco product under an approved 
     application would cause serious, adverse health consequences 
     or death, that is greater than ordinarily caused by tobacco 
     products on the market, the Secretary shall by order 
     temporarily suspend the approval of the application approved 
     under this section. If the Secretary issues such an order, 
     the Secretary shall proceed expeditiously under paragraph (1) 
     to withdraw such application.
       ``(e) Service of Order.--An order issued by the Secretary 
     under this section shall be served--
       ``(1) in person by any officer or employee of the 
     department designated by the Secretary; or
       ``(2) by mailing the order by registered mail or certified 
     mail addressed to the applicant at the applicant's last known 
     address in the records of the Secretary.

     ``SEC. 911. JUDICIAL REVIEW.

       ``(a) Right To Review.--
       ``(1) In general.--Not later than 30 days after--
       ``(A) the promulgation of a regulation under section 907 
     establishing, amending, or revoking a performance standard 
     for a tobacco product; or
       ``(B) a denial of an application for approval under section 
     910(c),
     any person adversely affected by such regulation or order may 
     file a petition with the United States Court of Appeals for 
     the District of Columbia or for the circuit wherein such 
     person resides or has his or her principal place of business 
     for judicial review of such regulation or order.
       ``(2) Requirements.--
       ``(A) Copy of petition.--A copy of the petition filed under 
     paragraph (1) shall be transmitted by the clerk of the court 
     to the Secretary or other officer designated by the Secretary 
     for that purpose.
       ``(B) Record of proceedings.--With respect to an action 
     under paragraph (1), the Secretary shall file in the court 
     the record of the proceedings on which the Secretary based 
     the Secretary's regulation or order and each record or order 
     shall contain a statement of the reasons for its issuance and 
     the basis, on the record, for its issuance.
       ``(C) Definition.--For purposes of this section, the term 
     `record' means all notices and other matter published in the 
     Federal Register with respect to the regulation or order 
     reviewed, all information submitted to the Secretary with 
     respect to such regulation or order, proceedings of any panel 
     or advisory committee with respect to such regulation or 
     order, any hearing held with respect to such regulation or 
     order, and any other information identified by the Secretary, 
     in the administrative proceeding held with respect to such 
     regulation or order, as being relevant to such regulation or 
     order.
       ``(b) Court May Order Secretary To Make Additional 
     Findings.--
       ``(1) In general.--If the petitioner in an action under 
     subsection (a)(1) applies to the court for leave to adduce 
     additional data, views, or arguments respecting the 
     regulation or order being reviewed and shows to the 
     satisfaction of the court that such additional data, views, 
     or arguments are material and that there were reasonable 
     grounds for the petitioner's failure to adduce such data, 
     views, or arguments in the proceedings before the Secretary, 
     the court may order the Secretary to provide additional 
     opportunity for the oral presentation of data, views, or 
     arguments and for written submissions.
       ``(2) Modification of or additional findings.--The 
     Secretary may modify the Secretary's findings, or make new 
     findings by reason of the additional data, views, or 
     arguments under paragraph (1) and shall file with the court 
     such modified or new findings, and the Secretary's 
     recommendation, if any, for the modification or setting aside 
     of the regulation or order being reviewed, with the return of 
     such additional data, views, or arguments.
       ``(c) Standard of Review.--Upon the filing of the petition 
     under subsection (a) for judicial review of a regulation or 
     order, the court shall have jurisdiction to review the 
     regulation or order in accordance with chapter 7 of title 5, 
     United States Code, and to grant appropriate relief, 
     including interim relief, as provided in such chapter. A 
     regulation or order described in paragraph (1) or (2) of 
     subsection (a) shall not be affirmed if it is found to be 
     unsupported by substantial evidence on the record taken as a 
     whole.
       ``(d) Finality of Judgment.--The judgment of the court 
     affirming or setting aside, in whole or in part, any 
     regulation or order shall be final, subject to review by the 
     Supreme Court of the United States upon certiorari or 
     certification, as provided in section 1254 of title 28, 
     United States Code.
       ``(e) Other Remedies.--The remedies provided for in this 
     section shall be in addition to and not in lieu of any other 
     remedies provided by law.
       ``(f) Regulations and Orders Must Recite Basis in Record.--
     To facilitate judicial review under this section or under any 
     other provision of law or a regulation or order issued under 
     section 906, 907, 908, 909, 910, or 914, each such regulation 
     or order shall contain a statement of the reasons for its 
     issuance and the basis, in the record of the proceedings held 
     in connection with its issuance, for its issuance.

     ``SEC. 912. POSTMARKET SURVEILLANCE.

       ``(a) Discretionary Surveillance.--The Secretary may 
     require a tobacco product manufacturer to conduct postmarket 
     surveillance for a tobacco product of the manufacturer if the 
     Secretary determines that postmarket surveillance of the 
     tobacco product is necessary to protect the public health or 
     is necessary to provide information regarding the health 
     risks and other safety issues involving the tobacco product.
       ``(b) Surveillance Approval.--Each tobacco product 
     manufacturer required to conduct a surveillance of a tobacco 
     product under subsection (a) shall, within 30 days after 
     receiving notice that the manufacturer is required to conduct 
     such surveillance, submit, for the approval of the Secretary, 
     a protocol for the required surveillance. The Secretary, 
     within 60 days of the receipt of such protocol, shall 
     determine if the principal investigator proposed to be used 
     in the surveillance has sufficient qualifications and 
     experience to conduct such surveillance and if such protocol 
     will result in collection of useful data or other information 
     necessary to protect the public health. The Secretary may not 
     approve such a protocol until it has been reviewed by an 
     appropriately qualified scientific and technical review 
     committee established by the Secretary.

     ``SEC. 913. REDUCED RISK TOBACCO PRODUCTS.

       ``(a) Requirements.--
       ``(1) In general.--For purposes of this section, the term 
     `reduced risk tobacco product' means a tobacco product 
     designated by the Secretary under paragraph (2).
       ``(2) Designation.--
       ``(A) In general.--A product may be designated by the 
     Secretary as a reduced risk tobacco product if the Secretary 
     finds that the product will significantly reduce harm to 
     individuals caused by a tobacco product and is otherwise 
     appropriate to protect public health, based on an application 
     submitted by the manufacturer of the product (or other 
     responsible person) that--

[[Page 10435]]

       ``(i) demonstrates through testing on animals and short-
     term human testing that use of such product results in 
     ingestion or inhalation of a substantially lower yield of 
     toxic substances than use of conventional tobacco products; 
     and
       ``(ii) if required by the Secretary, includes studies of 
     the long-term health effects of the product.

     If such studies are required, the manufacturer may consult 
     with the Secretary regarding protocols for conducting the 
     studies.
       ``(B) Basis for finding.--In making the finding under 
     subparagraph (A), the Secretary shall take into account--
       ``(i) the risks and benefits to the population as a whole, 
     including both users of tobacco products and non-users of 
     tobacco products;
       ``(ii) the increased or decreased likelihood that existing 
     users of tobacco products will stop using such products 
     including reduced risk tobacco products;
       ``(iii) the increased or decreased likelihood that those 
     who do not use tobacco products will start to use such 
     products, including reduced risk tobacco products; and
       ``(iv) the risks and benefits to consumers from the use of 
     a reduced risk tobacco product as compared to the use of 
     products approved under chapter V to reduce exposure to 
     tobacco.
       ``(3) Marketing requirements.--A tobacco product may be 
     marketed and labeled as a reduced risk tobacco product if 
     it--
       ``(A) has been designated as a reduced risk tobacco product 
     by the Secretary under paragraph (2);
       ``(B) bears a label prescribed by the Secretary concerning 
     the product's contribution to reducing harm to health; and
       ``(C) complies with requirements prescribed by the 
     Secretary relating to marketing and advertising of the 
     product, and other provisions of this chapter as prescribed 
     by the Secretary.
       ``(b) Revocation of Designation.--At any time after the 
     date on which a tobacco product is designated as a reduced 
     risk tobacco product under this section the Secretary may, 
     after providing an opportunity for an informal hearing, 
     revoke such designation if the Secretary determines, based on 
     information not available at the time of the designation, 
     that--
       ``(1) the finding made under subsection (a)(2) is no longer 
     valid; or
       ``(2) the product is being marketed in violation of 
     subsection (a)(3).
       ``(c) Limitation.--A tobacco product that is designated as 
     a reduced risk tobacco product that is in compliance with 
     subsection (a) shall not be regulated as a drug or device.
       ``(d) Development of Reduced Risk Tobacco Product 
     Technology.--A tobacco product manufacturer shall provide 
     written notice to the Secretary upon the development or 
     acquisition by the manufacturer of any technology that would 
     reduce the risk of a tobacco product to the health of the 
     user for which the manufacturer is not seeking designation as 
     a `reduced risk tobacco product' under subsection (a).

     ``SEC. 914. EQUAL TREATMENT OF RETAIL OUTLETS.

       ``The Secretary shall issue regulations to require that 
     retail establishments for which the predominant business is 
     the sale of tobacco products comply with any advertising 
     restrictions applicable to retail establishments accessible 
     to individuals under the age of 18.

     ``SEC. 915. JURISDICTION OF AND COORDINATION WITH THE FEDERAL 
                   TRADE COMMISSION.

       ``(a) Jurisdiction.--
       ``(1) In general.--Except where expressly provided in this 
     chapter, nothing in this chapter shall be construed as 
     limiting or diminishing the authority of the Federal Trade 
     Commission to enforce the laws under its jurisdiction with 
     respect to the advertising, sale, or distribution of tobacco 
     products.
       ``(2) Enforcement.--Any advertising that violates this 
     chapter or a provision of the regulations referred to in 
     section 102 of the Youth Smoking Prevention and Public Health 
     Protection Act, is an unfair or deceptive act or practice 
     under section 5(a) of the Federal Trade Commission Act (15 
     U.S.C. 45(a)) and shall be considered a violation of a rule 
     promulgated under section 18 of that Act (15 U.S.C. 57a).
       ``(b) Coordination.--With respect to the requirements of 
     section 4 of the Federal Cigarette Labeling and Advertising 
     Act (15 U.S.C. 1333) and section 3 of the Comprehensive 
     Smokeless Tobacco Health Education Act of 1986 (15 U.S.C. 
     4402)--
       ``(1) the Chairman of the Federal Trade Commission shall 
     coordinate with the Secretary concerning the enforcement of 
     such Act as such enforcement relates to unfair or deceptive 
     acts or practices in the advertising of cigarettes or 
     smokeless tobacco; and
       ``(2) the Secretary shall consult with the Chairman of such 
     Commission in revising the label statements and requirements 
     under such sections.

     ``SEC. 916. CONGRESSIONAL REVIEW PROVISIONS.

       ``In accordance with section 801 of title 5, United States 
     Code, the Congress shall review, and may disapprove, any rule 
     under this chapter that is subject to section 801. This 
     section does not apply to the regulations referred to in 
     section 102 of the Youth Smoking Prevention and Public Health 
     Protection Act.

     ``SEC. 917. REGULATION REQUIREMENT.

       ``(a) Testing, Reporting, and Disclosure.--Not later than 
     24 months after the date of enactment of the Youth Smoking 
     Prevention and Public Health Protection Act, the Secretary, 
     acting through the Commissioner of the Food and Drug 
     Administration, shall promulgate regulations under this Act 
     that meet the requirements of subsection (b).
       ``(b) Contents of Rules.--The regulations promulgated under 
     subsection (a) shall require the testing, reporting, and 
     disclosure of tobacco product smoke constituents and 
     ingredients that the Secretary determines should be disclosed 
     to the public in order to protect the public health. Such 
     constituents shall include tar, nicotine, carbon monoxide, 
     and such other smoke constituents or ingredients as the 
     Secretary may determine to be appropriate. The regulations 
     may require that tobacco product manufacturers, packagers, or 
     importers make such disclosures relating to tar and nicotine 
     through labels or advertising, and make such disclosures 
     regarding other smoke constituents or ingredients as the 
     Secretary determines are necessary to protect the public 
     health.
       ``(c) Authority.--The Food and Drug Administration shall 
     have the authority under this chapter to conduct or to 
     require the testing, reporting, or disclosure of tobacco 
     product smoke constituents.

     ``SEC. 918. PRESERVATION OF STATE AND LOCAL AUTHORITY.

       ``(a) Additional Requirements.--
       ``(1) In general.--Except as provided in paragraph (2), 
     nothing in this chapter, or rules promulgated under this 
     chapter, shall be construed to limit the authority of a 
     Federal agency (including the Armed Forces), a State or 
     political subdivision of a State, or the government of an 
     Indian tribe to enact, adopt, promulgate, and enforce any 
     law, rule, regulation, or other measure with respect to 
     tobacco products, including laws, rules, regulations, or 
     other measures relating to or prohibiting the sale, 
     distribution, possession, exposure to, or use of tobacco 
     products by individuals of any age that are in addition to, 
     or more stringent than, requirements established under this 
     chapter. No provision of this chapter shall limit or 
     otherwise affect any State, Tribal, or local taxation of 
     tobacco products.
       ``(2) Preemption of certain state and local requirements.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     no State or political subdivision of a State may establish or 
     continue in effect with respect to a tobacco product any 
     requirement which is different from, or in addition to, any 
     requirement applicable under the provisions of this chapter 
     relating to performance standards, premarket approval, 
     adulteration, misbranding, registration, reporting, good 
     manufacturing standards, or reduced risk products.
       ``(B) Exception.--Subparagraph (A) does not apply to 
     requirements relating to the sale, use, or distribution of a 
     tobacco product including requirements related to the access 
     to, and the advertising and promotion of, a tobacco product.
       ``(b) Additional Restrictions on Underage Usage.--Nothing 
     in this chapter shall be construed to prevent a Federal 
     agency (including the Armed Forces), a State or a political 
     subdivision of a State, or the government of an Indian tribe 
     from adopting and enforcing additional measures that further 
     restrict or prohibit tobacco product sale to, use by, and 
     accessibility to individuals under the legal age of purchase 
     established by such agency, State, subdivision, or government 
     of an Indian tribe.
       ``(c) No Less Stringent.--Nothing in this chapter is 
     intended to supersede any State, local, or Tribal law that is 
     not less stringent than this chapter.
       ``(d) Rule of Construction Regarding Product Liability.--No 
     provision of this chapter relating to a tobacco product shall 
     be construed to modify or otherwise affect any action or the 
     liability of any person under the product liability law of 
     any State.
       ``(e) Waivers.--Upon the application of a State or 
     political subdivision thereof, the Secretary may, by 
     regulation promulgated after notice and an opportunity for an 
     oral hearing, exempt from subsection (a), under such 
     conditions as may be prescribed in such regulation, a 
     requirement of such State or political subdivision applicable 
     to a tobacco product if--
       ``(1) the requirement is more stringent than a requirement 
     applicable under the provisions described in subsection 
     (a)(1) which would be applicable to the tobacco product if an 
     exemption were not in effect under this subsection; or
       ``(2) the requirement--
       ``(A) is required by compelling local conditions; and
       ``(B) compliance with the requirement would not cause the 
     tobacco product to be in violation of any applicable 
     requirement of this chapter.

     ``SEC. 919. TOBACCO PRODUCTS SCIENTIFIC ADVISORY COMMITTEE.

       ``(a) Establishment.--Not later than 1 year after the date 
     of enactment of the

[[Page 10436]]

     Youth Smoking Prevention and Public Health Protection Act, 
     the Secretary shall establish a 9-member advisory committee, 
     to be known as the `Tobacco Products Scientific Advisory 
     Committee'.
       ``(b) Membership.--
       ``(1) In general.--The Secretary shall appoint as members 
     of the Tobacco Products Scientific Advisory Committee 
     individuals who are technically qualified by training and 
     experience in the medicine, medical ethics, science, or 
     technology involving the manufacture, evaluation, or use of 
     tobacco products, who are of appropriately diversified 
     professional backgrounds. The committee shall be composed 
     of--
       ``(A) 3 individuals who are officers or employees of a 
     State or local government, or of the Federal government;
       ``(B) 2 individuals as representatives of interests of the 
     tobacco manufacturing industry;
       ``(C) 2 individuals as representatives of interests of 
     physicians and other health care professionals; and
       ``(D) 2 individuals as representatives of the general 
     public.
       ``(2) Limitation.--The Secretary may not appoint to the 
     Advisory Committee any individual who is in the regular full-
     time employ of the Food and Drug Administration or any agency 
     responsible for the enforcement of this Act. The Secretary 
     may appoint Federal officials as ex-officio members.
       ``(3) Chairperson.--The Secretary shall designate 1 of the 
     members of the Advisory Committee to serve as chairperson.
       ``(c) Duties.--The Tobacco Products Scientific Advisory 
     Committee shall provide advice, information, and 
     recommendations to the Secretary--
       ``(1) as provided in this chapter;
       ``(2) on the effects of the alteration of the nicotine 
     yields from tobacco products;
       ``(3) on whether there is a threshold level below which 
     nicotine yields do not produce dependence on the tobacco 
     product involved; and
       ``(4) on its review of other safety, dependence, or health 
     issues relating to tobacco products as requested by the 
     Secretary.
       ``(d) Compensation; Support; FACA.--
       ``(1) Compensation and travel.--Members of the Advisory 
     Committee who are not officers or employees of the United 
     States, while attending conferences or meetings of the 
     committee or otherwise engaged in its business, shall be 
     entitled to receive compensation at rates to be fixed by the 
     Secretary, which may not exceed the daily equivalent of the 
     rate in effect for level 4 of the Senior Executive Schedule 
     under section 5382 of title 5, United States Code, for each 
     day (including travel time) they are so engaged; and while so 
     serving away from their homes or regular places of business 
     each member 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 
     service employed intermittently.
       ``(2) Administrative support.--The Secretary shall furnish 
     the Advisory Committee clerical and other assistance.
       ``(3) Nonapplication of faca.--Section 14 of the Federal 
     Advisory Committee Act (5 U.S.C. App.) does not apply to the 
     Advisory Committee.
       ``(e) Proceedings of Advisory Panels and Committees.--The 
     Advisory Committee shall make and maintain a transcript of 
     any proceeding of the panel or committee. Each such panel and 
     committee shall delete from any transcript made under this 
     subsection information which is exempt from disclosure under 
     section 552(b) of title 5, United States Code.''.

     SEC. 102. CONSTRUCTION OF CURRENT REGULATIONS.

       (a) In General.--The final regulations promulgated by the 
     Secretary of Health and Human Services in the August 28, 
     1996, issue of the Federal Register (62 Fed. Reg. 44615-44618 
     beginning at ``part 897'') are hereby deemed to be lawful and 
     shall have the same legal force and effect as if such 
     regulations had been lawfully promulgated by the Secretary 
     under chapter IX and section 701 of the Federal Food, Drug, 
     and Cosmetic Act (as amended by this Act). Not later than 30 
     days after the date of enactment of this Act, the Secretary 
     shall republish such regulations in the Federal Register. 
     Such regulations shall take effect on the date that is 12 
     months after such date of enactment, except that the 
     Secretary may designate an earlier effective date. The 
     Secretary shall amend the designation of authority in such 
     regulations in accordance with this subsection.
       (b) Limitation on Advisory Opinions.--As of the date of 
     enactment of this Act, the following documents issued by the 
     Food and Drug Administration shall not constitute advisory 
     opinions under section 10.85(d)(1) of title 21, Code of 
     Federal Regulations, except as they apply to tobacco 
     products, and shall not be cited by the Secretary of Health 
     and Human Services or the Food and Drug Administration as 
     binding precedent:
       (1) The preamble to the proposed rule in the document 
     entitled ``Regulations Restricting the Sale and Distribution 
     of Cigarettes and Smokeless Tobacco Products to Protect 
     Children and Adolescents'' (60 Fed. Reg. 41314-41372 (August 
     11, 1995)).
       (2) The document entitled ``Nicotine in Cigarettes and 
     Smokeless Tobacco Products is a Drug and These Products Are 
     Nicotine Delivery Devices Under the Federal Food, Drug, and 
     Cosmetic Act'' (60 Fed. Reg. 41453-41787 (August 11, 1995)).
       (3) The preamble to the final rule in the document entitled 
     ``Regulations Restricting the Sale and Distribution of 
     Cigarettes and Smokeless Tobacco to Protect Children and 
     Adolescents'' (61 Fed. Reg. 44396-44615 (August 28, 1996)).
       (4) The document entitled ``Nicotine in Cigarettes and 
     Smokeless Tobacco is a Drug and These Products are Nicotine 
     Delivery Devices Under the Federal Food, Drug, and Cosmetic 
     Act; Jurisdictional Determination'' (61 Fed. Reg. 44619-45318 
     (August 28, 1996)).

     SEC. 103. CONFORMING AND OTHER AMENDMENTS TO GENERAL 
                   PROVISIONS.

       (a) Amendment of Federal Food, Drug, and Cosmetic Act.--
     Except as otherwise expressly provided, whenever in this 
     section an amendment is expressed in terms of an amendment 
     to, or repeal of, a section or other provision, the reference 
     is to a section or other provision of the Federal Food, Drug, 
     and Cosmetic Act (21 U.S.C. 301 et seq.).
       (b) Section 301.--Section 301 (21 U.S.C. 331) is amended--
       (1) in subsection (a), by inserting ``tobacco product,'' 
     after ``device,'';
       (2) in subsection (b), by inserting ``tobacco product,'' 
     after ``device,'';
       (3) in subsection (c), by inserting ``tobacco product,'' 
     after ``device,'';
       (4) in subsection (e), by striking ``515(f), or 519'' and 
     inserting ``515(f), 519, or 909'';
       (5) in subsection (g), by inserting ``tobacco product,'' 
     after ``device,'';
       (6) in subsection (h), by inserting ``tobacco product,'' 
     after ``device,'';
       (7) in subsection (j), by striking ``708, or 721'' and 
     inserting ``708, 721, 904, 905, 906, 907, 908, or 909'';
       (8) in subsection (k), by inserting ``tobacco product,'' 
     after ``device,'';
       (9) by striking subsection (p) and inserting the following:
       ``(p) The failure to register in accordance with section 
     510 or 905, the failure to provide any information required 
     by section 510(j), 510(k), 905(i), or 905(j), or the failure 
     to provide a notice required by section 510(j)(2) or 
     905(j)(2).'';
       (10) by striking subsection (q)(1) and inserting the 
     following:
       ``(q)(1) The failure or refusal--
       ``(A) to comply with any requirement prescribed under 
     section 518, 520(g), 906(f), or 908;
       ``(B) to furnish any notification or other material or 
     information required by or under section 519, 520(g), 904, 
     906(f), or 909; or
       ``(C) to comply with a requirement under section 522 or 
     912.'';
       (11) in subsection (q)(2), by striking ``device,'' and 
     inserting ``device or tobacco product,'';
       (12) in subsection (r), by inserting ``or tobacco product'' 
     after ``device'' each time that it appears; and
       (13) by adding at the end the following:
       ``(aa) The sale of tobacco products in violation of a no-
     tobacco-sale order issued under section 303(f).''.
       (c) Section 303.--Section 303(f) (21 U.S.C. 333(f)) is 
     amended--
       (1) by striking the subsection heading and inserting the 
     following:
       ``(f) Civil Penalties; No-Tobacco-Sale Orders.--'';
       (2) in paragraph (1)(A), by inserting ``or tobacco 
     products'' after ``devices'';
       (3) by redesignating paragraphs (3), (4), and (5) as 
     paragraphs (4), (5), and (6), and inserting after paragraph 
     (2) the following:
       ``(3) If the Secretary finds that a person has committed 
     repeated violations of restrictions promulgated under section 
     906(d) at a particular retail outlet then the Secretary may 
     impose a no-tobacco-sale order on that person prohibiting the 
     sale of tobacco products in that outlet. A no-tobacco-sale 
     order may be imposed with a civil penalty under paragraph 
     (1).'';
       (4) in paragraph (4) as so redesignated--
       (A) in subparagraph (A)--
       (i) by striking ``assessed'' the first time it appears and 
     inserting ``assessed, or a no-tobacco-sale order may be 
     imposed,''; and
       (ii) by striking ``penalty'' and inserting ``penalty, or 
     upon whom a no-tobacco-order is to be imposed,'';
       (B) in subparagraph (B)--
       (i) by inserting after ``penalty,'' the following: ``or the 
     period to be covered by a no-tobacco-sale order,''; and
       (ii) by adding at the end the following: ``A no-tobacco-
     sale order permanently prohibiting an individual retail 
     outlet from selling tobacco products shall include provisions 
     that allow the outlet, after a specified period of time, to 
     request that the Secretary compromise, modify, or terminate 
     the order.''; and
       (C) by adding at the end, the following:
       ``(D) The Secretary may compromise, modify, or terminate, 
     with or without conditions, any no-tobacco-sale order.'';
       (5) in paragraph (5) as so redesignated--
       (A) by striking ``(3)(A)'' as redesignated, and inserting 
     ``(4)(A)'';
       (B) by inserting ``or the imposition of a no-tobacco-sale 
     order'' after ``penalty'' the first 2 places it appears; and

[[Page 10437]]

       (C) by striking ``issued.'' and inserting ``issued, or on 
     which the no-tobacco-sale order was imposed, as the case may 
     be.''; and
       (6) in paragraph (6), as so redesignated, by striking 
     ``paragraph (4)'' each place it appears and inserting 
     ``paragraph (5)''.
       (d) Section 304.--Section 304 (21 U.S.C. 334) is amended--
       (1) in subsection (a)(2)--
       (A) by striking ``and'' before ``(D)''; and
       (B) by striking ``device.'' and inserting the following: 
     ``, (E) Any adulterated or misbranded tobacco product.'';
       (2) in subsection (d)(1), by inserting ``tobacco product,'' 
     after ``device,'';
       (3) in subsection (g)(1), by inserting ``or tobacco 
     product'' after ``device'' each place it appears; and
       (4) in subsection (g)(2)(A), by inserting ``or tobacco 
     product'' after ``device'' each place it appears.
       (e) Section 702.--Section 702(a) (21 U.S.C. 372(a)) is 
     amended--
       (1) by inserting ``(1)'' after ``(a)''; and
       (2) by adding at the end thereof the following:
       ``(2) For a tobacco product, to the extent feasible, the 
     Secretary shall contract with the States in accordance with 
     paragraph (1) to carry out inspections of retailers in 
     connection with the enforcement of this Act.''.
       (f) Section 703.--Section 703 (21 U.S.C. 373) is amended--
       (1) by inserting ``tobacco product,'' after ``device,'' 
     each place it appears; and
       (2) by inserting ``tobacco products,'' after ``devices,'' 
     each place it appears.
       (g) Section 704.--Section 704 (21 U.S.C. 374) is amended--
       (1) in subsection (a)(1)(A), by inserting ``tobacco 
     products,'' after ``devices,'' each place it appears;
       (2) in subsection (a)(1)(B), by inserting ``or tobacco 
     product'' after ``restricted devices'' each place it appears; 
     and
       (3) in subsection (b), by inserting ``tobacco product,'' 
     after ``device,''.
       (h) Section 705.--Section 705(b) (21 U.S.C. 375(b)) is 
     amended by inserting ``tobacco products,'' after 
     ``devices,''.
       (i) Section 709.--Section 709 (21 U.S.C. 379) is amended by 
     inserting ``or tobacco product'' after ``device''.
       (j) Section 801.--Section 801 (21 U.S.C. 381) is amended--
       (1) in subsection (a)--
       (A) by inserting ``tobacco products,'' after ``devices,'' 
     the first time it appears;
       (B) by inserting ``or subsection (j) of section 905'' after 
     ``section 510''; and
       (C) by striking ``drugs or devices'' each time it appears 
     and inserting ``drugs, devices, or tobacco products'';
       (2) in subsection (e)--
       (A) in paragraph (1), by inserting ``tobacco product,'' 
     after ``device,''; and
       (B) by redesignating paragraph (4) as paragraph (5) and 
     inserting after paragraph (3), the following:
       ``(4) Paragraph (1) does not apply to any tobacco product--
       ``(A) which does not comply with an applicable requirement 
     of section 907 or 910; or
       ``(B) which under section 906(f) is exempt from either such 
     section.

     This paragraph does not apply if the Secretary has determined 
     that the exportation of the tobacco product is not contrary 
     to the public health and safety and has the approval of the 
     country to which it is intended for export or the tobacco 
     product is eligible for export under section 802.''.
       (k) Section 802.--Section 802 (21 U.S.C. 382) is amended--
       (1) in subsection (a), by striking ``device--'' and 
     inserting ``device or tobacco product--'';
       (2) in subsection (a)(1)(C), by striking ``and'' after the 
     semicolon;
       (3) in subsection (a)(2), by striking subparagraph (C) and 
     all that follows in that subsection and inserting the 
     following:
       ``(C) is a banned device under section 516; or
       ``(3) which, in the case of a tobacco product--
       ``(A) does not comply with an applicable requirement of 
     section 907 or 910; or
       ``(B) under section 906(f) is exempt from either such 
     section,

     is adulterated, misbranded, and in violation of such sections 
     or Act unless the export of the drug, device, or tobacco 
     product is, except as provided in subsection (f), authorized 
     under subsection (b), (c), (d), or (e) of this section or 
     section 801(e)(2) or 801(e)(4). If a drug, device, or tobacco 
     product described in paragraph (1), (2), or (3) may be 
     exported under subsection (b) and if an application for such 
     drug or device under section 505, 515, or 910 of this Act or 
     section 351 of the Public Health Service Act (42 U.S.C. 262) 
     was disapproved, the Secretary shall notify the appropriate 
     public health official of the country to which such drug, 
     device, or tobacco product will be exported of such 
     disapproval.'';
       (4) in subsection (b)(1)(A), by inserting ``or tobacco 
     product'' after ``device'' each time it appears;
       (5) in subsection (c), by inserting ``or tobacco product'' 
     after ``device'' and inserting ``or section 906(f)'' after 
     ``520(g).'';
       (6) in subsection (f), by inserting ``or tobacco product'' 
     after ``device'' each time it appears; and
       (7) in subsection (g), by inserting ``or tobacco product'' 
     after ``device'' each time it appears.
       (l) Section 1003.--Section 1003(d)(2)(C) (as redesignated 
     by section 101(a)) is amended--
       (1) by striking ``and'' after ``cosmetics,''; and
       (2) inserting a comma and ``and tobacco products'' after 
     ``devices''.
       (m) Effective Date for No-Tobacco-Sale Order Amendments.--
     The amendments made by subsection (c), other than the 
     amendment made by paragraph (2) of such subsection, shall 
     take effect only upon the promulgation of final regulations 
     by the Secretary of Health and Human Services--
       (1) defining the term ``repeated violation'', as used in 
     section 303(f) of the Federal Food, Drug, and Cosmetic Act 
     (21 U.S.C. 333(f)) as amended by subsection (c), by 
     identifying the number of violations of particular 
     requirements over a specified period of time that constitute 
     a repeated violation;
       (2) providing for notice to the retailer of each violation 
     at a particular retail outlet;
       (3) providing that a person may not be charged with a 
     violation at a particular retail outlet unless the Secretary 
     has provided notice to the retailer of all previous 
     violations at that outlet;
       (4) establishing a period of time during which, if there 
     are no violations by a particular retail outlet, that outlet 
     will not considered to have been the site of repeated 
     violations when the next violation occurs; and
       (5) providing that good faith reliance on false 
     identification does not constitute a violation of any minimum 
     age requirement for the sale of tobacco products.

  TITLE II--TOBACCO PRODUCT WARNINGS AND SMOKE CONSTITUENT DISCLOSURE

     SEC. 201. CIGARETTE LABEL AND ADVERTISING WARNINGS.

       (a) In General.--Section 4 of the Federal Cigarette 
     Labeling and Advertising Act (15 U.S.C. 1333) is amended to 
     read as follows:

     ``SEC. 4. LABELING.

       ``(a) Label Requirements.--
       ``(1) In general.--It shall be unlawful for any person to 
     manufacture, package, or import for sale or distribution 
     within the United States any cigarettes the package of which 
     fails to bear, in accordance with the requirements of this 
     section, one of the following labels:
     ``WARNING: Cigarettes are addictive''
     ``WARNING: Tobacco smoke can harm your children''
     ``WARNING: Cigarettes cause fatal lung disease''
     ``WARNING: Cigarettes cause cancer''
     ``WARNING: Cigarettes cause strokes and heart disease''
     ``WARNING: Smoking during pregnancy can harm your baby''
     ``WARNING: Smoking can kill you''
     ``WARNING: Tobacco smoke causes fatal lung disease in non-
     smokers''
     ``WARNING: Quitting smoking now greatly reduces serious risks 
     to your health''
       ``(2) Placement; typography; etc.--
       ``(A) In general.--Each label statement required by 
     paragraph (1) shall be located in the upper portion of the 
     front and rear panels of the package, directly on the package 
     underneath the cellophane or other clear wrapping. Except as 
     provided in subparagraph (B), each label statement shall 
     comprise at least the top 25 percent of the front and rear 
     panels of the package. The word ``WARNING'' shall appear in 
     capital letters and all text shall be in conspicuous and 
     legible 17-point type, unless the text of the label statement 
     would occupy more than 70 percent of such area, in which case 
     the text may be in a smaller conspicuous and legible type 
     size, provided that at least 60 percent of such area is 
     occupied by required text. The text shall be black on a white 
     background, or white on a black background, in a manner that 
     contrasts, by typography, layout, or color, with all other 
     printed material on the package, in an alternating fashion 
     under the plan submitted under subsection (b)(4).
       ``(B) Flip-top boxes.--For any cigarette brand package 
     manufactured or distributed before January 1, 2000, which 
     employs a flip-top style (if such packaging was used for that 
     brand in commerce prior to June 21, 1997), the label 
     statement required by paragraph (1) shall be located on the 
     flip-top area of the package, even if such area is less than 
     25 percent of the area of the front panel. Except as provided 
     in this paragraph, the provisions of this subsection shall 
     apply to such packages.
       ``(3) Does not apply to foreign distribution.--The 
     provisions of this subsection do not apply to a tobacco 
     product manufacturer or distributor of cigarettes which does 
     not manufacture, package, or import cigarettes for sale or 
     distribution within the United States.
       ``(b) Advertising Requirements.--
       ``(1) In general.--It shall be unlawful for any tobacco 
     product manufacturer, importer, distributor, or retailer of 
     cigarettes to advertise or cause to be advertised within the 
     United States any cigarette unless its advertising bears, in 
     accordance with the requirements of this section, one of the 
     labels specified in subsection (a) of this section.

[[Page 10438]]

       ``(2) Typography, etc.--Each label statement required by 
     subsection (a) of this section in cigarette advertising shall 
     comply with the standards set forth in this paragraph. For 
     press and poster advertisements, each such statement and 
     (where applicable) any required statement relating to tar, 
     nicotine, or other constituent yield shall comprise at least 
     20 percent of the area of the advertisement and shall appear 
     in a conspicuous and prominent format and location at the top 
     of each advertisement within the trim area. The Secretary may 
     revise the required type sizes in such area in such manner as 
     the Secretary determines appropriate. The word ``WARNING'' 
     shall appear in capital letters, and each label statement 
     shall appear in conspicuous and legible type. The text of the 
     label statement shall be black if the background is white and 
     white if the background is black, under the plan submitted 
     under paragraph (4) of this subsection. The label statements 
     shall be enclosed by a rectangular border that is the same 
     color as the letters of the statements and that is the width 
     of the first downstroke of the capital ``W'' of the word 
     ``WARNING'' in the label statements. The text of such label 
     statements shall be in a typeface pro rata to the following 
     requirements: 45-point type for a whole-page broadsheet 
     newspaper advertisement; 39-point type for a half-page 
     broadsheet newspaper advertisement; 39-point type for a 
     whole-page tabloid newspaper advertisement; 27-point type for 
     a half-page tabloid newspaper advertisement; 31.5-point type 
     for a double page spread magazine or whole-page magazine 
     advertisement; 22.5-point type for a 28 centimeter by 3 
     column advertisement; and 15-point type for a 20 centimeter 
     by 2 column advertisement. The label statements shall be in 
     English, except that in the case of--
       ``(A) an advertisement that appears in a newspaper, 
     magazine, periodical, or other publication that is not in 
     English, the statements shall appear in the predominant 
     language of the publication; and
       ``(B) in the case of any other advertisement that is not in 
     English, the statements shall appear in the same language as 
     that principally used in the advertisement.
       ``(3) Adjustment by secretary.--The Secretary may, through 
     a rulemaking under section 553 of title 5, United States 
     Code, adjust the format and type sizes for the label 
     statements required by this section or the text, format, and 
     type sizes of any required tar, nicotine yield, or other 
     constituent disclosures, or to establish the text, format, 
     and type sizes for any other disclosures required under the 
     Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 et. 
     seq.). The text of any such label statements or disclosures 
     shall be required to appear only within the 20 percent area 
     of cigarette advertisements provided by paragraph (2) of this 
     subsection. The Secretary shall promulgate regulations which 
     provide for adjustments in the format and type sizes of any 
     text required to appear in such area to ensure that the total 
     text required to appear by law will fit within such area.
       ``(4) Marketing requirements.--
       ``(A) The label statements specified in subsection (a)(1) 
     shall be randomly displayed in each 12-month period, in as 
     equal a number of times as is possible on each brand of the 
     product and be randomly distributed in all areas of the 
     United States in which the product is marketed in accordance 
     with a plan submitted by the tobacco product manufacturer, 
     importer, distributor, or retailer and approved by the 
     Secretary.
       ``(B) The label statements specified in subsection (a)(1) 
     shall be rotated quarterly in alternating sequence in 
     advertisements for each brand of cigarettes in accordance 
     with a plan submitted by the tobacco product manufacturer, 
     importer, distributor, or retailer to, and approved by, the 
     Secretary.
       ``(C) The Secretary shall review each plan submitted under 
     subparagraph (B) and approve it if the plan--
       ``(i) will provide for the equal distribution and display 
     on packaging and the rotation required in advertising under 
     this subsection; and
       ``(ii) assures that all of the labels required under this 
     section will be displayed by the tobacco product 
     manufacturer, importer, distributor, or retailer at the same 
     time.''.
       (b) Repeal of Prohibition on State Restriction.--Section 5 
     of the Federal Cigarette Labeling and Advertising Act (15 
     U.S.C. 1334) is amended--
       (1) by striking ``(a) Additional Statements.--'' in 
     subsection (a); and
       (2) by striking subsection (b).

     SEC. 202. AUTHORITY TO REVISE CIGARETTE WARNING LABEL 
                   STATEMENTS.

       Section 4 of the Federal Cigarette Labeling and Advertising 
     Act (15 U.S.C. 1333), as amended by section 301 of this 
     title, is further amended by adding at the end the following:
       ``(c) Change in Required Statements.--The Secretary may, by 
     a rulemaking conducted under section 553 of title 5, United 
     States Code, adjust the format, type size, and text of any of 
     the warning label statements required by subsection (a) of 
     this section, or establish the format, type size, and text of 
     any other disclosures required under the Federal Food, Drug, 
     and Cosmetic Act (21 U.S.C. 301 et seq.), if the Secretary 
     finds that such a change would promote greater public 
     understanding of the risks associated with the use of tobacco 
     products.''.

     SEC. 203. SMOKELESS TOBACCO LABELS AND ADVERTISING WARNINGS.

       Section 3 of the Comprehensive Smokeless Tobacco Health 
     Education Act of 1986 (15 U.S.C. 4402) is amended to read as 
     follows:

     ``SEC. 3. SMOKELESS TOBACCO WARNING.

       ``(a) General Rule.--
       ``(1) It shall be unlawful for any person to manufacture, 
     package, or import for sale or distribution within the United 
     States any smokeless tobacco product unless the product 
     package bears, in accordance with the requirements of this 
     Act, one of the following labels:
     ``WARNING: This product can cause mouth cancer''
     ``WARNING: This product can cause gum disease and tooth 
     loss''
     ``WARNING: This product is not a safe alternative to 
     cigarettes''
     ``WARNING: Smokeless tobacco is addic-tive''
       ``(2) Each label statement required by paragraph (1) shall 
     be--
       ``(A) located on the 2 principal display panels of the 
     package, and each label statement shall comprise at least 25 
     percent of each such display panel; and
       ``(B) in 17-point conspicuous and legible type and in black 
     text on a white background, or white text on a black 
     background, in a manner that contrasts by typography, layout, 
     or color, with all other printed material on the package, in 
     an alternating fashion under the plan submitted under 
     subsection (b)(3), except that if the text of a label 
     statement would occupy more than 70 percent of the area 
     specified by subparagraph (A), such text may appear in a 
     smaller type size, so long as at least 60 percent of such 
     warning area is occupied by the label statement.
       ``(3) The label statements required by paragraph (1) shall 
     be introduced by each tobacco product manufacturer, packager, 
     importer, distributor, or retailer of smokeless tobacco 
     products concurrently into the distribution chain of such 
     products.
       ``(4) The provisions of this subsection do not apply to a 
     tobacco product manufacturer or distributor of any smokeless 
     tobacco product that does not manufacture, package, or import 
     smokeless tobacco products for sale or distribution within 
     the United States.
       ``(b) Required Labels.--
       ``(1) It shall be unlawful for any tobacco product 
     manufacturer, packager, importer, distributor, or retailer of 
     smokeless tobacco products to advertise or cause to be 
     advertised within the United States any smokeless tobacco 
     product unless its advertising bears, in accordance with the 
     requirements of this section, one of the labels specified in 
     subsection (a).
       ``(2) Each label statement required by subsection (a) in 
     smokeless tobacco advertising shall comply with the standards 
     set forth in this paragraph. For press and poster 
     advertisements, each such statement and (where applicable) 
     any required statement relating to tar, nicotine, or other 
     constituent yield shall--
       ``(A) comprise at least 20 percent of the area of the 
     advertisement, and the warning area shall be delineated by a 
     dividing line of contrasting color from the advertisement; 
     and
       ``(B) the word ``WARNING'' shall appear in capital letters 
     and each label statement shall appear in conspicuous and 
     legible type. The text of the label statement shall be black 
     on a white background, or white on a black background, in an 
     alternating fashion under the plan submitted under paragraph 
     (3).
       ``(3)(A) The label statements specified in subsection 
     (a)(1) shall be randomly displayed in each 12-month period, 
     in as equal a number of times as is possible on each brand of 
     the product and be randomly distributed in all areas of the 
     United States in which the product is marketed in accordance 
     with a plan submitted by the tobacco product manufacturer, 
     importer, distributor, or retailer and approved by the 
     Secretary.
       ``(B) The label statements specified in subsection (a)(1) 
     shall be rotated quarterly in alternating sequence in 
     advertisements for each brand of smokeless tobacco product in 
     accordance with a plan submitted by the tobacco product 
     manufacturer, importer, distributor, or retailer to, and 
     approved by, the Secretary.
       ``(C) The Secretary shall review each plan submitted under 
     subparagraph (B) and approve it if the plan--
       ``(i) will provide for the equal distribution and display 
     on packaging and the rotation required in advertising under 
     this subsection; and
       ``(ii) assures that all of the labels required under this 
     section will be displayed by the tobacco product 
     manufacturer, importer, distributor, or retailer at the same 
     time.
       ``(c) Television and Radio Advertising.--It is unlawful to 
     advertise smokeless tobacco on any medium of electronic 
     communications subject to the jurisdiction of the Federal 
     Communications Commission.''.

[[Page 10439]]



     SEC. 204. AUTHORITY TO REVISE SMOKELESS TOBACCO PRODUCT 
                   WARNING LABEL STATEMENTS.

       Section 3 of, as amended by section 303 of this title, is 
     further amended by adding at the end the following:
       ``(d) Authority To Revise Warning Label Statements.--The 
     Secretary may, by a rulemaking conducted under section 553 of 
     title 5, United States Code, adjust the format, type size, 
     and text of any of the warning label statements required by 
     subsection (a) of this section, or establish the format, type 
     size, and text of any other disclosures required under the 
     Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.), 
     if the Secretary finds that such a change would promote 
     greater public understanding of the risks associated with the 
     use of smokeless tobacco products.''.

     SEC. 205. TAR, NICOTINE, AND OTHER SMOKE CONSTITUENT 
                   DISCLOSURE TO THE PUBLIC.

       Section 4(a) of the Federal Cigarette Labeling and 
     Advertising Act (15 U.S.C. 
     1333(a)), as amended by section 301 of this title, is further 
     amended by adding at the end the following:
       ``(4)(A) The Secretary shall, by a rulemaking conducted 
     under section 553 of title 5, United States Code, determine 
     (in the Secretary's sole discretion) whether cigarette and 
     other tobacco product manufacturers shall be required to 
     include in the area of each cigarette advertisement specified 
     by subsection (b) of this section, or on the package label, 
     or both, the tar and nicotine yields of the advertised or 
     packaged brand. Any such disclosure shall be in accordance 
     with the methodology established under such regulations, 
     shall conform to the type size requirements of subsection (b) 
     of this section, and shall appear within the area specified 
     in subsection (b) of this section.
       ``(B) Any differences between the requirements established 
     by the Secretary under subparagraph (A) and tar and nicotine 
     yield reporting requirements established by the Federal Trade 
     Commission shall be resolved by a memorandum of understanding 
     between the Secretary and the Federal Trade Commission.
       ``(C) In addition to the disclosures required by 
     subparagraph (A) of this paragraph, the Secretary may, under 
     a rulemaking conducted under section 553 of title 5, United 
     States Code, prescribe disclosure requirements regarding the 
     level of any cigarette or other tobacco product smoke 
     constituent. Any such disclosure may be required if the 
     Secretary determines that disclosure would be of benefit to 
     the public health, or otherwise would increase consumer 
     awareness of the health consequences of the use of tobacco 
     products, except that no such prescribed disclosure shall be 
     required on the face of any cigarette package or 
     advertisement. Nothing in this section shall prohibit the 
     Secretary from requiring such prescribed disclosure through a 
     cigarette or other tobacco product package or advertisement 
     insert, or by any other means under the Federal Food, Drug, 
     and Cosmetic Act (21 U.S.C. 301 et seq.).''.

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